Protecting Indonesian Supply Chain Workers from COVID-19

Part 3 of 4 in our research series

There is a warning to heed from high-income countries’ struggles against coronavirus. It is: low-income countries are next, and their battles will take a graver toll.

Indonesia is the world’s fourth most populous country, with a population of 273 million people spread over its 17,000+ islands.¹ While the sheer size of this archipelago gives it a relatively low population density of 151 people per square kilometer, its bustling cities are a different story.² Take Jakarta; this capital city is home to 11 million people in its city proper (that number jumps to 30 million when considering its metropolitan area) with a density of 14,464 people per square kilometer.² This figure alone indicates potential hotbed for viral transmission — but as this article makes clear, several different circumstances are coinciding to put Indonesia at risk for tremendous loss of life.

As of this writing, worldwide coronavirus cases are approaching 2.6 million and the death toll is nearly 179,000.³ The bulk of cases has so far occurred in high-income countries like the USA, Spain, Italy, France, and Germany, where storefronts are located and major brands and retailers are headquartered.³ However, every major brand and retailer depends on its global supply chain. This interconnected web of factories and vendors is spread over the globe, and Indonesia is now home to a significant percentage of garment and textile factories. These factories employ large numbers of workers, who gather in close quarters each day to earn their livelihoods.

The urgent need to implement COVID-19 health and safety measures for supply chain workers is a stark new reality. This article explains the reasons Indonesia is at grave risk, and concludes by answering a crucial question:

How can brands and retailers protect workers from infection across large-scale supply chains, and do so in the short timeframe needed to fight the virus?

A weak healthcare system

Coronavirus has exposed an unpleasant reality about global healthcare systems: they appear unable to adequately handle a pandemic. According to the World Health Organization (WHO), the strongest healthcare systems belong to France, Italy, and Spain.⁴ These healthcare systems have Efficiency Indices (a metric the WHO uses to measure overall system performance) between 0.972 and 0.994, with 1 being the highest possible value.⁴

France, with the world’s highest ranked healthcare system, has had to resort to shipping train cars of patients to other hospitals for treatment and has a current morbidity rate of 13.2%.^3,5 Italy, ranked second, currently has a COVID-19 death rate of over 13.4% and has been unable to treat large numbers of patients.^3,6. Spain, ranked third in the world, has a morbidity rate of 10.4% and has also faced overwhelming numbers of patients in its hospitals.^3,7

Indonesia, by comparison, is 92nd in the world with an Efficiency Index of 0.662.⁴ If the virus begins to spike here, there is reason to believe its healthcare system would be unable to absorb the blow.

Paycheck-to-paycheck income

Though their healthcare systems are struggling to handle the pandemic, high-income countries are still at an obvious advantage in that their governments and populations have more resources available on average than do low-income countries.

The US economy is the strongest in the world, yet it has taken a dramatic hit in recent weeks. The last two weeks of March saw 10 million people file for unemployment, and estimates for Q2 rival or surpass the 25% unemployment mark that defined the Great Depression.⁸ Store fronts have shuttered operations and demand for apparel products has dwindled.⁹

With a $1.1-trillion GDP, Indonesia is an emerging market.¹⁰ The average monthly income in the country is just $320, and its per-capita GDP is $4,164.^11,10 The UNDP ranks Indonesia at 111th in the world for development with a Human Development Index of 0.707, suggesting significant barriers to achievement in the country.¹²

For the millions of people employed in the country’s garment and manufacturing facilities, their livelihoods and meals depend on their ability to work.¹³ However, these facilities produce for store fronts in high-income countries, making the Indonesian economy move partly in sync with high-income economies. As a result of the pandemic, the baseline 2020 growth of Indonesia’s economy is expected to decline by 60%, from 5% to 2%.¹³ Closed store fronts means closed factories.⁹ The economic incentives high-income countries can offer their citizens will be in short supply in countries like Indonesia, making extended lockdowns untenable for their workforces. When storefronts reopen, factory demand will surge and workers will have little economic choice but to return.

Out-of-phase contagion curves

If a weak healthcare system and economy are the kindling, the timing of contagion peaks is the lit match.

Retailers in high-income countries are currently facing a “mountain of unsold inventory” at the same time as their contagion curves are peaking.^9,14 For these countries, a best-case scenario sees economic activity resuming sometime in the coming months.¹⁴ Whenever this date arrives, consumers will restart the demand for products overseas.

The virus has not yet begun to spike in low-income countries like Indonesia. Strict policies mandating social distancing and halting movement have so far helped prevent rampant transmission. The true spike in cases is expected in the coming months — around the same time storefronts are expected to reopen and draw workers back into factories.

It is this unfortunate timing that completes the recipe for disaster in places of production. When a person is running out of food and is offered a chance to return to work, even during an outbreak, the opportunity to provide for their family outweighs the risk for exposure. Anyone would choose possible infection over certain starvation.

Poor forecasts for aid and positive outcomes

Adding to the urgency of this situation are two additional factors: a low likelihood of foreign aid, and ominous predictions for possible outcomes.

Prospects of a global response to help low-income countries like Indonesia have not been promising. Many pinned hopes on the recent G20 summit, a council “created precisely to respond to crises such as these,” according to Foreign Policy;¹⁵ however, aside from increased funding for the World Health Organization, little resulted beyond a vague statement about support and unity.¹⁶ Similarly, $70 billion in foreign investments have vanished from countries of production in the past two months; this is nearly as much as entered their economies in all of 2019.¹⁷

Second, ACAPS has released an analysis predicting three potential outcomes of the COVID-19 pandemic.¹⁸ The best-case scenario of global containment, which is noted as having very low probability, predicts moderate impacts to high-income economies and poorer outcomes for low-income countries. The subsequent scenarios detail far worse outcomes, including potential civil unrest and repression by authoritarian regimes.¹⁸ There is one common outcome across all three scenarios, however: poverty worsens.

Brands and retailers are now face-to-face with an opportunity to protect lives in their supply chains. By implementing health and safety protocols, we as an industry can ensure our overseas facilities do not put countries like Indonesia at an even greater risk than they currently are. We are all facing extreme challenges in this crisis, but as the Atlantic Council writes, organizations risk being so “focused internally that they take their eyes off a potential disaster-in-the-making among fragile states and emerging markets.”¹⁹ Indonesia is one of these markets.

Understanding Indonesia’s apparel industry

Fabric and apparel manufacturing has become a vital component of Indonesia’s economy in the past decade. Although West Java still boasts the nation’s highest manufacturing output, other parts of the island of Java have grown to prominence as well.²⁰ Many of the country’s garment and apparel manufacturing facilities are located around Jakarta and now employ over 3 million people (up from 1.1 million people in 2012)²⁰, contributing $19.3 billion annually to the economy with a 5.2% growth rate.^13,21 Many major brands source apparel from Indonesia, contributing to the overall 22% national rate of employment in manufacturing.^22,21

COVID-19 precautionary measures have been swift. Jakarta has closed many offices and banned gatherings. Demand for products has fallen sharply, leaving tens of thousands without a job and putting over 3 million workers — most of whom are women — at severe risk for unemployment.^13,23 Indonesia has gone from a minimal role in the world apparel trade in 2009 to becoming a major player today, making the stakes of this crisis much higher.¹³ President Joko Widodo has announced a $24.9 billion spending package to “ensure public health [and] save the national economy and the financial system.” ²⁴

It has yet to be seen what effect this has on the daily lives of workers. Many factories have closed their doors regardless of the package, citing a lack of raw materials, an inability to ship finished products, and suspended orders.²³ Factories’ ability to stay open depends on raw material delivery from China, the ability of brands to continue purchasing, the size of factories, and other factors. But for the workers sent home, an extended loss of employment will simply translate to a lack of food and money.

Indonesia has seen 7,418 cases and 635 deaths since March 2.³ This yields a death rate of 8.5% at the time of writing, the highest in Southeast Asia.²⁵ However, a study presented to Indonesia’s government showed that over 140,000 people could die from the virus by May if strict measures were not taken, prompting the president to enact tougher rules.²⁶ A research team from the University of Indonesia estimated the number of infections to range between 600,000 and 2.5 million by mid-May.²⁶

The current high fatality rate persists in spite of a relatively low number of cases. This does not bode well for Indonesia; experts cite an inability of the health system to handle the quantity of cases, a lack of rapid testing, and a lack of personal protective equipment.²⁵ Indonesia’s health ministry says the entire country has just 2,813 hospitals and 110,040 doctors, or 12 beds and four doctors per 10,000 people.²⁵

When international storefronts reopen and demand returns, workers are likely to rush to factories regardless of the health risk. The same will likely occur across multiple industry sectors. When asked by Reuters about his continuing to give taxi rides during the outbreak, an Indonesian motorbike driver gave a telling answer: “I’m scared … but I have a family that I have to provide for … where would I get money from?” ²⁴

Improving health & safety conditions in factories needs to be undertaken before workers return — not after.²⁷ When spikes occur, factories without proper health & safety protocols could become high-risk areas for exposure. This would add to the danger that COVID-19 will spread within densely packed urban areas, making it nearly impossible to control and resulting in a tremendous loss of life.²⁸

Without industry collaboration, we cannot protect our supply chains

Brands and retailers will face a new level of consumer scrutiny over health measures in the post-COVID-19 world.²⁹ Just as we are held indirectly responsible for social and environmental conditions, so too will we be held responsible for outbreaks in our supply chains. We can implement the necessary standards to keep the workers who build our products safe. It is our responsibility to act now. The information is available, the data are clear, and the clock is ticking.

We must work together to do this. We can only make a meaningful impact if we work as efficiently as possible, and that requires collaboration.

Inspectorio offers Rise platform to help in the fight against COVID-19

Given what we see and know now about how the novel coronavirus is impacting these hubs of industry, how can we reactivate supply chains activities, and therefore, livelihoods – without risk of another outbreak?

We must ensure workplaces and factories comply with guidelines for everyone’s health and safety, consistently monitor these efforts, and provide corrective and prevent actions (CAPA) for continuous improvement. However, most organizations have limited resources or insufficient tools to implement these measures quickly and successfully in the face of the current crisis.

This is where Inspectorio can help. Our Rise platform is uniquely positioned to help protect factory workers on a global scale:

• We have been collaborating with leading brands, retailers and international NGOs to curate a library of COVID-19 workplace readiness guidelines.
• Our real-time monitoring and reporting provides brands and retailers with instant updates on how their overseas partner facilities are complying with important health and safety initiatives.
• It is now becoming critical to be able to view up-to-date COVID-19 data trends and compliance information side by side. Our Rise platform features a COVID-19 Sourcing Dashboard that puts real-time COVID-19 and compliance data in one place, letting brand and retailer teams make better-informed sourcing decisions.
• As facilities submit assessments within the Rise platform, it automatically generates the CAPA reports that include automated recommendations for corrective actions, as well as didactic e-learning courses to facilitate continuous improvement.
• Our comprehensive Analytics dashboard helps brands and retailers understand which facilities need improvement, as well as what type they need.

If we can help, we must – to protect our partners and keep workers, and their communities, safe. At Inspectorio, we’re doing what we can, and what we must – but we need your help.

We can protect lives. And we need to start today.

Sources

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