Tangerang. A major garment factory in the Indonesian town of Tangerang will close down the business and lay off 1,163 workers after its main customer sportswear giant Puma stopped orders due to sluggish demand in the European markets, a local government official has said.

Tuntex Garment Indonesia, the biggest garment factory in Tangerang Regency founded in 1992, has halted operations since March 31 due to a steady decline in export sales over the past three years.

"The main reason for the layoffs is the continued decline in sales in the last three years due to the Covid-19 pandemic and because the Puma products supplied by Tuntex were largely sold to Europe and the US which are currently being hit by high inflation,” said Desyanti, an official with the Tangerang Regency Manpower Department.

The management has pledged to settle the mass layoffs according to government regulations and pay the Ramadan bonus -- known by the Indonesian acronyms THR or the national holiday allowance, she added.

"Tuntex will give the severance pay on April 19, 2023, while the THR payment will be settled on April 15 at the latest," Desyanti said.

Workers who have spent at least a year in the company are entitled to receive Ramadan bonus the equivalent of one month's salary, she added.

The Indonesian Fiber and Filament Yarn Producers Association or APSyFI. predicted that the country's textile and apparel export will drop to around $11 billion this year from $12 billion last year.

The association attributed the declining exports to the drop of 40-50 percent since early this year in the order value placed by overseas buyers.