Jakarta. An Indonesian factory that produces shoes for American company Nike has sacked 4,985 workers as the economic impact from the Covid-19 pandemic continues to take its toll.

The mass layoff by the Victory Chingluh Indonesia factory in Tangerang District, Banten Province, was the result of sluggish demand in the footwear market, an official with the district's manpower office said on Monday.

"Victory Chingluh Indonesia has terminated 4,985 of its workers and became the tenth company in Tangerang to succumb to the Covid-19 pandemic," Hedra, the office's head of labor dispute settlement, told reporters.

"They made the decision to lay off the workers because there has been a sharp fall in demand for Nike shoes. They explained to us the reason for the mass layoff in a meeting which was also attended by the company's labor union reps," Hendra said.

Victory Chingluh is a Taiwanese sportswear company that runs two factories in Indonesia.

A request for comments from the company has not received a response.

Earlier this month, another shoe factory was forced to close in Tangerang. It sacked 2,500 workers.

Shyang Yao Fun, a subcontractor for Adidas, plans to relocate its factory to Brebes, Central Java, which offers a lower minimum wage.

Banten has the highest unemployment rate among the country's 34 provinces this year.

According to government statistics, 8.01 percent of the labor force in the province south of Jakarta are jobless.

Indonesian Footwear Producers Association (Aprisindo) chairman Firman Bakri said Indonesian factories subcontracted to famous global brands like Nike and Adidas could lose up to 70 percent of their orders if the sluggish demand continues.

Firman estimated currently the Indonesian footwear industry is running at only 72 percent of its full capacity due to the pandemic.

Indonesia is one of the top ten footwear suppliers in the world.

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