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Impact of Local Hijab Producers on the Economy in Indonesia

According to industry executives, Indonesians buy 1.02 billion hijabs every year, paying over $6.09 billion. However, just 25% of the hijabs purchased by Indonesians are made domestically, representing a squandered potential for the economy. The impact on the Indonesian economy would be tremendous if the whole hijab market were manufactured domestically. Spending on "modest fashion," as hijabs and other Islamic-inspired clothing are commonly referred to, climbed by 5.7% in 2021, rising from $279 billion to $295 billion. This year, the industry is predicted to rise by 6%, reaching $313 billion.

ZM Zaskia Mecca (ZM) is an Indonesian company that was founded in 2016 and has its headquarters in fashionable South Jakarta. They have amassed a sizable fan base over the years, selling up to 70,000 pieces every month at an average price of $5.97. They manufacture their products locally, employing a hybrid approach of cloud manufacturing and traditional factory production. This allows them to keep manufacturing costs low while being flexible and scalable, allowing ZM to develop swiftly while delivering high-quality goods.

Pak Iyus, a hijab producer, is headquartered in Bandung, 150 kilometers from ZM's headquarters. Pak Iyus created a cloud manufacturing system that was inspired by and modified from comparable systems in China and Vietnam. It has allowed him to keep up with demand: at its peak between 2015 and 2017, he was able to create 150,000 clothes per day. His workshop allows ZM and other local fashion firms to concentrate on marketing and design while outsourcing production to cloud manufacturing technologies.

Although the process of making a hijab is straightforward, it does include several processes such as cutting, sewing, labeling, and packaging. Pak Iyus divides the process between high intensity but easy work and more highly skilled labor to cut expenses. He outsources low-skilled labor to the community, while high-skilled labor is performed in the plant. Pak Iyus transfers the goods to a fulfillment firm once the products are prepared at the facility. In this sense, the $2.39 he earns each product has an influence on the larger community.

Similarly, as demand for ZM's products has increased, the company has expanded manufacturing to numerous locations and relies on a number of other local businesses to offer services such as packing and shipping.

Indonesia now has an estimated 68 million small and medium-sized firms, such as ZM and Pak Iyus. The next 10 years might be a perfect time for these enterprises to flourish, as the country is expected to achieve the pinnacle of its demographic dividend, when the proportion of the population in working age reaches its peak, between 2020 and 2030. If more items are created locally, it has the potential to actually revolutionize the economy.

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