Wed, 26 Dec 2007

From: The Jakarta Post

By The Jakarta Post, Jakarta
The government needs to place more focus on the development of labor-intensive manufacturing industries, and the agricultural and mining sectors in order to maintain sustainable growth and reduce the country's high unemployment, the Indonesian Chamber of Commerce and Industry says.

Speaking at the chamber's year-end economic review last week, Kadin chairman Muhammad S. Hidayat said the development of the agricultural, manufacturing and mining sectors should serve as the backbone of the country's future growth given their greater impact on people's lives.

He said the government's current policy, which provided incentives only to certain business sectors, such as telecommunications, property and financial services, had contributed to slower growth in such sectors as manufacturing and agriculture.

"The government needs to focus on the development of agriculture and manufacturing to put them on a par with the growth in the non-trade sector, such as the telecommunications and property sectors," Hidayat said.

Over the past five years, he said, the growth structure of the country's economy indicated widening gaps between different sectors as the result of the differing treatment handed out by the government, the chamber said.

Citing data from the Central Statistics Agency (BPS), the chamber said that growth in the trade sector, which included the mining, agricultural and manufacturing sectors, lagged far behind growth in the telecommunications, property and services sectors.

Although the plantation sector showed high growth of 8.9 percent during the first nine months of this year thanks to sharp increases in commodity prices overseas, other sub sectors of agriculture, such as aquaculture, cattle-raising and the forestry industry, had suffered lower growth. The mining industry had also shown low growth.

"The numbers show that the government has been neglecting the trade sector," the Kadin report said.

In addition to the agricultural, manufacturing and mining sectors, the government also needed to pay more attention to the development of small and medium enterprises (SMEs).

The SMEs should be strengthened so that they can play important roles in supporting larger firms, either as suppliers or subcontractors.

Kadin said the revitalization of the trade sector should be made one of the government's priorities in its short-term economic development policy if it wanted to provide more jobs and reduce poverty.

He said that the government could no longer rely on foreign companies for job creation as many that were involved in labor-intensive industries had relocated their plants to other developing countries, such as Vietnam and China.

Kadin hailed the government's efforts to put the economy back on track this year, as indicated by the improvements in most economic indicators, such as GDP growth, inflation and the central bank's benchmark rate.

The chamber, however, said that growth had failed to provide jobs as expected because most of the drivers of economic growth came from sectors that were not labor intensive. (adt)