Ainur R. Sophiaan The Jakarta Post Contributor

WTC tragedy leads to more layoffs and export crash

The tragedy befalling the World Trade Center (WTC) twin towers has been a major blow to companies depending on the United States market.

Data compiled by the East Java chapter of the Association of Indonesian Entrepreneurs (Apindo) shows that in the last three months there have been at least 7,000 layoffs in a number of cities while another 3,000 layoffs will soon be on the cards.

"Apart altogether from the global recession and the decline in the U.S. economy, the situation has deteriorated due to the WTC tragedy, whose impact has been felt the world over," said W. Pattiradjawane, chairman of Apindo's East Java chapter. The laid- off workers come from five companies located in Surabaya, Sidoarjo and Pasuruan. These companies have lost orders for such goods as footwear, furniture and textiles, on which their businesses normally depend.

He noted that three more companies would also have to lay off workers in late December this year. They are now holding discussions with the local manpower service and the All-Indonesia Workers Association (SPSI). "They say they have to take this measure because many orders have been postponed and some have even been canceled," he said, adding that he was sure these companies would comply with the proper procedures when laying off their workers.

The impact of the WTC tragedy has also been substantial for small and medium-scale enterprises as many foreign buyers have stopped their purchase contracts. One of these enterprises, INTAKO in Tanggulangin, Sidoarjo, which produces leather bags, casings, wallets and the like, has seen many of their overseas buyers from Belgium, Italy, the United States and Japan, reduce their order quantities.

"Some have even stopped their contracts," said the marketing manager of INTAKO, M. Khozin, when meeting the Asian Development Bank's technical assistance team for Small and Medium Enterprise Development earlier this month.

He said that the drop in purchase orders and contracts was attributable to the worsening security situation and the sluggish economies of the importing countries. Purchasing power in those countries had also weakened.

Unfortunately, Khozin was unable to give exact figures quantifying this decline. He simply said, "The decline involves a large quantity. Now we can export only 5 percent of our usual quantity."

As for INTAKO alone, he said, it now exported only trumpet casings for its Japanese buyers. These casings are exported through the Pasuruan Industrial Estate Rembang (PiER) bonded zone.

Every month, they receive an order for 2,500 casings, which are made by five craftsmen through a partnership program. "Honestly, foreign demand is continuing to drop, especially now that the influx of Chinese products has made market competition very stiff," he noted.

Meanwhile, amid export inertia in East Java, there is a ray of hope following the recent visit of an ADB team to Surabaya and Sidoarjo. During their visit, the ADB team promised to help solve the problems hampering the export of East Java's products. The ADB has also agreed in principle to extend financial help to East Javanese exporters.

"We'll help put arrange deregulation for East Javanese exporters so that they can continue their businesses and improve their competitive edge on the global market," said James Mudge, chairman of the ADB Team for the Promotion of Deregulation and Competition Project.

The outcome of the discussions that the team has had with East Javanese exporters will be sent to ADB headquarters in the Philippines and later the ADB will make some recommendations in this respect to the Indonesian government.

Agung Rahardjo, chairman of the East Java chapter of the Association of Indonesian Exporters (GPEI), said that the measures to be taken by the ADB would bring a breath of fresh air for East Java's exporters, whose businesses have been hampered by a lot of constraints.

He cited as one constraint the stipulation on 5-day free demurrage. He said that if goods for some reason had to remain in the port warehouse for more than five days, the demurrage for the extra days should actually have to be borne by the shipping company, not the exporter. Otherwise, this cost would make the exporter raise the price of his goods, therefore causing the goods to be less competitive on the overseas market. So, he said, this problem must be solved so that a higher level of efficiency could be achieved.

In addition, regional autonomy in the regencies had led to regency administrations imposing various kinds of levies. "This is what exporters complain about more than any other problem. Unless matters related to levies imposed by regency administrations are immediately settled, our goods cannot compete well on the export market. In the long run, we will be too weak to face China and other countries on the global market, he said.

In this context, Agung also expressed the hope that the government would better identify what really constituted additional burdens on our exporters and hampered their export activities. "Our goal is certainly to improve our competitive edge in terms of quality and price", he said.