Ainur R. Sophiaan

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.