Analysts warn of higher unemployment rate in 2004
The Jakarta Post, Jakarta
Economists and labor analysts warned the nation of a possible higher unemployment rate in 2004, due to the heightened security issue and the upcoming general elections.
Former labor minister Bomer Pasaribu said the unemployment rate would increase by 6.2 percent to 42.5 million in 2004 from 40 million early this year, which would result in serious impacts on the unstable situation in the social, economic and political spheres unless emergency measures were taken.
"The unemployment problem will worsen as 2.5 million new job seekers, mostly high school and university graduates, will join the labor force in 2004, while only a maximum 1.1 million are expected to be absorbed in the labor market," he said yesterday.
Workers categorized as "unemployed" are those who work less than 40 hours per week, while "open unemployment" indicates those without jobs.
Bomer said the number of jobless under the open unemployment category would reach more than 15 million nationwide.
He warned that the issue was a time bomb that could explode some time soon if no progress is achieved in improving the economic, political and security situations.
Bomer, chairman of the Center for Labor and Development Studies (CLDS) and labor economy lecturer at the Bogor Institute of Agriculture (IPB), said he was pessimistic that Indonesia's economic growth would reach five percent in the 2004 fiscal year, since the government did not seem serious in handling security issues, including terrorist attacks and separatism, to create an environment conducive to investment.
Coordinating Minister for the Economy Dorodjatun Kuntjoro- Jakti said the President was scheduled to present the draft 2004 budget to the House of Representatives on Aug. 15, with an economic growth target of five percent.
Defending his arguments, Bomer pointed out that besides the initiation of the 2003 Year of Investment, no significant progress had been made by the government to cope with the unemployment issue, and that new foreign investments did not really create any job opportunities this year.
"Many foreign investors have made divestments in the banking sector, but this does not create any job opportunities. This means the economic growth targeted to reach four percent this year will mostly rely on consumption, which will contribute less to job creation."
Bomer said that based on a recent study conducted by CLDS and the International Labor Organization in Jakarta, an economy mostly dependent on the consumption sector for growth was expected to grow by three percent in 2004 and provide between 900,000 and 1.1 million new jobs.
To help cope with the serious unemployment problem, Bomer said, the government's economic and non-economic policies should be oriented to the creation of jobs.
"We need concrete measures and policies to lower risks for foreign investments. All necessary measures should be taken to repair Indonesia's image, which has been tarnished by increasing terrorist attacks and separatism," he said.
Dradjad Wibowo, an economic analyst in Jakarta, and Riasto Widiatmono, an economist from Diponegoro University in Semarang, concurred and said the country would have difficulties in reaching a five percent economic growth in 2004, particularly as the IMF economic recovery program would end in December.
Riasto argued that an economic growth of five percent, even if it was realized, would not automatically create jobs for the 2.5 million people entering the work force next year, because growth was based on the consumption sector.
He said the central bank's efforts at lowering its benchmark interest rate had failed to precipitate a similar decline in credit interest rates at local banks, which would continue to hinder development of the real sector.
Dradjad said many political parties would likely buy votes in the next elections, and while this would improve the people's purchasing power, it would simultaneously cause an increase in the inflation rate.