Wed, 05 Mar 2003

Bankruptcy on the rise

Rendi A. Witular, The Jakarta Post, Jakarta

The country's manufacturing sector was mired in gloom last year as the number of bankruptcies jumped by 22 percent, making many thousands jobless, the Central Bureau of Statistics (BPS) said.

In its latest corporate survey, a copy of which was made available to The Jakarta Post, the BPS said that some 835 large and medium manufacturing companies went bankrupt in 2002, up from 650 the previous year.

The agency added that 767 companies had to downsize their operations, a 41 percent increase from the 447 in 2001.

The massive number of bankruptcies, downsizings and mergers had caused some 138,088 people to be laid off, further worsening the country's huge unemployment problem.

The number of jobless last year reached some 9.1 million, according to official data.

The BPS did not provide any explanation for the higher bankruptcy figures, but earlier reports said that the manufacturing sector had been hit by various uncertainties both at home and overseas.

On the domestic front, among of the negative factors were labor disputes, rising production costs, security problems, illegal charges, legal uncertainty and the smuggling into the country of cheaper overseas-made products.

These problems had not only forced local companies to shut down their operations, but a number of foreign firms had also been forced to do same or relocate their businesses to neighboring countries that offered better investment climates.

On the external front, the slowing down of the economies of developed nations and growing competition from regional peers were shrinking export markets for local manufacturers.

Labor-intensive sectors such as textiles, garments and leather goods topped the bankruptcy list last year (242 companies went bankrupt), followed by the food, beverage and tobacco sector (215), and the wood, bamboo, rattan and willow sectors (143).

Business leader Sofjan Wanandi said that the latest BPS data provided further evidence of the bad times being suffered by the country's manufacturers.

"The government should focus more on resolving problems hampering the sector instead of just dealing with the macro economic situation," said Sofjan, who is also the chairman of the National Economic Recovery Committee (KPEN).

Sofjan predicted that more manufacturing firms would collapse as the government this year would be inclined to concentrate more on preparing for the upcoming general election in mid 2004, instead of focusing on reviving the manufacturing sector.

The government is targeting the economy to grow at 4 percent this year, but experts have said that in order to create enough jobs, growth must be at least 6 percent per annum.

The BPS report was based on a 2002 survey of more than 21,000 manufacturing firms across the country.

Head of the BPS industrial statistics division Rifa Rufiadi said the survey was conducted for the agency's "Manufacturing Industry Directory 2002" year book.

He explained that the agency distributed questionnaires to all manufacturing firms in early 2002. If a firm did not return the questionnaire, BPS personnel at the regency level checked whether the firm was still operating or not.

The agency defines a large company as one that employs 100 or more workers, while a medium firm has between 20 and 99 workers.

The BPS data also revealed that at the end of 2002 there were 19,696 manufacturing firms still operating.