CORE: Labour-intensive sector incentives must boost productivity
Jakarta (ANTARA) - Researcher from the Center of Reform on Economics (CORE) Yusuf Rendy Manilet believes that the design of incentives for labour-intensive sectors should be directed not only towards absorbing labour but also towards boosting productivity.
According to Yusuf, the most effective incentives are those that directly address business costs and risks, thereby enabling sustainable expansion and job creation.
“The most effective incentives are precisely those that directly reduce business costs and risks,” he stated when contacted in Jakarta on Friday.
This statement responds to the government’s policy of shifting the priority of fiscal incentives from being based on large investment values to being based on labour absorption.
Yusuf stressed that the design of incentives needs to consider the quality of jobs and the added value generated, rather than merely the number of workers absorbed.
He cited relevant instruments, such as interest subsidies for expansion, relief on labour burdens, and incentives that maintain workers’ purchasing power.
However, he emphasised that non-fiscal incentives often matter more to investors than tax incentives.
“Fast permitting, land certainty, and infrastructure—for investors, these are often more determining than tax holidays,” he said.
Furthermore, he assessed that the most important incentives are those for industrial transformation, encompassing worker training, technology adoption, and productivity improvements.
“Without that, incentives will only serve as short-term cushions,” he stated.
From an opportunity perspective, Yusuf believes that not all labour-intensive sectors are worth saving. He emphasised that the government must be selective so that incentives are truly directed towards sectors capable of creating added value and productivity.
According to him, the food and beverage sector as well as the agricultural processing industry (agroprocessing) deserve to be promoted because they have stable demand, are domestically based, and export-oriented.
On the other hand, he believes the textile and footwear sector still holds prospects, but only if serious modernisation is undertaken. Furniture, crafts, and tourism are also seen as attractive because they are labour-intensive and follow global trends.
“Even construction and property can become quick engines for labour absorption in the short term, though selectivity remains essential,” he remarked.