Economists welcome revitalization strategy

Adianto P. Simamora, The Jakarta Post, Jakarta

Economists welcomed on Monday the government's proposal to revitalize four key manufacturing sectors -- textiles, electronics, footwear, pulp and paper -- saying it would create more jobs and help boost exports.

"This strategy is basically good because it can absorb many workers and boost export revenue," Pande Raja Silalahi, an economist at the Centre for Strategic and International Studies (CSIS) told The Jakarta Post.

Pande, however, urged the government to immediately communicate the policy to the banking sector to gain financial support.

"The government needs to reassure them (both foreign and domestic banks) because they are reluctant to channel new credit to the real sector," he said.

"And the government should also explain that these four sectors will become the country's prime mover for economic growth," Pande said.

Minister of Industry and Trade Rini Soewandi proposed the revitalization of these four industries in an attempt to counter rising unemployment and slowing exports.

The recovery of these four industries is expected to create 350,000 new jobs and avoid layoffs.

The country's textile sector currently employs 250,000, the electronics sector 1.19 million, the footwear industry 389,000, pulp and paper 100,000.

Aside from the four sectors, Rini also proposed the development of seven other industries -- leather, fishing, crude palm oil, fertilizer and agricultural machinery, food, software, as well as handicrafts and jewelry.

It said that the development of these seven industries would absorb 809,000 new workers.

Revitalizing the four manufacturing sectors plus the development of seven industries will also boost exports to US$42.2 billion from $39.7 billion last year.

Meanwhile, Gadjah Mada University economist Sri Adiningsih, said the new policy was crucial to avoid bankruptcy and layoffs in the manufacturing sector, which has been badly hit by years of economic woes at home and the current global economic slowdown.

Sri, however, added that the government's strategy should also focus on boosting the competitiveness of local industries amid tougher competition and increasing trade liberalization.

She added that in order to create more employment, the government must also formulate a policy to boost the use of local content in the above industries.

"In the long term, the government must focus on this issue," she said.

Some 80 percent of the local production system is believed to depend on imported raw materials.

Separately, University of Indonesia economist Mohammad Ikhsan criticized the government for being too late in launching the revitalization strategy compared to its regional competitors.

He also said that it was important for the government to create a conducive investment climate at home to allow the four key manufacturing sectors to prosper.