Fuel hike major blow to industry

Fuel hike major blow to industry

Indra Harsaputra, The Jakarta Post, Surabaya

The fuel price hikes have severely affected industries in East
Java with more than a 40 percent of firms in the province in
danger of collapsing by the end of the year, a research institute
says.

The Regional Economic Development Institute (REDI) predicts
that by December this year, some 40 percent of total 4,600 firms
in the province would have gone out of business, or would be on
the brink of collapse.

Most of the worst affected industries were food and beverage
and textile and garment industries, REDI managing director Indra
Nur Fauzi said.

"Even before the fuel price hike, the industry already faced
tough competition from the many Chinese products circulating in
East Java. The Chinese products are much cheaper, therefore they
are crowding out local products from market," Indra said.

More than a third of firms in a Mojokerto regency industrial
park were shutting down or on the brink of going bust, an
employers spokesman said on Wednesday.

East Java Employers Association deputy chairman Alianto Wibowo
said most of the industries, located in 40-business strong Ngoro
Industrial Persada (NIP) industrial park, were aluminum, brass
and tin foundries, which were supported by Taiwanese investment.
The firms' main products were electricity cables and wheel rims,
he said.

"These industries are preparing to leave Indonesia and they
will apparently choose Vietnam, which offers cheaper fuel prices
for industry," Alianto said.

Currently, the price of fuel oil for industry in Vietnam
equals about Rp 2,800 a liter, while prices in Indonesia are
around Rp 3,810 a liter.

The fuel price hike has not only affected Taiwanese industries
in NIP but also 22 shoemakers, which employed some 15,000
workers, Alianto said.

Gas shortages, the rising prices of raw materials and employee
pressure for wages rises were all making costs for businesses
soar, Alianto said.

Manufacturing unions in East Java are calling for the minimum
wage in province to rise to Rp 1,500,000 a month, three times the
current amount of Rp 500,000 a month.

Indra urged the government to provide incentives for
industries so they could survive amid rising prices for fuel and
foreign competition.

If no help was given to industry, thousands of people would
lose their jobs, he said.