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.