Govt pushes to focus on real sector

Anissa S. Febrina, The Jakarta Post, Jakarta

Aside from addressing the chronic problems of the high-cost economy, the government needs to balance its focus on macroeconomy with efforts to prioritize the real sector next year if it wants to reduce unemployment, a powerful business group says.

Speaking at the group's evaluation of the country's 2005 economy on Tuesday, Indonesian Chamber of Commerce and Industry (Kadin) chairman M. S. Hidayat said the government had to make a list of potential industrial sectors and produce comprehensive policies to help them and the real sector in general.

Attributed in part to this year's fuel price increases, several industries in the country have been forced to lay off workers. According to the Central Bureau of Statistics (BPS), the open unemployment rate reached, as of November, 10 percent of the country's 106 million workforce.

That figure is likely to rise as several big companies, such as the world's largest instant noodle producer PT Indofood, have said more layoffs are in the pipelines.

"Our economy must grow by 7 percent next year to be able to absorb 350,000 more workers," Hidayat said, adding that reaching even 6 percent would be difficult amid soaring inflation.

The classic problems of the high-cost economy, overlapping taxes and tariffs as well as increasing energy costs are among pressing issues.

In its evaluation, the chamber said the country's rigid bureaucratic system, the ever-occurring "black" or illegal economy and the structural problems faced by the financial and banking sectors inevitably made the situation worse.

"The government should sit down with the private sector on which industries to focus on, and later on figure out which banking and financial policies could be made to support them," Hidayat said.

The chamber has listed several labor-intensive industries like the textiles, garment, footwear and agricultural-based businesses that have potential as the country's industrial focus.

Hidayat stressed again the importance of tax and other fiscal incentives to help alleviate the burden of increasing production costs on industries.

"More importantly, the government must carry out the promised bureaucratic reforms," the chamber's vice chairman Rachmat Gobel added.

Gobel said consistency in policy-making was essential if private sector businesses were to be encouraged to expand.

He said the high tariffs imposed on raw industrial materials, for example, would force companies to shift to trading rather than developing their manufacturing companies.

Aside from that, he said, other unnecessary costs such as the high distribution costs due to insufficient transportation infrastructure needed to be reduced.