Govt pushes to focus on real sector

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.