Indonesia needs new approaches to heal economy: Experts
Tony Hotland, The Jakarta Post, Jakarta
Jump-starting Indonesia's ailing economy will require "unconventional methods" to draw back foreign investment and overcome the pressing problem of unemployment, experts have said.
Chairman of the Indonesian Employers Association (Apindo) Sofjan Wanandi said on Wednesday that one way would be by freezing the minimum wage, as it could help address the issue of massive unemployment faced by the country.
"Think of the many people who are jobless before getting busy talking about the minimum wage. Whoever can pay more, pay more. For those who can only pay less, so be it. What's important is that the jobless get a job first," said Sofjan here during a two- day seminar on Indonesia's economic and political transition process.
He warned that the level of unemployment was tremendous, with an estimated one million to 1.5 million new workers entering the job market annually.
"A friend of mine who's a big employer here said that the cost of paying labor here is much greater than in China or Vietnam. Furthermore, the workers there are more productive than those here. How can we compete with that?" Sofjan said.
Labor costs account for 20 percent of total production costs in the garment, shoe and toy industries. Indonesia's minimum wage varies in different regions, ranging from Rp 350,000 (US$41.7) to Rp 700,000.
During the past few years there has been pressure for companies to raise workers' minimum wages, a demand that has often led to protracted labor disputes. This has been perceived as a deterrent to new investment in the country, whose economy has been growing at a low rate during the past few years, mainly driven by domestic consumption, while both exports and investments have remained weak.
Another way to revive the economy, said Sofjan, would be to grant land title to farmers to help them obtain loans from banks. Most farmers work ancestral land, which is unregistered.
"Some 80 percent of our land here is unregistered. Registration is vital; for example, it can be used as collateral by farmers when seeking loans," he asserted.
Sofjan, also chairman of the National Economic Recovery Committee (KPEN), said the government should lend thousands of hectares of destroyed forest areas to private companies at no charge to turn the land into productive use such as for plantations.
"Who wants to purchase damaged land? Just lend the land for use at no charge and make a deal that the companies will hire thousands of people (while developing the land). Should the companies reap a profit, the government can tax them. That way, the government will get money and the level of unemployment can be reduced," he affirmed.
He also criticized the implementation of the new visa-on- arrival policy, calling it "nonsense" and "unsupportive for the tourism industry".
Sofjan also lamented the country's confusing legal system, whereby many laws conflicted with one another.
His view was shared by noted lawyer Todung Mulya Lubis, who thought that foreign investment would not come if the government failed to clean up the judiciary.
Todung recommended the establishment of an ad hoc court for foreign investment to settle exclusively legal problems faced by foreign investors. He also suggested the provision of training programs for Indonesia's judges to help them better comprehend the complexity of international business transaction issues.