Indonesia's labor indicators deteriorate: ILO report
Ridwan Max Sijabat, The Jakarta Post/Jakarta
Overall labor market indicators for Indonesia and other countries in Southeast Asia and the Pacific region have deteriorated over the past decade, although some improvements have been observed recently, ILO's 2004-2005 Employment Report says.
Released on Tuesday, the report said the deteriorating labor indicators for Indonesia, the biggest economy in Southeast Asia, was related to the prolonged economic crisis, which had severely affected the country since it hit in 1997.
The report comes as no surprise as far as the government data on employment is concerned. The latest government data revealed that open unemployment had reached 9.5 million while disguised unemployment had risen to 43 million.
Thousands of workers employed in forestry, manufacturing and textile sectors have been dismissed or laid off since their products could not compete with similar products from China, Thailand, Vietnam and Korea.
Deteriorating or non-existent infrastructure in rural areas and the high-cost economy is one of the many things that have discouraged foreign investors from coming to Indonesia.
The country's labor productivity remains low, according to the data, because 71 percent of the country's 100-million strong workforce were under-educated, many with less than six years of formal education. Only 2 percent of Indonesia's workforce are graduates from universities or post-high school academies, while the remaining 27 percent are university dropouts with certificates from vocational training centers.
Analysts have urged Indonesia to completely overhaul and improve the people's skills and productivity, for it to have any chance of competing with Malaysia, Singapore, Thailand and the Philippines in the ASEAN free trade market in 2007 and with China in the China-ASEAN single market later in 2010.
In its report, the United Nations main labor agency concluded that unemployment rates rose 2 percentage points higher than 10 years ago and employment-to-population ratio was lower than it had been 10 years ago.
It said that the latter partly reflected a growing trend in education: People are not actually looking for work so soon, because they are studying for longer periods.
"But at the same time rising unemployment rates in the region indicate that not enough employment opportunities exist," it said.
The report showed an upward trend in productivity since 1993 that was much slower than in other Asian subregions, but higher than in most other developing regions.
It noted that from 1967 to 1997, during former president Soeharto's New order regime, Indonesia's Gross Domestic Product grew by an average of 7 percent annually and this rapid economic growth was mainly caused by high rates of labor-intensive exports and was accompanied by a significant reduction in poverty and the economy diversification to non-agriculture sectors.
"Although the development was built on strong macroeconomic policies and supported by increasingly liberal trade and foreign investment policies, underlying social, political, legal and financial institutions did not develop accordingly. This lack of functioning institutions, combined with high levels of corruption, made the country vulnerable to shocks," said the report.
The absence of strong institutions has made it more difficult and costly for Indonesia to defuse the crisis than other crisis- affected countries in the region.
Until the crisis, the report said, Indonesia had reduced the share of employment in the agriculture relative to the employment share in industry and services. After the crisis, this trend came to a halt, partly because people moved back to rural areas as they could no longer find employment opportunities in urban areas.
"This can be taken as a serious sign of delay in the development process, caused by the fact that social institutions were not in place; and the unemployment rate, which was around 4 percent before the crisis, subsequently went up to over 6 percent," said the report.