Rini claims labor unrest is hitting exports

Rini claims labor unrest is hitting exports

Rendi A. Witular and Adianto P. Simamora, The Jakarta Post, Jakarta

The increasing number of incidents of labor unrest here has not
only affected the flow of foreign direct investment but has also
hit the country's export sector, Minister of Industry and Trade
Rini MS Soewandi warned.

She said on Friday that the latest signs of weakening export
performance was mainly attributed to widespread labor protests
and security problems.

She explained that labor unrest was creating new uncertainties
in the delivery of goods to overseas buyers.

"Many international buyers have decided to shift their orders
to other countries because of security and labor problems here,"
she said.

"That's why I have several times expressed my concern on this
labor problem to Minister of Manpower and Transmigration Jacob
Nuawea and asked him to promptly sort it out," she added.

The Central Bureau of Statistics (BPS) revealed earlier this
week that exports in May were down by 1.5 percent to US$4.7
billion from April, and down 1.85 percent when compared to the
same period last year.

It was the first signs of the country's weakening export
performance after exports had started to rise during the past
previous months amid hopes of a quicker economic recovery in the
U.S. and Japan, Indonesia's largest export destinations.

Exports were behind the impressive 4.8 percent economic growth
in 2000. Although the government has said this year's 4 percent
growth will mainly be driven by domestic consumption, a stronger
export performance will be crucial to obtain higher economic
growth to create more jobs and lower the current high level of
unemployment, which according to one estimate has reached 40
million.

Electronics, footwear and textiles have suffered a decline in
exports during the first five months of this year. The
electronics sector saw a decline in exports from $2.6 billion to
$2.2 billion; textiles down from $1.2 billion to $1 billion, and
footwear dropped from $706 million to $572 million.

These industries happen to employ huge numbers of workers and
have often experienced trouble with workers' protests.

The Centre for Strategic and International Studies (CSIS)
economist Djisman Simandjuntak agreed with Rini, saying that many
overseas buyers of Indonesian exports have shifted to China
partly due to local labor conflicts.

Other analysts have said that another factor was the sharp
increase in the value of the rupiah against the U.S. dollar,
which has made Indonesian products less competitive than their
Chinese counterparts, which has a fixed exchange rate system.

Indonesia is competing with China in the export of low-end
manufacturing products like textiles, electronics and footwear.

Djisman said that the government must quickly deliver policies
that could suppress the seemingly unending labor conflict. He
said this could entice new investment into the country's export-
oriented industries.

But the Minister of Manpower and Transmigration instead drew
controversy recently when proposing a new labor protection bill,
which many businessmen and investors said was overly protective
for workers. They said that if approved, it would scare away
investors.

Foreign direct investment (FDI) approvals during the first
five months of this year dropped by 60 percent to $1.67 billion
compared to the same period last year.

Chairman of the Investment Coordinating Board (BKPM) Theo F.
Toemion said that legal uncertainty and labor unrest were among
the factors causing the drop in FDI.

Meanwhile, analyst from Institute for Development of Economics
and Finance (INDEF) Bustanul Arifin, disagreed with the
accusation that labor unrest was the main factor contributing to
the dismal export performance.

"It's just ridiculous to blame the workers for this. Rini is
just being emotional about the decline. She should elaborate on
the policy and overall business climate instead of pointing the
finger at a scapegoat," said Bustanul.

According to Bustanul, the main reason for the weakening
exports is mainly due to the global economic slowdown and
Indonesia's inability to fulfill buyers' orders.