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.