Up to 1 million workers may face layoff, says minister

The Jakarta Post, Jakarta

The economic hardship faced by businesses, in particular due to the recent fuel prices hike, may result in up to 1 million workers losing their jobs by the end of the year, a minister says.

"Others estimated that there could be up to two million workers forced out of work, but our study showed that the number would be only as much as one million," said Minister of Manpower and Transmigration Fahmi Idris on Thursday.

The government, under pressure to avoid fiscal disaster amid an inflated fuel subsidy, increased on Oct. 1 domestic fuel prices by an average of 126 percent.

Operating costs of several industrial sectors have gone up by 10 percent to 50 percent since, prompting companies to consider reducing their workforce to stay in business.

Fahmi added that the sectors most affected were the furniture and timber industry, as well as textiles and garments.

Aside from the fuel prices hike, the furniture and timber industry are currently also having difficulties in obtaining raw materials due to the lower logging quota and illegal logging.

"Meanwhile, textiles are facing tight competition due to China's massive expansion," he said.

However, Indonesian Business Association (APINDO) chairman Sofyan Wanandi promised that companies under the association would not terminate any of their workers in the next six months.

"We will try not to lay off workers in the next six months. But, we cannot guarantee this for SMEs (small and medium enterprises)," Sofyan said after signing a memorandum of understanding between APINDO and state workers insurance company Jamsostek on Thursday.

Bigger companies, he explained, had more capital and therefore were more resilient during times like this. Sofyan estimated that there could be hundreds of thousands of workers in SMEs facing possible layoffs.

As of February 2005, there were 105.8 million workers nationwide, of which around 79 million were working with the country's 42.3 million SMEs.

Meanwhile, Jamsostek director Iwan Pontjowinoto added that his company had set aside Rp 1 trillion for possible disbursement of worker's pension funds.

Workers registered under Jamsostek pension fund program usually cash in their benefits after being retrenched.

There are currently 115,000 companies that have registered 7.5 million active workers in Jamsostek's workers insurance scheme.

Meanwhile, responding to demands of adjustments in the minimum regional wage (UMR), Fahmi explained that it would depend on the cost of living in each area as well as the level of economic development of the provinces and the productivity of companies.

"We have set the UMR based on the cost of a decent standard of living and not the minimum cost. It will be effective in January," he said.

This standard includes education and housing costs aside from the minimum cost of living. The amount varies between provinces.

Jakarta's minimum wage currently stands at Rp 711,283. Labor unions have demanded that it be raised to Rp 1.2 million following the rising costs of basic commodities.