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Businesses face bankruptcy, workers face the sack

Source
Suara Pembaruan - October 16, 1997

There will be many redundancies in the industrial sector if businesses are forced to close down because of the present tight money policy, said Adi Putra Tahir, who heads the Organisation Dept of the business association, KADIN. He said that the first thing businesses do when facing cash-flow problems is to lay off employees.

He said the current tight money policy has led to stagnation in many sectors of the economy. The fact is that many businesses rely heavily on bank loans to finance their day to day operations, but now banks are charging 37 per cent on loans, with some setting an even higher rate. Yet in Thailand which has also been struck by a monetary crisis, the prevailing interest rate is only 17 per cent. 'It's up to the government to help businesses because the value of the currency is determined by market forces,' he said.

The situation could worsen in the near future as various holidays approach. On such occasions, workers raise demands for special bonuses but the employers will not have the cash to meet these demands.

Meanwhile construction companies are also facing stagnation because of the sharp increase in the cost of raw materials. According to the figures given, raw material prices have increased by thirty per cent and in some cases as much as fifty per cent, as a result of the fall in the value of the rupiah. The price rises have occurred across a range of domestic and imported materials.

Construction businesses working under contract with the government say the only way to resolve their problems is for the government to revise costs written into their contracts, otherwise there will be many bankruptcies.

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