Anissa S. Febrina, Jakarta – The stark reality of the bandied-about terms "high-cost economy" or "increased operating costs" may come down to the resulting worker layoffs.
Last year, they translated to about 350,000 workers losing their jobs, almost triple the 138,000 workers laid off in 2004. With the threat of a power rate hike this year, more workers may find themselves scrimping to get by in the near future.
"Companies were forced to streamline their factories for efficiency (in 2005), since fuel prices increased while, on the other hand, the promised incentives have not been realized," Indonesian Employers Association (Apindo) secretary-general Djimanto said last week.
Almost half of the number of layoffs came in wood-processing industries, followed by the textile and garment sector, he added.
Wood and textile weaving industries had already lost about 500,000 and 300,000 jobs respectively in the past two successive years, shrinking the number of jobs in the nation's manufacturing sector from 11.50 million in 2003 to 10.7 million in 2005.
Businesses in the hardest-hit forestry-based subsector, which terminated employment for about 170,000 workers last year, have long complained about increasing transportation cost and rampant illegal levies.
Transportation costs and the high-cost economy from the illegal fees contributed to 20 percent and 30 percent respectively of the industries' total operating costs, he said.
There was also a limited supply of timber after the government cut the logging quota from natural forests from 5.7 million cubic meters in 2004 to 5.4 million cubic meters in 2005.
With the fight against illegal logging intensifying, some government officials, including many without authorization, have started carrying out unnecessary checks and raids on the supply of timber, making it even more difficult for firms to secure raw materials, said Indonesian Sawmill and Wood Working Association chairwoman Soewarni.
She explained that about half of the country's 115 wood-based industries had collapsed, victim of the high-cost economy as well as the prevalence of aging machinery amid increased competition with more efficient China and Malaysia.
The country saw its wood products exports fall from US$3.28 billion in 2003 to $3.17 billion in 2004. Last year, exports of the goods, accounting for about 6 percent of Indonesia's total non-oil and gas exports, dropped again, reaching $2.8 billion.
Problems are also hampering textile and garment companies. At the end of last year, the Indonesian Textile Association (API) reported that 70 companies had stopped operating, leaving about 70,000 textile and garment workers jobless.
The industry, which employs a total of 1.2 million workers, is one of the largest contributors to the country's non-oil and gas exports.
With no signs of an economic upturn yet, the outlook for the businesses does not look as good despite government forecasts of better times ahead. A planned hike in electricity rates, if realized, would add to their woes.
"The upcoming electricity rate hike would leave businesspeople no other option but to lay off more workers," API secretary-general Ernovian G. Ismy warned.
The government is currently reviewing a proposal by state power firm PT PLN to increase rates, although it has said the effects would be "minimized". Djimanto predicted an increase in rates would put about 700,000 jobs at risk this year.