Labor-rich industries lagging

Aditya Suharmoko, The Jakarta Post, Jakarta

The government has not supported the steady growth of labor-intensive industries over the last six quarters, missing a vital opportunity to reduce unemployment and poverty, several lawmakers say.

Last year, the economy grew 6.3 percent, while in the first half of this year, the economy expanded by 6.4 percent, according to the Central Statistics Agency (BPS).

However, "Growth by sectors shows that the agriculture and manufacturing industry sectors had a low growth," Rama Pratama of the Prosperous Justice Party (PKS) Faction said Wednesday during a House of Representatives plenary session.

"These two sectors absorb more laborers than most other sectors," she added.

If the government fails to improve labor-intensive industries immediately, it might miss its poverty and unemployment reduction targets, Rama said.

"The government's challenge is to create a quality economic growth, meaning the growth can absorb a significant number of laborers to reduce poverty," he said.

In a speech last week, President Susilo Bambang Yudhoyono said the government targets to reduce the rate of poverty in 2009 to between 12 and 14 percent, and unemployment to between 7 and 8 percent.

The poverty rate stood at 15.4 percent in March 2008, and the unemployment rate was 8.5 percent in February 2008, Yudhoyono said, citing BPS data.

Nusyirwan Soejono of the Indonesian Democratic Party of Struggle (PDI-P) faction said the nation's economic growth was being enjoyed only by middle- and high-income people, while low-income people continued to suffer.

"Modern markets and malls are developing, while traditional markets are declining," Nusyirwan Soejono of the PDI-P said.

Economists have said the government must improve labor-intensive industries and empower regions to secure a leap in the economy.

Finance Minister Sri Mulyani Indrawati has said the government will focus starting next year on improving labor-intensive industries, as well as other rapidly growing industries.

"The manufacturing industry will be one of the government's priorities for revitalization," Sri Mulyani said.

"If we see the composition by sectors, our hopes lie in the labor-intensive sectors, also including the agriculture and services sectors."

According to the BPS, the transportation and communication sectors grew the most in the period beginning 2004 and ending at the start of the second half of 2008, despite it contributing only a small portion to Indonesia's gross domestic product (GDP).

In the same period, the manufacturing industry sector lagged behind the transportation and communication sectors as well as the construction, financial, real estate and company services, and the trade, hotel and restaurants sectors.
Growth (in percent):
2004 2005 2006 2007 Q1 2008
Manufacturing 6.4 4.6 4.6 4.7 4.1
GDP 5.0 5.7 5.5 6.3 6.4

Source: Central Statistic Agency
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