INVESTMENT IN LABOR-INTENSIVE INDUSTRIES SLOWED

The decline in investment this year is certainly very influential to labor absorption. Data from the Ministry of Industry mentioned that last year, number of workers in the textile sector (upstream and downstream) is approximately 1.3 million people. This year, it is estimated that there is only a slight increase, which is about 1.4 million. The industrial sector is a sector that absorb large number of workers. But lately, new investment in this sector declined because production activities are heading toward automation. Additionally, the condition of Regional Minimum Wage (UMR) and the high cost of domestic production due to high cost of energy is considered as the cause of the slowdown of investment in labor-intensive industries.

Sofyan Wanandi, Chairman of Indonesian Employers Association (Apindo), in Jakarta, on Thursday (July 17), said that the role of labor-intensive industries this year will not be as significant as last year. According to him, throughout 2013, the industry grew 6.06% or higher compared to growth in 2012, which is approximately 4.27%. Sofyan admitted that since the beginning of 2014, new investment in labor-intensive industries is relatively slow.

It is said that declining investments occur in labor-intensive sectors, especially textiles and textile products. Based on data of the Investment Coordinating Board (BKPM) processed by Ministry of Industry, investment in the textile sector through Domestic Investment (PMDN) in the first quarter of 2014 reached IDR 362.8 billion, down 55.31% over the same period of last year, which reached IDR 811.9 billion. Investment in the textile sector through Foreign Investment (PMA) is worth USD 99.9 million, down 57.37% over the same period of last year, which reached USD 234.3 million.

Meanwhile, according to Indonesian Textile Association (API), the investment decline occurred because production costs are very high and it is no longer competitive. This makes it a lot of investors not interested to enter Indonesia. API noted that there are at least five investors that will enter Central Java. The number is not as many as last year. In 2013, investment in the textile sector reached USD 750.5 million, up 58.67% compared to 2012 which reached USD 473.1 million. The increase in 2013 is quite high compared to investment performance in 2012 which was down approximately 5.1%.

He admitted that Indonesia’s economic growth is slowing. Until the first quarter of 2014, Indonesia’s annual economic growth is only 5.21%. It is still positive, but it is the slowest growth over the last five years. In the same period of 2013, Indonesia’s economic growth is 6.03%. Slowing economic growth not only hit Indonesia. Many countries in the world are also experiencing the same thing. United States, China, Thailand, Vietnam, and the Philippines were hit by slowdown in economic growth.

Therefore, whoever is elected as the next president will have a variety of challenges, particularly from the aspect of developing the economy in the future. The next president should also boost the real sector to support economic growth. Economic observer of Indef, Enny Sri Hartati, said that the next president should be able to maintain economic stability, especially fluctuations due to external and internal factors. In addition, there should be an attempt to fix the real sector, given its huge impact on the Indonesian economy.

According to him, if the real sector is fixed, it will facilitate sustainable growth of the Indonesian economy. However, that does not mean that the President is left alone in the issuance of economic policies in Indonesia. Enny said that there are challenges that need to be addressed properly by the newly elected president. The first challenges is the declining competitiveness of Indonesia. Second, the high cost economy. Thirds, poor logistics. Fourth, inadequate infrastructure development in Indonesia. (E)

Business New - July 23, 2014