LABOR-INTENSIVE INDUSTRIES SHOULD BE ENCOURAGED TO INCREASE EMPLOYMENT

Investment Coordinating Board (BKPM) encouraged labor-intensive industries to increase employment in the country. Head of BKPM, Franky Sibarani, on Tuesday (February 17), said that in the last two years, employment is only around 200,000 plus 1%. Whereas, president Joko Widodo is targeting employment to reach 2 million by 2019.

Franky said that currently there are some investors who are committed to investing. In fact, BKPM noted that investment potential from investors reached USD 74 billion. According to Franky, the majority of the investment potential is to expand the industry that has been operating in the country. He said that interest in investment potential in labor-intensive sector is quite large, and this a positive signal. He believed that the potential is based on BKPM records from October 2014 to January 2015. Some of them have also been doing construction since January 2015.

Franky said that target absorption of 2 million new workers/year might fail if licensing problem in the regions is still slow and unsystematic. New employment can be much sustained by labor-sensitive sector, which is greatly hampered by licensing problem. He explained that the low interest of investors to develop business in labor-intensive sectors was due to unfavorable investment climate, such as licensing problem in the regions.

The becomes a problem for investors, including business in labor-intensive industries. If the sector is not growing, then the increase in labor absorption can be inhibited. Franky said, high production costs was due to cost of land lease for plants, and high labor costs dissuade investors from investing in big cities like Jakarta.

Meanwhile, in various locations outside the city, it is as if investors do not have choice because of the complexity in licensing procedure. Moreover, as long as investors have to take care of licensing procedure at the local level with an unsystematic licensing system. Franky added that this problem so that simplification of the licensing process in the regions can be realized. Hopefully, labor-intensive industries could be developed more widely in various regions so that there will be more new workers that can be absorbed.

BKPM recorded a decrease in the elasticity of labor in Indonesia. This was reflected in the number of employment of every 1% economic growth. Franky admitted that in 2004, every 1% economic growth can absorb 450,000 workers. In the last year, 1% economic growth could only create 160,000 workforce. Franky said that currently the government, especially BKPM, the Ministry of Industry and the Ministry of Labor, are working hard to achieve the target of provision of 2 million workers each year. Therefore, BKPM and the Minister of Industry and Minster of Labor agreed to encourage growth of investment in labor-intensive industries. Franky stressed that any investors who invest in Indonesia must use local human resources. However, these policies must be balanced with the availability of human resources who are ready to work.

Meanwhile, the Ministry of Labor is targeting regions outside Java, especially eastern part of Indonesia, as a source of employment as well as employment opportunities in the country. Director General of Manpower Placement and employment of the Ministry of Labor, Reyna Usman, said that labor-intensive industries are expected to assist the government in expanding employment opportunities in regions outside Java, especially in eastern Indonesia.

For java and Bali region, the government will maximize the tourism service and infrastructure sectors to help achieve target of employment opportunities and 5.7% economic growth, where every 1% economic growth can absorb around 350,000 workers. (E )

Business News - February 20, 2015