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Stimulus can absorb 3m new workers

The government expects its stimulus package to absorb an extra 3 million workers amid large scale layoffs from companies hit by the global economic downturn

Aditya Suharmoko (The Jakarta Post)
JAKARTA
Thu, February 26, 2009

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Stimulus can absorb 3m new workers

The government expects its stimulus package to absorb an extra 3 million workers amid large scale layoffs from companies hit by the global economic downturn.

On late Tuesday, the government received approval from the House of Representatives to launch the stimulus package. The House even raised the amount by Rp 2 trillion to Rp 73.3 trillion in total.

The Rp 2 trillion increase, which will be added to fund infrastructure projects, is expected to help absorb an additional 3 million workers, said State Minister for National Development Planning Paskah Suzetta.

His estimate was based  the assumption that each additional  1 percent economic growth achieved could generate employment for between 431,000 and 450,000 people.

According to the Finance Ministry, as of January export-oriented industries had laid off 24,790 workers, and were planning to lay off 25,000 more in the coming months.

Of the total Rp 73.3 trillion stimulus package, Rp 12.2 trillion is allocated to infrastructure projects and empowerement programs for the people living in rural areas.

This amount is on top of over Rp 90 trillion already set aside in the 2009 state budget for infrastructure projects  under the auspices of various relevant ministries.

“With an economic growth of between 4.5 percent and 5 percent, helped by the extra Rp 2 trillion increase in the stimulus, the poverty rate is expected to drop to between 12 percent and 13 percent.

“Last year it was 15.4 percent,” said Paskah.

Finance Ministry head of fiscal policy Anggito Abimanyu said the Rp 2 trillion increase would be allocated to build roads in villages and municipalities, and irrigation schemes, which “can quickly generate employment”.

The House said the government should finish the stimulus package details in five days, launching it as early as March to limit the negative impact of the global financial crisis.

“In five days the budget document will be ready. Thus, the money can be absorbed in the first semester (of 2009),” said Anggito.

Critics said if the government failed to launch the stimulus in early 2009, Indonesia’s economy might have a slower growth than expected.

Finance Minister Sri Mulyani Indrawati said the economy might only expand 4.5 percent this year, far lower than the 6.1 percent growth achieved last year.

Bambang Susantono, the deputy minister to the coordinating minister for the economy, in charge of infrastructure, said the government would launch the stimulus in early March, although it “still depends on the projects”.

He said the government had also worked with the International Labour Organization (ILO) to generate more employment.

“ILO said there are labor-based methods, which can generate employment 1.5 times higher based on the (same) jobs and sectors.”

He added that the government expected ministries and government agencies to create more employment without raising project costs or reducing project quality.

To reduce the burden of low- to mid-income workers, the government will introduce an income tax cut to workers having a monthly income of less than Rp 5 million, said the Finance Ministry’s director general of taxation Darmin Nasution.

He said the tax cut would be applied to February’s income tax, but the government was still designing which sectors would get the benefit of the tax reduction.

The regulation is expected to be issued soon.

Since last October Indonesia’s economy has increasingly suffered negative  impacts from the global economic downturn.

According to the Central Statistics Agency (BPS), the economy grew the slowest in two years in the fourth quarter of 2008 as the global slowdown slashed commodity prices and export demand.

The economy expanded 5.2 percent in the fourth quarter of 2008 from a year earlier, slower than the annualized growth rate of 6.4 percent booked in the previous quarter.

Also, on a quarterly basis, the economy contracted by 3.6 percent in quarter four from the previous quarter, replicating a similar trend that occurred in the same period during the last two years.

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