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Fewer local jobs despite booming growth
More than 400,000 jobs were to have resulted for every 1 percent increase in the nation’s economic growth rate, according to the 2011 and 2012 state budgets
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ore than 400,000 jobs were to have resulted for every 1 percent increase in the nation’s economic growth rate, according to the 2011 and 2012 state budgets.
Ironically, while Indonesia has boasted an average economic growth rate greater than 6 percent for the last several years, less than 500,000 jobs were created last year.
The shortfall augurs the question of why has it been so hard to create jobs in a nation with one of the most vibrant economies in the world.
The Central Statistics Agency (BPS) revealed in a report released on Monday that open unemployment in Indonesia was 7.24 million as of August, dropping merely 460,000, or about 6 percent, compared to the same period of last year.
Half unemployment, defined as people working part time and principally comprised of those working in the informal sector, also dropped slightly in August, down 30,000, or less than 1 percent, to 34.3 million from the same period a year ago, according to the BPS.
Measuring unemployment in Indonesia should also take into account the numbers of the half employed, according to analysts, who say that unlike in developed economies, where the unemployed receive state aid, the unemployed in Indonesia do just about anything to make ends meet.
“The sectors that became the major contributors to growth are not labor-intensive ones such as manufacturing and agriculture,” economist Adam Latief of state research agency the Indonesian Institute of Sciences (LIPI) said.
“Instead, the sectors that enjoyed most of the growth had low take-up [of employees]: banking, finance, trade and telecommunications.”
According to the BPS, the agriculture sector lost 450,000 jobs between August 2011 and August 2012, while the trade sector shed 250,000 workers.
The agriculture sector accounts for 35 percent of 110 million employed people, followed by the trade sector at 21 percent and industry at 13.8 percent, the BPS data said.
“The government has not been able to fully utilize its spending to develop labor intensive industries, such as agriculture and manufacturing. These sectors should have been the ones receiving more incentives from the state budget,” Harry Azhar Aziz, the deputy chairman of House of Representatives’ Commission XI overseeing
finance, said.
As the agriculture sector has seen less improvement in infrastructure, the manufacturing sector has recently been hit with violent labor protests and unfavorable labor policies.
According to the Indonesian Employers Association (Apindo), these factors have created higher costs for business and legal and security uncertainties, as the police have been reluctant to take action to squash violent labor movement.
Latief called for a new course. “There’s an urgency for revising the government’s mind-set on making growth as the final destination of a nation’s economy. The final destination must be on job creation,” he said.
As doubts emerge on the quality of growth in the nation, the BPS also reported that the nation’s economy may miss its growth target of 6.5 percent for 2012 due to a decline in exports.
Indonesia’s economy grew by 6.17 percent in the third quarter compared to the same period last year, which was the lowest year-on-year quarterly growth this year.
In the first and second quarter, growth stood at 6.3 percent and 6.4 percent, respectively.
“One of the major factors that has slowed our economic growth is weakening exports,” BPS statistics analysis deputy Suhariyanto said. “We have three major markets for our exports: China, Japan and the United States. The impact of the current global crisis has been deeper for those markets.”
Exports during the third quarter declined by 2.78 percent year-on-year, while imports dropped by 0.54 percent.
The decline in growth was also attributed by Suhariyanto to a 3.22 percent drop in government spending based on its decision to disburse additional salary to public officials earlier in the year.
While other economic indicators, such as domestic consumption and investment, were still showing healthy growth in the third quarter, according to the BPS; Suhariyanto believed that it would be very unlikely for the economy to achieve its economic growth target for 2012 set by the government.
“If we manage to improve our exports and maintain domestic consumption growth, we may well achieve 6.3 percent growth this year,” Suhariyanto said.
Bank Mandiri economist Destry Damayanti said the government should focus on domestic industry rather than trying to open up new export markets, which he described as a long-term measure.
