Editorial

The week in review: Reflections
and contemplations

Once again it has been a week at the end of the year when analysts, businesses and government institutions have gathered, reflected as 2012 drew to a close and projected economic and political developments in 2013.

Indonesia has a lot of blessings to count this year with its economy persistently performing well amid the weak global economy and even a contraction in Europe.

The government, including the central bank — Bank Indonesia — estimate this year will bring an economic expansion of 6.3 percent, down slightly from 6.5 percent last year, but still the second highest in the world after China.

Even though global economic conditions are predicted to remain uncertain and weak next year, the government expects even a higher growth, taking into account big additional expenditures for making preparations for the 2014 legislative and presidential elections.

However, the World Bank seemed to be more conservative, warning that the worst effects of the weakening global economy have yet to hit Indonesia. The multilateral development bank foresaw this year’s growth at only 6.1 percent, rising to 6.3 percent next year.

In view of the 2014 elections that may tempt the government to take populist programs and set off a new wave of inordinate nationalistic sentiment, the World Bank warned in its fourth quarter economic review for Indonesia, issued last week, that the government had no room for complacency.

Even though the World Bank realized it would be much more difficult politically to undertake reform measures next year, it still urged the government to reduce regulatory barriers and strengthen legal certainty to maintain the high pace of investment. The World Bank warned that global investors’ appetites for Indonesian natural resources could weaken due to prevailing economic uncertainties in the US, Europe, Japan and China. This in turn would put pressure on commodity prices and thus affect Indonesia, a major exporter of raw minerals and basic commodities.

If not controlled, the mounting radicalization of the labor movement could adversely affect Indonesia’s advantage in attracting investment in labor-intensive businesses that are badly needed to absorb the 2.6 million new job seekers entering the market annually and the 45-50 million others fully unemployed or under-employed.

The recent decision by the Jakarta administration to raise its regional minimum wage by more than 40 percent for 2013 has triggered strong demands in other provinces for similar high wage rises.

Industry Minister MS Hidayat warned that if labor-intensive industries were forced to meet high increases in the minimum wages next year, they might lose their competitiveness given fierce competition in the international market for their products.

So concerned has been the Industry Ministry about the severe impact of high increases in wages that it has recommended to the Manpower and Transmigration Ministry that labor-intensive industries such as textiles, garments and shoes be exempted from the wage increases.

However, Manpower and Transmigration Minister Muhaimin Iskandar said industrial companies asking for exemptions from the 2013 minimum wage should be willing to have their books independently audited.

Coordinating Economics Minister Hatta Rajasa admitted at a seminar early this week that the steep increase in the minimum wage had decreased investor interest in labor-intensive industries.

*****

The official announcement on Tuesday by the National Transportation Safety Committee that pilot error was primarily to blame for the crash in May of a Sukhoi Superjet 100 in West Java could be a big boost for the sales of the Russian jetliner in Indonesia.

The final report of the committee, released after seven months of investigations, concluded that the cockpit recording revealed the pilots, who were unfamiliar with the country’s terrain and had flown off course, wrongly assumed that the aircraft’s warning system — which repeatedly told them to pull up — had malfunctioned and turned it off.

The investigation team found that the presence of a potential buyer of the aircraft in the cockpit and a prolonged conversation might have distracted the pilots’ attention.

The conversation apparently made the pilots unaware that the aircraft was heading south to the mountainous area, instead of back toward the planned route. The aircraft, which was on a demonstration flight, then slammed into the slope of a dormant volcano, killing all the 45 people on board.

By turning off the warning system, according to the report, the pilots also disabled further visual instructions to climb, along with depictions on cockpit screens of the mountainous terrain around the aircraft.

The aircraft’s warning system functioned well and the crash could have been avoided if the pilots had reacted to its warnings because there were no indications of any malfunctions of the plane’s systems during the flight, the committee said.

Russia’s state-owned United Aircraft Corp. has aggressively been marketing its small passenger jet, which is suitable for such a vast archipelago like Indonesia, where many of the airports have only short runways.

The Indonesian government had apparently anticipated the final conclusion of the investigations because it decided last month to certify the 100-seat passenger jetliner as airworthy.

Indonesia’s Kartika Airlines has ordered 30 Sukhoi 100 and PT Sky Aviation has ordered 12.

However, the report also said that a lack of information from the air traffic controller (ATC) at Soekarno-Hatta International Airport may have contributed to the crash.

—Vincent Lingga

Paper Edition | Page: 4

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