Jamsostek warns of massive layoffs

The Jakarta Post, Jakarta | Tue, 01/12/2010 9:13 AM

State-owned insurance company PT Jamsostek has warned of massive layoffs this year following the implementation of the ASEAN-China free trade area (ACFTA) starting this year.

“Millions of workers in the formal sector will lose their jobs as many manufacturing companies are expected to be unable to compete with Chinese products that will flood the Indonesian market,” Jamsostek’s operation and service director Ahmad Anshori told The Jakarta Post here on Monday.

He said more and more workers would enter the informal sector leaving them unprotected and underpaid.

Millions of workers, including those dismissed due to the negative impacts of the 2008 global economic crisis, have entered the informal sector, composing almost 70 percent of the workforce of 105 million.

“Besides the crucial impacts of the global financial crisis and the free trade area on employment conditions in the future, Jamsostek’s income and profit will also decline.

“We are preparing programs, including voluntary social security programs for informal workers, in anticipation of the negative impacts,” said Ahmad.

Quoting the results of numerous studies, Ahmad said that around 2.5 million workers in the labor-intensive leather and garment factories and agribusiness industries would lose their jobs as a result of the free trade agreement with China.

As of January this year, cheap garments, agribusiness and steel and leather products from China have entered ASEAN countries, including Indonesia, with zero tariffs, in implementation of the free trade agreement between the Southeast Asian countries and China.

Separately, labor economist and observer Payaman Simanjuntak said that all stakeholders, mainly employers, the government and labor unions should play an active role in improving workers’ skills to improve their productivity, company productivity and enable Indonesian products to compete with those from China and other ASEAN countries.

Indonesia’s labor-intensive garment, textile and agriculture products will be unable to compete with similar products from China mainly because of the low quality of human resources, he said.

“To win the competition and make our products marketable, we have to improve workers’ skills to make them more creative and productive in producing cheaper and better quality products,” he said.

Trade Minister Mari Elka Pangestu denied the free trade’s negative impacts, saying that Indonesia would be limited to products from six sectors only, and that the ACFTA would also enable Indonesia to import machinery in the six sectors without any taxes.

Meanwhile, Jamsostek’s CEO Hotbonar Sinaga expressed concern over the slow reaction by the government and employers to address the potential impacts of the free trade agreement on domestic employment.

“Besides strengthening the formal sector by improving their skills, the government should pay more attention to the informal sector.

“Both the government and employers should start implementing the national social security system for all, the special benefit program for dismissed workers, and improve the quality of workers in the formal and informal sectors,” he said.