Job Creation Must Be Priority in Industrial Development

Kompas/Didit Putra Erlangga Rahardjo

Workers of PT Haier Electronic Appliances Indonesia worked on assembling mobile phones with 4G cellular networks to be marketed by the telecommunication operator Smartfren at their factory in the Cikarang area, Bekasi, some time ago.

JAKARTA, KOMPAS — The government needs to ensure that investments in priority industrial sectors can provide jobs to create quality economic growth. Along with this, transformation efforts in the manufacturing sector must also be intended to promote the development of human resources and the creation of decent and quality jobs.

According to data from the Investment Ministry, the service sector (tertiary industry) still dominated investments in the first semester of 2021 with a total value of Rp 218.8 trillion (US$5.40 billion), or equivalent to 49.4 percent of Rp 442.8 trillion in total investments. Investments in the manufacturing sector reached Rp 167.1 trillion, or 37.8 percent of total investments. Meanwhile, investments in the processing industry has continued to decline since 2017, with the majority of investments coming from foreign investors.

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In the first semester of 2021, the total investments of Rp 442.8 trillion provided jobs for 623,715 workers. Although the figure was an increase compared to last year, labor absorption from investments continued to decline compared to the 2014-2016 period.

The government has set four priority industries in order to boost investments. The first is export-oriented, labor-intensive industries, such as the pharmaceutical and medical equipment, automotive, and electronics industries. The second is new and renewable energy, while the third is infrastructure, and the fourth comprises industries that can generate value added (downstream).

Mohammad Faisal, the executive director of the Center of Reform on Economics (CORE) Indonesia, said on Monday (4/10/2021) it must be ensured that priority sector investments can provide quality jobs and absorb the local workforce. As such, local human resources must be prepared. For example, if Batang regency in Central Java becomes the center of the battery industry, local human resources must be readied first through vocational education and manpower training programs.

Kompas/Bahana Patria Gupta

Java Integrated Industrial and Port Estate (JIIPE), Gresik, East Java, Friday (3/9/2021).

The government must also be firm with investors. There should be disincentives for investors that do not employ local workers. “There is a slight gap in skills, but this can be overcome by technology transfers. Don\'t allow investors to take a shortcut and employ workers from their own counties," he said.

Earlier, investment realization and management deputy Imam Soejoedi of the Investment Ministry said that the value of investments in labor-intensive manufacturing was shrinking as more businessmen chose to invest in the service sector, which required less capital.

Investments in the manufacturing sector continued to grow, but they were primarily technology-intensive investments. "We admit that there is a decline in labor absorption, even though the value of investments in the manufacturing sector remains high," said Imam.

SMEs and MSMEs must be included in the supply chain of large industries.

As a solution, the government has encouraged large investors to cooperate with small and medium enterprises (SMEs) as well as local micro, small and medium enterprises (MSMEs), which employ a large number of workers. SMEs and MSMEs must be included in the supply chain of large industries.

Downstream

In Surabaya, East Java vice chairman Tony Hernanto of the Industrial Estates Association said it would be easier for investors to realize their downstream investments if they operated their businesses in an industrial zone. To date, East Java province has 11 industrial areas, most of which are located in Surabaya, Gresik, Mojokerto, and Pasuruan.

According to Adik Dwi Putranto, the East Java chairman of the Indonesian Chamber of Commerce and Industry (Kadin), the province’s downstream industry was progressing well, in part thanks to the operation of the PT Freeport Indonesia (PT FI) smelting plant in Gresik. Manufacturing companies (downstream) could obtain raw materials directly from the Gresik smelter. East Java Deputy Governor Emil Elestianto Dardak said he hoped that the smelter could synergize with other companies.

According to PT FI corporate communications head Riza Pratama, there are many downstream products that could benefit. He said local factories could further process the products from smelting plants in the Gresik/JIIPE Special Economic Zone (SEZ), such as PT Smelting.

The JIIPE, which was inaugurated in June, has five industry “clusters”, namely logistics and supporting industries, metals, chemicals, electronics, and energy.

The Galang Batang SEZ realized total investments reaching Rp 17 trillion and employed 4,000 workers, of which 20 percent are technicians from China.

Meanwhile, industrial activities in the Galang Batang SEZ in the Riau Islands are dominated by the smelter-grade alumina refinery of PT Bintan Alumina Indonesia (BAI). The bauxite processing plant plans to export 2 million tons of alumina per year starting in 2027. The Galang Batang SEZ realized total investments reaching Rp 17 trillion and employed 4,000 workers, of which 20 percent are technicians from China.

KOMPAS/KRISTIAN OKA PRASETYADI

Bitung Special Economic Zone in North Sulawesi, Sunday (5/9/2021).

According to PT BAI president director Santoni, the development of a coal-fired power plant in order to meet the surge in electricity demand from industrial companies in the Galang Batang SEZ had been hampered by Indonesia\'s commitment to reduce greenhouse gas emissions. The existing power plant produces only 80 megawatts. In 2022, its capacity will be doubled to 160 MW, but this is still much lower the projected demand of 2,850 MW. (AGE/WER/NDU)