Government Questions Mass Dismissals

FRANSISKUS WISNU WARDHANA DANY

Thousands of workers from various trade unions held an action against the Omnibus Law and the increase in fees for the Health Social Security Administering Body at the House of Representatives/People's Consultative Assembly Complex, Senayan, Jakarta, on Monday (20/1/2019).

The results of the Fiscal Policy Agency’s monitoring of a number of companies’ export and financial performance indicates a satisfactory condition, and even a potential for further growth.

BOGOR, KOMPAS – News about mass dismissals in labor-intensive industries has been circulating widely of late. Despite cautioning against imminent pressures on the real sector, the government is questioning the companies’ decision to resort to dismissing workers when industry growth is actually rapid.

The results of export and financial performance monitoring of a number of companies going public by the Finance Ministry’s Fiscal Policy Agency has indicated a favorable industry condition, and even a potential for rapid growth amid global economic turmoil.

In January-August 2022, textile and textile product (TPT) exports still grew 20.21 percent year-on-year (yoy). Export growth declined for two TPT items, namely fabrics (minus 2.5 percent) and various textile products (minus 5.76 percent). However, the other TPT products recorded growth, even up to double digits.

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Meanwhile, in terms of financial performance, sales income from TPT grew more than 10 percent, higher than the manufacturing industry, which posted sales growth of around 5 percent.

“So, it is in fact rather confusing that workers are being dismissed,” Abdurohman, the acting head of the Macroeconomic Policy Center (PKEM) under the Finance Ministry’s Fiscal Policy Agency (BKF), said over the weekend in Bogor, West Java.

Two indicators were used to measure the condition of companies: the first is corporate income and the second is the interest coverage ratio (ICR), or a company’s capacity to use their profits in paying the loan interest.

He said apart from the TPT industry, the manufacturing sector’s condition was generally still good. Two indicators were used to measure the condition of companies: the first is corporate income and the second is the interest coverage ratio (ICR), or a company’s capacity to use their profits in paying the loan interest.

“The indicators keep improving. All sectors are still above the safe level, the coal industry is even very high above it. Only one sector remains on the margin or below the threshold level, which is the property sector,” Abdurohman said.

Not arbitrary

The government plans to continue anticipating and observing the potential spread of global risk, which has started to impact workers’ dismissals in several labor-intensive sectors, as Finance Minister Sri Mulyani Indrawati told a press conference on the results of a regular meeting of Financial System Stability Committee (KSSK) IV on Thursday (3/11/2022).

Yet, the government is not looking to make arbitrary or sudden decisions, such as launching new social aid programs or incentives.

KOMPAS/HERU SRI KUMORO

The activities of factory workers in the Nusantara Bonded Zone, North Jakarta, some time ago.

BKF head Febrio Kacaribu said the manufacturing sector’s condition would be fine until the end of the year. Although exports were decreasing from previous levels, the incoming demand was high. On the other hand, even though the Manufacturing Purchasing Managers Index (PMI) had decline from 53.7 to 51.8, it still remained in the expansive zone (above 50).

“This is indeed the condition up to the present. What it will look like next year is the developments that we are continuing to monitor from month to month. So far, the aggregate condition has indeed been good, but we will later see how the future risk is growing,” said Febrio.

No reallocation

Made Arya Wijaya, expert staffer to the Finance Minister on state expenditure, noted that according to the ministry’s recent monitoring over West Java, workers were not yet being dismissed on a large scale.

“But many companies have started decreasing production and making their workers take turns [at work]. So, these may simply be leading to dismissals. In reality, this has not been done,” said Made.

In terms of state expenditure, he said the government had no plan as yet to reallocate this year’s unspent budget for additional social protection or business incentives.

“With the time left and the existing allocations, there should not be any pressure to shift or reallocate the budget,” he said.

This entailed the dismissals of 70,000 workers.

It was previously reported that during the January to September 2022 period, a number of TPT factories had ceased operations in West Java, the center of the TPT industry. This entailed the dismissals of 70,000 workers.

According to general chairman Yan Mei of the West Java Textile Producers’ Association, dismissals and terminated contracts had spread across 14 regencies/cities in West Java due to the sluggish garment production industry. As many as 18 companies had closed down, affecting 9,500 workers.

Orders had decreased by between 40 and 70 percent since May 2022 until next year. It was feared that staff reduction and contract termination would keep increasing (Kompas, 3/11).

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.

Stagnation in TPT exports had affected upstream companies, said general chairwoman Redma Gita Wirawasta of the Indonesian Filament Fiber and Thread Producers Association. Although there had been no dismissals so far, 1,000-1,500 workers in the upstream industry had been laid off.

The government was urged to issue a policy to protect the domestic market by substituting imports and maximizing local TPT products. (AGE)

This article was translated by Aris Prawira.