1. Mengapa situasi perekonomian yang relatif menggembirakan sepanjang tahun 2004, tiba-tiba meledak di pertengahan tahun 2005? Apa yang salah? Sejak tahun 2003, tingkat inflasi yang terus menurun menjadi 6,8% atau 5,1% menurut versi pemerintah (dari 11,9% atau 10% [vp] tahun 2002) yang rI would like to thanks USAID for inviting me (again) to share my concern on this very important session discussing the private sector involvement in generating employment. As we already knew, an unemployment rate, open or disguised, tells not only a matter of statistical number stating the state of the economy of a country, but also more importantly describes the welfare level of the people and the size of the economy to supply growth.
2. The picture is straight forward that the more companies are created or expanded the more employment will be offered and the unemployment rate will be down. Of course, increasing the rate of employment will fertilize the prosperity issues of growth and development. The key is to seek answers to security and profitability questions involving market-friendly business and legal-incentive environment for investors. This is not only right for formal business entities, which currently provide employment for a little bit more than 30% of total labor force, but also for the informal ones that count for almost 70% of total labor force in Indonesia. The trend during this transition period indicates that the informal sector bypasses the formal sector of employment which provokes the issues of marginalization of the Indonesian economy.
3. Interestingly, employment has become not only an economic or welfare issue but as amended in 2000 for the 1945 Indonesian Constitution, it has been now becoming a human right issue (Article 28D of the Constitution states that “everyone has the right to work and…”). Therefore, providing a job is constitutionally imperative for the government as well as morally encouraged for everyone having the opportunity for maintaining jobs or creating new jobs.
4. The issue of “high-cost economy” is still there. The government officials are still viewed as the predators for business people. The red tape behavior is the taste of oil-grease to development, as one stated. The blames are to a low salary level, commercialization of authority, lack of transparency, lack of competency or professionalism, and crony business environment. Rent-seeking behavior enriches the high-cost economy of the country that transforms from centralized government before to decentralized one that now experienced in many government budget items. Most of these items have no performance indicators and realization rate is starting low at the beginning of fiscal year and getting huge at the end of the same year showing the behavior of “December Child.” In this case, how much budget can create a new job will not be a question anymore.
5. Agenda for creating new jobs could start from monetary and fiscal policies as well as improvement of law-enforcement system. Currently, uncontrolled domestic interest rate and foreign exchange fluctuation would certainly have a damaged impact on employment. Stabilization policy for Rupiah purchasing power in domestic and international market is a must. Each Rupiah of the government budget could be used as performance indicator versus the rate of employment. Schedule of salary increase for government officials versus marke-salary index is a must because not only for productivity concerns but also market-friendly and professional behavior of the officials that will benefit business community in creating new jobs.
6. The new tax law packet proposed by the government recently could also be used for business community, especially in encouraging corporate-social responsibility, thru for example, a tax deductable system. This scheme could cut the size of informal sector of employment into the formal sector that will benefit the growth of the economy. The new tax schedule should also be created for giving more incentive for the companies which create more jobs (labor intensive) than to the ones that have capital intensive orientation.
7. Last but not least, driving private sector to provide large new jobs closely related with enhancing education system of the country. This is a long term proposal. In a short term, with abundant of labor force that has low-level of skill labors, jobs that will be created are not far from informal sector, agriculture and infrastructure. Therefore, connecting this job environment to high-tech and capital intensive jobs is needed.
* Member of Parliament of the Republic of Indonesia (DPR RI) sitting in the Finance and Banking Committee (Commission XI), a former USAID economics specialist, presenting at USAID/Indonesian Partners for Economic Growth Retreat, Hyatt Hotel, Bandung, September 14-16, 2005.