Minggu, 04 Desember 2011

Era Reformasi As Indonesia strikes it rich, workers start to strike; Indonesia Political and Economic Outlook 2011-2015 by the Economist Intelligence Unit (EIU)

 


Source: http://www.theglobeandmail.com/report-on-business/as-indonesia-strikes-it-rich-workers-start-to-strike/article2257871/



Indonesian police (L) clash with striking workers (R) of US gold and copper mining giant company Freeport McMoran in Timika in Indonesia's Papua province. - Indonesian police (L) clash with striking workers (R) of US gold and copper mining giant company Freeport McMoran in Timika in Indonesia's Papua province. | TJAHJO ERANIUS/AFP/Getty Images
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Commodities

As Indonesia strikes it rich, workers start to strike

Neil Chatterjee and Olivia Rondonuwu

Jakarta— Reuters

Published Friday, Dec. 02, 2011 9:26AM EST


When the Jakarta governor offered a hefty pay rise last week to workers, he successfully headed off a major strike. But almost immediately, workers went on the rampage in another part of the country demanding a wage hike too.

It is another illustration of the most recent and, for investors, troubling risk they face in what has become one of the darlings of the emerging economies.
More related to this story

    * Three shot dead near Freeport's Indonesia mine
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    * Think commodities have peaked? Don't count on it

The big drivers for the strikes have been high prices for the commodities that are the backbone of the Indonesian economy, rising costs and a strong sense that the country's widely trumpeted economic successes have not been shared.

"Workers are not dumb. They are going to see prices are high. They're going to say 'we want our just rewards'," said Dick Blin, spokesman for the International Federation of Chemical, Energy, Mine and General Workers' Unions (ICEM), which covers the bulk of Indonesia's main industries.

The highest profile -- and so far most costly -- strike has been going on since September at the giant Freeport McMoRan Copper & Gold Inc (FCX-N39.300.020.05%) mine where 8,000 miners in the remote eastern province are demanding better pay.

Though union leaders in other industries deny that the Freeport strike was their trigger, the number of strikes has begun to mushroom across a broad range of industries from supermarket to telecoms, threatening to temper investor enthusiasm for one of Asia's fastest growing economies.

"These strikes are dangerous and show how weak the government is in facing industrial disputes," said Sofjan Wanandi, a leading businessman and chairman of the Employers' Association of Indonesia.

"With this situation, businesses will re-consider their expansion and investment plans, as well as plans to relocate factories from China to Indonesia," he said.

Businessmen from South Korea, a top investor, were also expressing concern, he said.

Investors in Southeast Asia's biggest economy have long factored in industrial-scale corruption, a complex and lethargic bureaucracy and even militant attacks.

But industrial disputes in the densely populated society, which has had little more than a decade of democracy, is a much newer hurdle.

Union membership is still quite low in a country where militant union leaders just a few years ago could expect to be hounded into jail, or worse.

Poor referees
Subiyanto, the Secretary-General of Indonesia's Chemical, Energy and Mining Union Federation, estimates that only seven per cent of companies have unions and the total number of workers who belong to unions is 15 per cent. The number, though, appears to be growing.

Some labour-related laws are decades out of date and the number of officials supervising companies is simply too small to cope, he said.

"The fact is that government supervisors in the regions are getting lower and lower in number. For example in Tangerang regency (an industrial region), there are not more than 10 supervisors overseeing over 4,000 companies. How can you possibly monitor relations between the workers and the capital owners?"

"It's like playing football when the referee is not firm and you can see the strong oppressing the weak."

Some of those strikes have turned violent, and tension over the failure to create enough higher value jobs in the predominately youthful population could become one of the biggest mid-term risks, some analysts say.

A planned strike last week in Jakarta by 85,000 unionised workers was averted after the city governor agreed to hike minimum wages by about 20 per cent.

Almost immediately, there was a similar protest for higher pay by 10,000 workers in Batam, an island home to manufacturers from nearby Singapore.

This time the response was slow. The military had to guard industrial estates after a mob burned traffic police posts and cars and attacked a government office.

As Freeport considers lifting pay by as much as double for more skilled contractors to end its crippling strike, any high pay award risks setting a precedent.


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http://ecoggins.hubpages.com/hub/Indonesia-Political-and-Economic-Outlook-2011-2014

Indonesia Political and Economic Outlook 2011-2015

By ecoggins

This hub examines the political and economic outlook of Indonesia for 2011-2014. Before one travels to or decides to do business in a foreign country like Indonesia, it is wise to learn a little about that country in terms of its cultural background, and its political and economic outlook in the near term. Through the country intelligence data obtained by the Economist Intelligence Unit (EIU), Country Watch, and Culture Grams, this hub introduces the potential traveler or global business leader to Indonesia and what they could expect in the near future concerning Indonesia's Political and Economic Outlook for 2011-2014.

EIU Overview of Indonesia Political and Economic Outlook for 2011-2015

According to a country intelligence report filed by the Economist Intelligence Unit for December 2010, the following are important highlights of Indonesia's political and economic outlook for 2011-2015:

    * The president, Susilo Bambang Yudhoyono, has a strong mandate to pursue his reformist policy agenda, having won re-election comfortably in July 2009, but his reforms are encountering resistance from vested interests.

    * Indonesia will elect a new president to succeed Mr Yudhoyono in 2014. A requirement of the election law means that the next president is likely to be the nominee of one of the country's three main secular political parties.

    * Bank Indonesia (BI, the central bank) will raise interest rates in early 2011. There is a possibility that it will expand recently imposed capital controls aimed at slowing the appreciation of the rupiah.

    * The fiscal deficit will narrow in the forecast period, to the equivalent of 0.2% of GDP in 2015, from 1.6% in 2009, owing partly to the inability of the civil service to utilise fully the sums allocated to it for capital expenditure.

    * The Economist Intelligence Unit forecasts that real GDP growth will accelerate to an average of 6.3% a year in 2011-15, driven mainly by private consumption and fixed investment.

    * EIU researchers expect the current account to record an average surplus equivalent to 1.3% of GDP in 2011-15. The income account will remain in deficit, owing to the repatriation of earnings by foreign-owned companies.

Indonesia Political Outlook 2011-2015

According to the Economist Intelligence Unit December 2010 report, Indonesia's political outlook for the immediate short-term seems relatively stable. Due to successfully leading his country through the global financial crisis of 2008-2009, President Yudhoyono retained the confidence of the voters and was re-elected for a second term in the 2009 election.

This result does not mean that Indonesia's political scene is without controversy. In order to retain his position, President Yudhoyono had to piece together a six-party coalition. However, one year into his second term, there are signs that the six-party coalition is not working well together and that they are divided on many reform issues.

Moreover, the first anniversary President Yudhoyono's second-term was marked by student-led protests due to a controversy involving conservative members of his coalition and the exit of Sri Mulyani Indrowati from her cabinet post. Ms. Mulyani, who now works with the World Bank, was one of Indonesia's most popular reformers. Evidence seems to indicate that Mulyani was ousted by her more conservative opponents including Mr. Aburizal Bakrie, a rich ethnic-Indonesian and managing chairman of the coalition government. Mr. Bakrie seemed to oppose Mulyani because she would not allow the stockmarket to be manipulated in his favor and she began to investigate alleged tax evasion by mining firms owned by the Bakrie family.

According to the EIU report, Yudhoyono's backing of the conservative members of his coalition does not bode well with his stated commitment to democratic reforms. If he continues to give way to those who vested interests like Mr. Bakrie "the prospects for a strengthening of democracy and an improvement in standards of government are likely to diminish." If however President Yudhoyono and other reformers continue to confront vested interests like Mr. Bakrie then there is a real possibility that conflict could erupt within the ruling coalition.

Indonesia Economic Outlook for 2011-2015

According to the EIU's Indonesia country report filed for December 2010, Indonesia's economy was affected less severely by the global recession than other neighboring Asian countries. This was mostly due to the fact that exports make up a relatively small portion of the country's economy.

Due to less need to recover from the global economic downturn, the EIU forecastors reported that Indonesia's real GDP accelerated to 5.9% for the first three quarters of 2010 and believed the whole year figure would also come in at 5.9%. Beyond, 2010 EIU forecasts real GDP growth to be around 6% in 2011, 6.4% in 2012; and an estimated 63% from 2013 to 2015. After an increased demand of various commodities by China in 2010, Indonesia exports are expected to slow in 2011, but should expand by an annual rate of 8% from 2012-2015.

EIU researchers reported the following downside risks to their forecast including the possibility of fiscal austerity programs leading to a sharper slowdown in global growth than expected and loose monetary policy stance of Western central banks like the U.S. Federal Reserve which has led to heavy flows of capital into Asian countries. These heavy flows led to wide fears that asset price bubbles could develop in the Asian countries because such bubbles create risks particularly if assets are used to back higher levels of borrowing.

According to the EIU report, Indonesia was one of the recipients of strong flows of foreign finance in 2010 and will probably continue to attract funds in 2011. However, Indonesian companies and households are not highly leveraged and so the price asset bubble may be less of a factor and a period of mild borrowing could work to further stimulate the economy in the near future. This would be particularly helpful if the funds were spent on infrastructure improvements.

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