Government prepares ‘responses’ to layoffs

While the government is keeping an eye on potential waves of layoffs and preparing “realistic” responses to help businesses cope with slower growth next year, it warns that companies will have to share the burden.

“On the layoffs, we will monitor that based on information from business associations,” Finance Minister Sri Mulyani Indrawati said Tuesday.

“We’ll see also what responses will be needed and can be done by the government. Obviously they have to be realistic responses.”

A number of business associations have announced possible mass layoffs next year as export demand dwindles fast due to the global economic downturn.

On Monday, the Manpower and Transmigration Ministry revealed that companies had reported to the ministry plans to dismiss — permanently or temporarily — more than 40,000 workers because of the adverse economic conditions.

The Indonesian Rattan Furniture and Craft Producers Association (AMKRI) announced that the industry may lay off up to 35,000 workers next year, while the Indonesian Textile Association (API) said its industry had already temporarily laid off 14,000 workers on weak export demand.

Many other industries have announced production cuts to cope with the lower demand.

Mulyani said the government would respond to the possible mass layoffs, such as by possibly helping companies reduce their costs.

But she made it clear the government could not shoulder the entire burden and businesses had to do their bit too. “Not all risks will be carried by the government because people and businesspeople should also manage the conditions.”

The government did not rule out the possibility of preparing support additional to that in the 2009 state budget, which includes Rp 12.5 trillion in incentives to help stimulate the real sector.

The incentives are in the form of waived income and value-added taxes, as well as elimination of import duties.

The government is also considering providing a trade financing facility under which banks could extend loans with lower lending rates to reduce the cost of businesses, Mulyani said.

“There is an expectation that businesspeople will have a lesser burden,” she said.

Interest rates — a prerequisite for spurring economic growth — are expected to decline as inflation slows next year, according to the Finance Ministry.

The central bank governor, Boediono, said Tuesday that Bank Indonesia would look at the possibility of reducing its key interest rate to help prop up growth.

The current benchmark rate stands at 9.5 percent.

Mulyani said the government would try to maintain the level of private consumption next year, the main contributor to the Indonesian economy, to keep the rate of economic growth above 5 percent.

In December 2008, the government will disburse about Rp 120 trillion in funds, which remain idle in the central bank, to stimulate the economy.