Manufacturing Industry Wary of Turbulence in Financial Markets
Jakarta. Business leaders in the manufacturing industry started voicing out concerns that the weakening rupiah against the US dollar and the turbulence in the financial market will hit their business "harder than expected," with job cuts likely to happen.
Even though the rupiah depreciation has helped manufactured products regain competitiveness in the overseas markets, most factories in the country still have a huge dependency on imported materials in the production process, Aziz Pane, chairman of the Indonesian Tire Companies Association (APBI), said late on Wednesday.
A stronger dollar means it is costlier for manufacturers to import the necessary materials.
Tire manufacturers, which absorb 80 percent of Indonesia's natural rubber production and provide jobs for millions of local farmers, are facing risks of bankruptcy, he added.
"And the global tire industry is starting to use new and cheaper materials instead of natural rubber," Aziz explained.
Hariyadi Sukamdani, chairman of the Indonesian Employers Association (Apindo) said jobs are at stake because companies are making less money.
"Businesses are forced to cut their outsourced employees' contracts, give paid holidays [instead of a severance pay] or reduce working hours," Hariyadi said.
Data from the Confederation of Workers' Union (KSPI) showed that 13 companies have closed this year as they were unable to cope with the weakening rupiah, higher cost, and slow demands.
Indonesia's currency has fallen 13.36 percent so far this year, to hit Rp 14,102, according to the Jakarta Interbank Spot Dollar Rate (JISDOR).
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