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  •   In Indonesia, Waiting for the Work to Come Back

    By Keith B. Richburg
    Washington Post Foreign Service
    Sunday, February 8, 1998; Page A25

    TANGERANG, Indonesia—At the Cipta Guna machine-repair factory here, the white-haired manager with the wispy mustache sat behind a desk cluttered with metal spools and rings and mused about the dismal state of activity here since an economic crisis set in last year.

    "It's dead. Dead. Everything is gone," he said, sighing. "There's no work. I don't know if it will ever come back."

    His outlet mainly repairs machine parts for other plants in this factory town, but since Indonesia's currency, the rupiah, began its downward slide last year -- losing some 80 percent of its value against the U.S. dollar -- most of the factories here have slowed down or gone idle, so there are no machines to repair. As a result, the Cipta Guna factory, which employs 28 workers, hasn't been able to issue a paycheck since August. The owner has been paying employees out of his pocket.

    "All the factories are closing down," said the manager, Kardani Tjiptadharma, ticking off the list: shoe factories, textile plants, automobile makers, plants making ceramic tiles and glass. "Anything that's importing their raw materials has been shut down. We repair machines, so there's no business. That's my problem."

    Tjiptadharma, 57, has seen tough times before in Indonesia, like in the 1960s, before President Suharto's New Order government ushered in a period of economic stability and sustained growth. But now, he said, "this is the worst it's ever been."

    The problem at the Cipta Guna plant reflects the overall crisis affecting Indonesia's industrial sector in the midst of the country's worst economic slump in three decades. Orders for products have dried up, the collapsed currency has left hundreds of businesses saddled with astronomical debt they are unable to pay, and idle plants unable to import raw materials are struggling to meet payrolls, or in some cases simply to keep the electricity turned on.

    Now that much of the country's productive activity here has ground to a halt, everyone -- owners, plant managers and workers returning from a long break for a Muslim holiday -- is waiting to see what happens next.

    There have already been layoffs. Few precise figures are available, but anecdotal evidence from this heavily industrial area west of Jakarta, the capital, suggests they could be in the thousands. At the small Laksana Kurnia Sejati glass plant here, employees say about half the 300 workers were laid off in September when the factory started losing customers. The plant imports about 65 percent of its materials and has been unable to buy anything since the rupiah collapsed. The remaining workers were last paid two weeks ago, before the holidays that mark the end of the Muslim fasting month of Ramadan, and they are waiting until next week to learn whether they still have their jobs.

    Indonesia's manpower minister, Abdul Latief, said Thursday that more than 8 million people will likely be unemployed by the end of this year -- almost 10 percent of the labor force in a country of 200 million. Latief said the estimate includes 4.4 million currently unemployed, 1.5 million who could lose their jobs because of layoffs this year, and 2.7 million who are expected to enter the job market but will find no jobs available.

    Others say the figure could be far higher. Labor leaders here say the true number of Indonesia's unemployed is hidden, because millions work only an hour or so each week. By some estimates, as much as 40 percent of the work force is jobless.

    Lim Say Boon, a researcher with Crosby Corporate Advisory in Singapore and a frequent visitor to Jakarta, said: "The unemployment figures in Indonesia have always been vastly understated. There's a lot of disguised unemployment."

    An Asian diplomat with long experience in the country said that by June, because of new entrants into the job market, the number of unemployed could reach 14 million to 15 million people. A Western diplomat said: "It's all anecdotal. Nobody's got hard numbers on employment and unemployment. But it seems clear that for the whole economy, the best you can say is that it's at a standstill."

    The World Bank is so concerned about unemployment, and the likelihood of social unrest that could follow, that its president, James D. Wolfensohn, has announced a redirection of $600 million to new labor-intensive public works projects to create jobs for laid-off workers. An additional $400 million will go to buy food and medicines, which have become prohibitively expensive for many because of the currency collapse.

    A visit to Tangerang illustrates the depths of Indonesia's crisis and also its complexity. True, most factories are technically bankrupt. True, most manufacturing activity has dried up. But somehow, factories keep limping along, not quite fully functioning but also not quite bust. Few plants here have resorted to waves of layoffs, partly because managers were reluctant to do so during the Muslim holy month of Ramadan or recent holidays.

    "There's an unreal atmosphere here," the Asian diplomat in Jakarta said. "You hear that all these companies are technically bankrupt. But it doesn't feel like it yet. There's this funny sense of waiting."

    Channy Lee is waiting, hoping conditions will turn around before he is faced with an inevitable decision -- whether to begin firing some of his 350 workers. Lee, a Korean, is the marketing general manager for the Korean-owned Yoko Indo Maju Jaya shoe factory in Tangerang, which makes samples for Nike, Reebok and Adidas. Lee said he started to see orders dry up late last year, and then when the currency collapsed, "it caused us big problems."

    Some 40 percent of the plant's working materials must be imported, and with the collapsed rupiah -- and the weakened won in Korea -- there is no money on hand to buy materials. Five of the 10 Korean managers here have been sent home because the parent company could not afford to pay them in dollars. The workers are still being paid, but Lee said he does not know for how much longer.

    "Now we are running the factory with two shifts," he said. "If the orders decrease, we'll go to one shift. If the situation continues to decrease, we're not sure."

    Not all industries are as badly affected. Some, like a local plant that turns out coconut-oil products, have felt barely a ripple. "Our company is fine because we export everything and all of our raw materials are local," said Erianto, a worker at the plant. "I feel secure."

    Various ideas are being floated to try to get Indonesia out of its liquidity crunch and businesses operating again. Singapore's prime minister, Goh Chok Tong, who met with Suharto last week, has proposed a system of multilateral guarantees for letters of credit issued by Indonesian banks. Also, the Australian government has said it will back up locally issued letters of credit for the purchase of Australian food and raw materials to allow two-way trade with Indonesia to continue.

    But analysts said the problem will likely not be solved until the country's currency regains strength against the dollar. The dollar is currently worth about 10,000 rupiahs, but at a 5,000-to-the dollar level, "a lot of the factories would be basically back in business," said Andy Tan, general manager for Standard & Poor's in Singapore. As for when that might happen, Tan said it depends on two factors: "the economic factor and the political factor."

    "We'll probably have to wait," he said.

    © Copyright 1998 The Washington Post Company

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