BUSINESSES WORRY ABOUT POWER RATE HIKES

By Andi Abdussalam

Jakarta, Dec 29 (ANTARA) - Businessmen and industrialists have expressed concern about the government's plan to increase the electricity tariff by about 15 percent in 2013, saying it would hamper business development and slow the nation's economic and industrial growth.       Coupled with the planned increase in the minimum wage, the power rate increase will raise businesses production costs to about 43 percent.  This will drive up the prices of locally produced goods and reduce their competitiveness, prompting the country to be flooded with imported commodities, businessmen warned.       Further, the power tariff hikes would prevent the government from reaching its economic target of 6.8 percent growth in 2013. With high production costs, industry would also face difficulties in achieving its growth target of 7.1 percent next year.         "At present, we are pessimistic about Indonesia's economic growth. I think it would be good if the country's economy could grow by six percent," Sofyan Wanandi, the chairman of the Indonesian Businessmen Association (Apindo), said here over the weekend.            The same pessimism was also voiced by Bambang Sujagad, the deputy chairman of the Indonesian Chamber of Commerce and Industry (Kadin) for industry, research and technology affairs, saying he doubted that the industrial growth target set at 7.1 percent in 2013 could be reached.          "I don't think the target would be achieved. Industries, particularly small and medium scale as well as labor-intensive industries, will face electricity tariff and labor wage increases," Bambang said here on Saturday.          Therefore, Apindo urged the government to reduce its planned power rate increase in 2013.  "We want the Ministry of Energy and Mineral Resources to revise the power rate increase from 15 to 10 percent. We are confident that our proposal will be accepted," said Apindo's Secretary General, Franky Sibarani, on Wednesday.          He added that the government's plan to increase the electricity tariff by 15 percent would hinder the growth of many businesses, even if the increase is carried out on a quarterly basis by 4.3 percent each quarter.          Franky said that next year an increase in the power rate, along with an increase in the workers' provincial minimum wages, will increase the cost for operating businesses by about 43 percent.          Therefore, Apindo hopes that the government would revise its planned power rate increase from 15 percent to 10 percent. The implementation of the remaining 5 percent increase could be postponed until 2014.          He predicted that Indonesia's economic growth could even be less than six percent next year, since there were many factors that could contribute to the slowing of economic growth.          Sofyan said, at present, Indonesia was departing from the direction that had been experienced by India, and that was a serious problem.          "Their optimism disappeared after they witnessed realities in the world and because of their adopting wrong policies," the Apindo chairman said.          He further said there were several mistakes made by the government, such as policies regarding regional minimum wages (UMP) and legal uncertainties.          With these mistakes, Sofyan said, the business community was not sure whether the government would achieve its economic growth target of 6.8 percent in 2013.          Kadin also doubted whether the government plan to boost industrial growth to 7.1 percent was realistic. The Ministry of Industry earlier predicted that the manufacturing industry would grow by 7.1 percent in 2013.          "I don't think the target could be achieved. Industries, particularly small and medium scale as well as labor-intensive industries, will face electricity tariff and labor wage increases," Bambang, the deputy chairman of Kadin for industry, added.          He noted that the industrial sector will face a difficult time, because of increases in minimum wages and electricity tariffs. These two factors are expected to slow industrial growth next year.          He also said that production burdens from raw materials and wages had reached 85 percent, so that businesses could only see profits of very small margins. This excludes other costs, he added.          "Costs for infrastructure and illegal levies will still exist and reduce competitiveness. So, industrial growth will face difficulties in reaching 7.1 percent," he added.          Further, he predicted that some 600,000 workers would be laid off in 2013 as a result of the power tariff and labor wage hikes. This condition would slow industrial growth and its capacity to absorb new workers.         "New workers will not be absorbed, while those who have worked would be laid off. There would be no job opportunities to be offered," Bambang added.          He said that these policies were expected to weaken industries and harm the interests of workers, as well slow economic growth.          Bambang noted that the impact of electricity rate and labor wage hikes on industry will be apparent in the second quarter of 2013.          "The impact of the hikes could not yet be seen. In the second quarter of 2013 in June, it will weaken the competitiveness of industrial products," Bambang Sujagad warned here on Saturday.          He added that the power rate hike would increase production costs in the industrial sector by about five percent. This has not included the impact of wage hikes.      This condition, according to Bambang, would reduce the competitiveness of local products against imported goods.          Thus, Indonesia would be flooded by imported goods in 2013 because their prices are lower than local products.          "Imported goods are not affected by power tariff rate and minimum wage hikes, so that their prices would be lower and have high competitiveness. Our products, on the other hand, should be sold at higher prices to adjust to increasing production costs," he said.***2** (T.A014/INE/H-YH)     (T.A014/A/KR-BSR/A/H-YH) 29-12-2012 18:40: