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NEWS UPDATES 13 July 2010

Indonesia chosen for EU study on free trade and jobs

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The ongoing project to assess the effects of trade on employment in Indonesia is expected to support new national trade and labor market policies, a labor official told the Jakarta Post.

The Assessing and Addressing the Effects of Trade on Employment (ETE) program — a US$4.5 million European Union-funded project — aims to analyze the effects of free trade on employment. Indonesia was chosen as a research case because of its huge potential in the economically-active Southeast Asian region, said Ralf Peters, the International Labour Organization’s (ILO) chief technical adviser on ETE.

Bangladesh, Benin, and Guatemala were also chosen for the study The ILO hopes that ETE, which started in 2009 and will run until 2013, will help policy makers and researchers reduce the negative effects of free trade on employment, he said.

“We will start from a theoretical basis, and we will be very practical in implementation later,” Peters said.

The Asean-China Free Trade Area (ACFTA), which went into effect on Jan. 1, will be included in the project assessment, he added.

Peters said the ACFTA would “no doubt” destroy jobs in Indonesia. However, the agreement will also reduce the price of intermediate goods imported from China and give Indonesian companies opportunities to increase exports of other products produced with existing competitive advantages, he said.

The experience of East Java under the ACFTA is not yet clear, Manpower and Transmigration Ministry analyst Indro Warsito said.

The province recorded an overall trade deficit between March and May and its trade balance with China showed deficits of $39.93 million, $49.31 million, and $102.67 million in the same period. “It’s premature to say that the agreement negatively affects employment in the province,” he said, adding that the ministry was investigating how many workers had been laid off or furloughed due to the trade agreement.

Warsito said the ACFTA could have a positive impact on employment and that import substitutions could reverse the trend of unemployment and encourage more workers to enter the labor market. Chris Manning of the Australian National University said people had to look at the effect of trade development at a national level instead of focusing on regional effects.

“Indonesia has great capacity, as it is selling many commodities to the Chinese market,” he said. Indonesian laborers are not ready for free trade, as the government still ignores or overlooks fundamental labor problems such as basic workers rights, Indonesian Prosperous Labor Union chairman Rekson Silaban said.

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