Trade and employment in Indonesia

Increasing liberalization of trade and the planned formation of the ASEAN economic community will bring opportunities and challenges to Indonesian businesses. Though exports and imports of goods and services recorded a two-digit decline in 2009 (exports decreased by 11.4 percent and imports by 19.5 percent on the year-to year basis), international trade is expected to be back on a steady expansion path from 2010, according to the latest forecast by the World Bank. This trend is certainly to affect employment in Indonesia. Many formal jobs will be created in the export sectors, while some jobs may be lost in sectors that are not competitive. The impact of trade on employment depends on the kind of and volume of goods and services traded, as well as on labour market regulations.

Project description

The project will develop global knowledge tools that can support the formulation of coherent trade and labour market policies that address the adjustment challenges and expand opportunities for the creation of decent employment at the national level, based on sound data and diagnosis and with the involvement of the social partners. Actions will be taken at the global level and in four pilot countries, to strengthen the capacity of policy makers, researchers and the social partners to assess, address and monitor the effects of trade on employment.

Project objectives

The project will seek to promote a fair globalization by supporting the efforts of developing countries to take effective action to address any negative effects that might arise from trade related adjustment and to take advantage of potential opportunities for the creation of decent employment. It will facilitate consideration of the interaction between trade and labour market policies and support the design of effective, coherent and complementary policies.

Overall objective:

Analysing and supporting the formulation of effective and coherent trade and labour market policies that address the adjustment challenges that workers and employers face and expand opportunities for the creation of decent employment in developing countries.

The specific objectives of the project are:

Specific objective 1:

Develop global knowledge tools that can support the formulation of coherent trade and labour market policies at the national level, based on sound data and diagnosis, with the involvement of the social partners.

Specific objective 2:

Strengthen the capacity of policy makers, researchers and the social partners in pilot countries to assess the effects of changes in trade policy on employment and to design effective and coherent policies that enable countries mitigating any negative effects and expanding employment.

Main activities in Indonesia

• Review existing literature on trade and employment and available statistical data for assessing the effects of trade on employment;
• Develop training tool together with the International Training Centre of the ILO;
• Train policy makers and specialists from relevant government departments in Indonesia to assess the effects of changes in trade policy on employment and to support the formulation of coherent trade and labour market policy;
• Train the social partners on the effects of trade and employment;
• Establish a policy working group to facilitate policy coherence and to determine terms of references for country studies;
• Conduct assessment/study of the effects of trade on employment and of complementary labour market policies and strategies to address the employment effects;
• Tripartite social dialogue between relevant policy makers, representatives from employers’ organizations, trade unions and other institutions on the outcomes of the assessment/study; and
• Formulate policies, strategies and programmes to facilitate adjustment and enhance opportunities for employment creation.

Key partners

• Ministry of Manpower and Transmigration
• Ministry of Trade
• Coordinating Ministry for Economic Affairs
• National Development Planning Agency
• Indonesian Employers’ Association (Apindo)
• Trade unions
• International organizations