Jakarta (ANTARA News) – The implementation of free trade area effective as of January 2010 may reduce the performance of local companies which might be forced to lay off millions of workers, an insurance company executive said.

“Free trade will affect local companies` performance but it could not be avoided because the ASEAN-China Free Trade Area (ACFTA) has been agreed a long time so that we have to abide by the agreement,” Operational Director of Workers Insurance company (Jamsostek), Ahmad Ansyori said here over the weekend.

He said that many studies had been made on the impact of the free trade area on domestic industries in Indonesia. Most of the studies showed that its impact would be a reason for concern as it would affect workers.

A number of studies have predicted that with the free trade area, about 2.5 million workers could face lay-offs as a result of the declining performance of industries in the country.

The most affected industries would be industries on leather processing, clothing production, textiles and steel industries. The impact would be felt by hundreds of labor-intensive and small companies, he said.

“Based on the studies, about 2.5 million workers could face layoffs. I don`t think the figure would be that high but it would be about 1.8 million,” Ansyori said.

He said that the layoff would begin to take place gradually about eight months after the the free trade area became effective.

“I am sure the government will formulate a policy with regard to the matter if the free trade area massively weakens local industries. Probably the government would provide incentives and fiscal facilities as well as expansion of infrastructure projects and agribusiness development,” he said.(*)