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Labor row rages on as court decides to hear Apindo

The tension between manufacturing companies and labor unions in West Java and Banten is likely to escalate following a court decision on a proposed legal review on minimum wage increases in the two provinces

The Jakarta Post
Jakarta
Wed, January 25, 2012

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Labor row rages on as court decides to hear Apindo

T

he tension between manufacturing companies and labor unions in West Java and Banten is likely to escalate following a court decision on a proposed legal review on minimum wage increases in the two provinces.

The Bandung State Administrative Court agreed on Tuesday to process the legal complaint filed by the Bekasi Chapter of Indonesian Employers Association (Apindo), and is expected to return a verdict next week.

Apindo filed the lawsuit following the West Java administration’s review of workers’ salaries, which included a 15.97 percent increase of the standard minimum wage in the Bekasi Regency, bringing the figure to Rp 1,491,866 a month (US$166.68).

The rate of wage increase for the regency, which is the industrial base for many factories owned by both domestic and foreign investors, is considered burdensome by Apindo. The association claims that many foreign investors are planning to pull out due to rising labor costs.

An estimated 100,000 workers might lose their jobs, with a potential investment loss of $2 billion, should the West Java government insist on the new wage standard, Apindo says.

Apindo chairman Sofjan Wanandi said that both National Wage Council (DPN) and Apindo had proposed to the Bandung court that Bekasi’s minimum wage be revised to Rp 1,415,063.

“That is a 10 percent increase from the wage in 2011 and it is still in line with the decent living standards [KHL]. We will not ignore the workers’ livelihoods because they are our partners,” Sofjan said.

Dozens of union representatives from Bekasi attended the court hearing in Bandung and expressed their disappointment over Apindo’s legal move.

“Apindo had given its word to the workers that it would withdraw the lawsuit,” Nurdin, a worker, said after the hearing. “Now it betrayed us again.”

Nurdin was referring to a settlement on Jan. 15, in which Apindo agreed to end its legal challenge against the wage increase policy.

“The workers will discuss the next steps in response to the court’s decision,” Nurdin said.

Thousands of Bekasi workers staged a massive rally against Apindo last Friday, closing seven toll gates in the industrial area and causing traffic jams on the inner-city toll road.

The same day, some 10,000 people demonstrated in front of Apindo’s Tangerang office in Banten in support of their fellow workers in Bekasi. The rally was also held as a pre-emptive measure, should Apindo seek a legal review of wage increases in the regency.

The Banten administration raised the standard minimum wage for workers in Tangerang by 10.79 percent to Rp 1,529,000 for this year.

Although the wage increase was only 10 percent, wage increases in Tangerang, Banten, and in Bekasi, West Java, have put local factories in danger as some companies have considered relocatation.

Indonesian Footwear Producers Association (Aprisindo) chief patron Harijanto said recently that five Korean and Taiwanese footwear factories operating in Tangerang since 2009 would likely hold their business, or reduce workers at a company from 10,000 to between 2,000 and 3,000.

“They would review the situation by the end of the year. If business potential continues to fall, then they should relocate, with possible relocation to Central Java or to Sukabumi and Subang in West Java,” he said.

In addition, Aprisindo chairman Eddy Widjanarko said that 10 investors from South Korea and Taiwan planning to build footwear factories in Tangerang, Banten would withdraw their plans to build factories here.

“If we multiply the salary increase by 10,000 workers, then a factory should allocate an additional Rp 1.5 billion per month, or Rp 18 billion a year. Meanwhile, we have yet to count overtime wages,” he said.

The consequence of the withdrawal, Eddy predicted would cause a loss of $1 billion in investment, after calculation that one factory was estimated to worth $100 million.

“Since a factory was predicted to absorb 10,000 workers, then absorption of 100,000 workers in ten factories would also not be achievable,” Eddy said.

Indonesian Textile Association (API) chairman Ade Sudrajat told The Jakarta Post over the phone on Tuesday that the relocation of investment would be a direct consequence of the local government’s disregard of relevant rules and regulations.

“I think they should pay all the consequences. The government revises the wage without further discussion with association,” he said.

The Manpower Minister Regulation No. 01/1999 on minimum wage mentions in Article 11 that prior to the setting of a new minimum wage, associations, labor unions and the government should meet and discuss possible revisions.

Gadjah Mada University economist Revrisond Baswir said that relocation was a better option than “torturing” Indonesian workers.

“Wage allocation for a company in Indonesia is below 20 percent. In England, it may reach 60 percent. Compared to neighboring countries China and Vietnam, our wage is much lower,” he said.

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