Letter: Labor dilemma

Knowing that Indonesia is becoming a new honey pot for expatriates can benefit us. More than 55,000 were on working visas in 2011, a 10 percent rise from 2010. Economic factors have played a role in attracting them. In 2011 there was a significant increase in the number of expats working in the industry sector; 16,084 from 13,145 last year.

This is a good sign, as we are now a safe and promising country as foreign direct investment (FDI) in Indonesia jumped by 18.4 percent to US$19.28 billion in 2011 and is expected to rise even further after two international credit rating agencies upgraded Southeast Asia’s largest economy’s sovereign rating to investment grade, and previously Fitch’s Asia Pacific Sovereign rating group raised Indonesia’s sovereign rating for long-term foreign and local currency debts to BBB- from BB+, with a stable outlook.

Apart from those auspicious situations, there is a ticking time bomb that could turn the situation on its head: labor. Recently, thousands of workers rallied in showing their opposition to a lawsuit filed to revoke a recently approved minimum wage increases.

Indonesia will itself be in a bad situation if the problem isn’t dealt with properly.

Since the Labor Law enforcement in 2003, many small companies have employed contract-based workers in construction projects and plantations and many others have outsourced part of their work, including to security and cleaning service companies to avoid having to pay health, meal and transportation allowances and social security benefits to cut labor cost.

Based on this, the Manpower and Transmigration Ministry set new minimum wage limits this year. Some provinces saw significant increases such as Jakarta with 20 percent, Central Kalimantan with 17 percent, South Sulawesi (11 percent), West Sumatra (9 percent), Banten (8 percent) and Maluku (8 percent), to name a few.

However, the 2003 Labor Law remains a problem, and it has to be dealt with as soon as possible. Aloysius Uwiyono, a professor of labor economy at the University of Indonesia hailed the Constitutional Court’s decision as much-needed momentum to pressure employers to improve worker’s social welfare and prompt the government and the House of Representatives to review the labor law (The Jakarta Post, Jan. 19).

Apindo chairman Sofjan Wanandi said recently, “South Korean, Taiwanese and other East Asian companies in the footwear, textile and electronics sectors had announced they would move to Cambodia, where the minimum wage was $50 a month. If the companies left Indonesia, more than 100,000 workers would lose their jobs.”

Hariyadi Sukamdani, also a member of the Indonesian Chamber of Commerce and Industry (Kadin), said that the potential losses from those companies fleeing the country could surpass $2 billion within a year.

High wages will affect small and medium enterprises, which employ about 70 percent of Indonesia’s workforce of about 120 million. A decisive regulation must be made to give labor certainties without drowning businesses.

This is a big task for the government.
Magain Ratu Taufan Rumalean
Jakarta