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Foreign investors start leaving Batam due to wage increase
The increase in the minimum wage in Batam, Riau Islands, appears to have taken a toll on businesses, with foreign investors packing up and leaving their workers in uncertainty
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he increase in the minimum wage in Batam, Riau Islands, appears to have taken a toll on businesses, with foreign investors packing up and leaving their workers in uncertainty.
PT Shin-Etsu Magnetics Indonesia closed its plant in the Batamindo Industrial Park on Aug. 23 and laid off 500 workers, seemingly because its products were deemed out of date. PT Shin-Etsu is a joint venture between Singapore and Malaysia and was the oldest foreign investor in Batam.
A notice written in Indonesian and signed by PT Shin-Etsu Magnetics Indonesia president director Hiroshi Hisano advised employees that production had ceased as of Aug. 23, and no company inventory items were to be removed from the plant without a permit.
Factory security chief Robert told The Jakarta Post that only 30 permanent management employees were still working at the factory, while 40 others had been laid off as of Aug. 23, adding that 400 contractual employees had been let go.
'The factory is no longer operating. Only 30 management staff members are still working. We are only tasked with securing the factory,' said Robert.
He added that PT Shin-Etsu human resources and general affairs manager Afrizal K. and Hisano would hold a press conference once affairs related to the company's closure were completed.
'They will explain everything,' said Robert.
When repeatedly phoned and texted, Afrizal declined to comment on the issue. Batam Free Trade Zone Management Agency (BP FTZ) spokesman and One-Roof Integrated Service (PTSP) director Dwi Djoko Wiwoho said his office was monitoring information circulating among the community on the closure of the foreign company.
'PT Shin Etsu has yet to report to the BP FTZ, and we are restricted to monitoring only,' said Djoko.
According to Djoko, the company's closure was mainly due to the significant increase in the minimum wage, which rendered the company unable to invest in better equipment and machinery to manufacture more contemporary products.
Based on BP FTZ data, PT Shin-Etsu originally invested US$13.2 million when it was established in 1996. The company produced magnetic circuit parts, magnet holders and general magnets.
Meanwhile, a manpower agency circular dated Aug. 28 and addressed to the Batam mayor stated that some VCM components produced by the company would be usable only until 2017 as current smartphones used SSD components, so the reason for the closure may have been its unsalable products.
The circular also pointed out that PT Shin-Etsu customers tended to buy products manufactured by PT Shin-Etsu factories in Malaysia, Thailand, the Philippines and China, and not in Batam.
