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Jakarta Post

Massive wage hike may send jittery investors fleeing RI

  • Mariel Grazella

    The Jakarta Post

Jakarta   /   Fri, November 1, 2013   /  10:23 am

Employers called Thursday'€™s workers'€™ strike '€œcounter-productive'€. Instead of bringing workers closer to higher pay, the move was pushing investors away along with their job prospects.

Thousands of workers took to the streets to demand higher minimum wages. In West Java'€™s manufacturing hubs of Bogor and Depok, at least 50,000 workers rallied to demand a minimum wage increase of 68 percent to Rp 3.7 million (US$329.3) per month.

Workers conducted similar strikes in 2012, which, for example, ended with Jakarta raising this year'€™s minimum wage by 44 percent to Rp 2.2 million a month.

The strikes this year and the last were on grounds that costs of living had spiraled up due to inflation.

In response to the labor strikes, Indonesia Chamber of Commerce and Industry (Kadin) chairman Suryo Bambang Sulisto said '€œin principle, the business community is not against an increase in the minimum wage.'€

'€œBut the raise workers ask for should be reasonable,'€ he said, adding the workers'€™ demands were '€œunrealistic'€.

'€œBusinesses might as well shut down operations under such burdens,'€ he said.

Footwear Manufacturers Association (Aprisindo) chairman Eddy Widjanarko said at least 48 investors, mostly from South Korea and Taiwan, had relocated to other Asian countries since last year, thanks to the wage hikes approved last year.

Another minimum wage increase, if approved, would also disrupt the industry'€™s business performance, he said.

'€œWe are looking forward to 20 percent growth [next year], but if strikes continue, growth will stagnate [at 11 percent],'€ he said.

He added that another wage hike would further compound the challenges investors in Indonesia already faced '€” high raw material importation costs, multiple taxes, poor road infrastructure and convoluted importation red tape.

Indonesian Textile Association (API) chairman Ade Sudrajat said investors needed the government to peg wage hikes as this would facilitate investors in calculating their costs.

'€œIf the government does not do this, then investor costs would roller-coaster and swerve out of budget,'€ he said.

Indonesian Employers Association (Apindo) chairman Sofjan Wanandi said all sides '€” employers, workers and the government '€” had to stick to '€œthe rules of the game'€.

The government has passed a Presidential Instruction (Inpres) on provincial minimum wage (UMP). The Instruction states that a Payment Board would adjust minimum wages based on calculations of inflation, productivity and decent living standards.

The Instruction also prohibits ministers and governors from raising minimum wages above that sanctioned by the board.

Sofjan said if the government were to cave, medium and small-sized businesses would be at the greatest risk of collapse.

The Presidential Instruction on minimum wage was designed to protect small and medium enterprises.

Sofjan added that if the government were to grant workers'€™ demands, '€œemployers would shut down operations, and workers would loose their jobs as well'€.

He added that as many as 200,000 workers were laid off in the first six months of the year as businesses shut down due to this year'€™s wage hikes.

Indonesian Industrial Estate Association (HKI) chairman Sanny Iskandar lamented the government'€™s inability to prevent violence as mobs swept through industrial estates in Greater Jakarta and Purwakarta, West Java, inciting clashes with employers.

'€” Linda Yulisman contributed to this story

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