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Indonesian Employers Face Gov't Labor Salary Hike Policy
Source: news.xinhuanet.com
Source Date: Friday, November 23, 2012
Focus: Knowledge Management in Government
Country: Indonesia
Created: Nov 27, 2012

JAKARTA, Nov. 23 (Xinhua) -- Employers in Indonesia are now facing tough situation with decision made by regional governments to increase salary of factory workers beginning next year. They feared that such a decision would lead to massive layoff among workers themselves as operational costs burdened by employers would make them barely able to comply with the decision.

Intention to raise the blue-collar workers' salary was following the recent bold step taken by the capital city's new Governor Joko Widodo who decided to endorse demands conveyed by workers.

He has the set 44 percent of minimum monthly salary hike rate to 2.2 million rupiah (about 228.4 US dollars) as the current salary rate would not enough to cover the workers' daily needs due to increasing inflation.

The other regional governments intending to follow Jakarta governor's steps are among others West Java, recently that has set 25 percent hike, and Jogjakarta for the same reason.

Responding to such a decision, Chairman of Indonesian Employers Association (APINDO) Sofyan Wanandi said that employers would be hardly able to comply with salary hike decision.

He said that businessmen have already burdened by several costs that taking much from their capitals to run their factories. The highest expenditures spent by employers among others to finance construction of infrastructure to facilitate plant's operation, logistic, loan rates from banks and illegal levies in the regions.

He said that as long as illegal levies charged in the region is still rampant, employers would not be able to increase their workers' salary. "Illegal levies in the regions may take up to 10 to 12 percent of production costs," he said. Besides that, he said employers would also have to spend more cost for bad infrastructure in the region that disrupts their logistic distribution. It may swell 14 to 15 percent to their production cost. "It could be the most expensive logistic cost in Asia," he said.

"It does not mean that we are not willing to increase workers' salary. If the government is capable to resolve illegal levies and poor infrastructure, there are rooms for employers to raise the workers' salary," Sofyan pointed out.

He added if regional governments go ahead with plans to raise the salary at a minimum rate of 30 percent next year, businessmen would not be able to run their businesses. He said that most negotiable salary increase rates should be at a range of 2 to 3 percent, fit with the estimated inflation growth next year.

Indonesia's inflation accelerated to a 13-month high in October with consumer prices climbing 4.61 percent from a year earlier, according to the data issued by the state's statistics office said earlier this month.

APINDO planned to appeal the minimum salary hike decision made by the Jakarta governor to the state commercial court (PTUN).

Industry Minister MS Hidayat said on Friday that the APINDO would be welcomed if they wanted to lodge their complaint to the PTUN regarding this issue. But he said that the decision to increase workers' salary at that level can be implemented according to the schedule.

Indonesia is now regarded of new investment heaven as the largest economy in Southeast Asia has demonstrated tremendous positive growth that made international rating agencies awarded investment grade to Indonesia.

Indonesia recorded 6.4 percent growth last year and 6.5 percent as of the last quarter this year. Government aims to see growth reaching 6.5 percent by the end of the year and eying a 6.8 percent next year. That growth level was apparently the highest in the region.
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