Better business climate key to minimum wage hike

JAKARTA (JP): Businessmen say most employers will be able to increase their workers' salaries above the minimum wage level if the business climate improves and the high-cost economy is contained.

Antonius Tardia, chairman of the Indonesian Footwear Associ ation (Apresindo), said most manufacturing industries were now facing difficulties in obtaining banking services, especially letters of credits (L/C). This, he added, had caused the factories to cut their production capacities.

"In the footwear and textile sector, which is labor-intensive, idle capacity has reached between 30 percent and 40 percent. This sharp cut has contributed to the restriction of labor costs," he told The Jakarta Post here on Thursday.

Minister of Manpower Bomer Pasaribu said on Friday it would be difficult for the government to meet the workers' demands for an increase by above 50 percent because of the economic crisis that has affected most companies. He said the hike, slated to be announced in February, might be between 20 percent and 45 percent.

Yacob Nuwu Wea, acting chairman of the Federation of All Indonesian Workers Union (FSPSI), said the labor union would call for a national strike if the government could not increase the minimum wages by at least 50 percent. He said the current minimum wage level, which ranges between Rp 150,000 and Rp 290,000 per month, was too low.

Antonius said rampant illegal levies, poor law enforcement and strict labor regulations had also contributed to low wages.

"Despite the reform movement, there is no indication that civil servants and law enforcers have changed their mentality to restore their image," he said.

He said civil servants and law enforcers, including security authorities, should improve their services to the public in compensation for the tax and other legal levies they had paid to the government.

He said it had become an open secret that businessmen did not enjoy better services from government employees without paying money, and government employees were reluctant to serve businessmen unless they were paid.

Illegal levies were rampant in government offices dealing with licenses, deliveries, security and labor affairs and in delivery process, especially at seaports, he said.

"Most businessmen have no other alternative than spending extra money to avoid bureaucratic hurdles. Besides, most employers have to pay more money to security authorities for security at their plants. All these extra expenditures have been classified as invisible costs," he said.

He said most employers had slashed a part of their labor costs to cover these invisible costs, making them unable to pay their workers above the minimum wage level.

Antonius said most companies had frequently complained about prevalent illegal levies, but had yet to receive a positive response from the government.

"The government should take stern measures to enforce the law and improve its public service to create a better business climate and labor conditions in Indonesia," he said.

Hendrik Sasmita, president of footwear company PT Panarub, concurred and said the high-cost economy had become a classic issue that had yet to draw the proper attention of the present government.

He said that despite the reform era, it would be difficult for employers to pay their workers above the minimum wage level due to the high-cost economy.

"If we raise our labor costs, our products will not be competitive in the international market," he said, citing that in the footwear and textile sectors, Indonesia faces Asian competitors such as Vietnam, South Korea, Malaysia and China.

He said many hoodlums had used workers employed in his company to "rob" his money.

Anthon Sihombing, deputy chairman of the Association of Indonesian Labor Exporters (Apjati), said the government would be able to increase the current minimum wage by at least 30 percent if invisible costs could be minimized.

"The invisible cost could be reduced to zero if the government is capable of reforming the bureaucracy and taking stern measures against corruption and collusion," he said.

Malaysia, he said, could pay its workers more than Indonesia because it had managed to curb the high-cost economy.

Anthon also said foreign investors would refuse to invest in Indonesia if the government could not ensure legal certainties. (rms)