Better business climate key to minimum wage hike

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)