Kadin hails plan to cut levies
Kadin hails plan to cut levies
JAKARTA (JP): Business leaders yesterday welcomed the
government's plan to slash levies to the bare minimum to help
make Indonesian companies competitive, but also suggested that
civil servants' salaries should be raised as well.
During a meeting with Minister of Manpower Abdul Latief,
leaders of the Indonesian Chamber of Commerce and Industry said
that many civil servants, on account of their low pay, have come
to rely on the levies, including unofficial ones, to supplement
their income.
Phasing out official levies will only create new illegal
levies somewhere down the line of the bureaucracy if their
salaries are not improved, they said.
Latief is heading a government move to phase out levies, which
one official reckons to be 37, charged by his ministry. A ruling
is expected soon.
The minister stressed to the business leaders that in return
they have to strive to improve the welfare of their workers, and
at the very least comply with the government-set minimum wage
regulations.
A former businessman himself, Latief said that higher salaries
would also lead to higher worker productivity.
The House of Representatives is currently debating the
government's draft budget, including the contentious issue of
whether or not to award pay increases to the 4.5 million
government employees, and if so by how much.
The chamber executives yesterday said the government was
heading in the right direction by taking steps to eliminate
levies which have no direct consequence on output.
However they emphasized that the aim of this initiative would
be impeded if the government neglects to improve the living
standard of civil servants which they identify as the source of
hidden levies.
A.A. Baramuli, a member of the chamber's advisory board, said
high business costs will persist if this issue is not tackled.
Economist Dorodjatun Kuntjoro-Jakti said that cutting back
official levies would not help cut down production costs, nor
would raising wages necessarily enhance productivity.
"If you continue increasing the minimum wage without doing
anything to stop the other costs then the measure would be
fruitless."
He underlined the urgency of the matter. "The issue we are
facing is extremely urgent. We are at a point of no return."
Latief said in the past decade labor costs in the industrial
sector have hovered at just 10 percent of the total production
costs, while productivity has soared four times higher.
This means that while production has quadrupled, workers wages
have not changed.
"There are those who claim that the disparity between
productivity and salary is caused by the increase in non-
production costs, which could range from 5 to 30 percent of total
production costs," Latief said.
Latief promised to study these claims and promised to cut down
on official levies from his ministry.
While all seemed in agreement that official and unofficial
levies should be dropped, Latief advocated a more cautious
approach then merely hiking civil servants' salaries.
He warned that a huge pay hike could create more problems than
it would solve.
"If we raise civil servants' salaries tomorrow, then we would
have inflation again," he said, adding that "what is need is a
concept not only a pay increase."
Latief acknowledged the need for priming the bureaucracy as a
way of improving efficiency, both for the government and the
private sector.
"Yes, that's right, abolish levies and curtail the
bureaucracy," he said, adding "I think the government is heading
in that direction. It's just a matter of time."
He underlined that companies must strive to improve efficiency
and cost effectiveness and argued that many discrepancies are
still to be found in local companies which should be addressed.
He pointed to one instance where workers in a palm oil
plantation in Indonesia receive Rp 3,000 (US$1.3) a day, while in
Malaysia they get about Rp 12,000.
"Now I don't know what's wrong there, but something is," he
told the business magnates. (mds)