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)