Tue, 04 Jan 2011

From: The Jakarta Post

By Fadli, The Jakarta Post, Batam
Up to 1,200 people could lose their jobs following the announcement that a Japan-based electronics manufacturer plans to close its plant in Batam, Riau Islands, in April.

The management of PT Panasonic Shikoku Electronics Batam said it would close down the plant because production costs there were too high, which meant its products were not competitive with those of rival overseas companies.

“Our products are considered too expensive compared with the competition. We have already implemented an efficiency minded scheme in production, [but] still we cannot suppress production costs,” Herry Pranata, the company’s official in charge of human resources, told The Jakarta Post in Batam on Monday.

“The city’s minimum wages are increasing every year how can we push [prices] down further if operational components there increase,” he said, adding that the management planned to lay off the plant’s 1,200 workers in stages.

He said Batam’s Free Trade Zone had not significantly benefitted production costs, but stopped short of blaming the closure on this alone.

“These two things are in fact not related. This is purely business demand for production is based on orders; if orders continue to drop we have no option but to close down,” he said.

The Batam Labor Office responded to the news by saying it expected the number of unemployed in Batam, which is currently at about 11,000 to 12,000 people, to further increase.

“We have received the report that they are going to send home 1,200 workers. I assume this is not because of Batam but purely [down to] business competition,” labor office head Rudy Syakyakirty said.

He said it did not make sense to blame the plant’s closure on a number of regional minimum wage hikes over the past few years, “because the wages set by the Batam authorities are still competitive with those in Malaysia and Vietnam”.

“I guess our government is implementing a flexible labor policy. In China, companies are obliged to provide accommodation, stipend and transport facilities. In Batam, many workers are only given their wages,” Rudy said.

PT Panasonic, which has operated in Batam since 1998, has two business units that produce fluid dynamic bearings, which are used in computers.

The company closed down its plant producing batteries in Batamindo in 2008.

The company has plants in Singapore, Malaysia, Philippines, Thailand and Vietnam in the Southeast Asia region.