Productivity to low: Minister

JAKARTA (JP): Minister of Industry and Trade Tunky Ariwibowo blamed yesterday the non-oil and gas export slowdown in recent years on the low productivity of Indonesian workers, which had not risen to match the rapid rise in government-mandated minimum wages.

Speaking at a hearing of House Commission VI for industry and investment, Tunky said the lower growth of non-oil and gas exports was caused by the slow rise of workers' productivity compared to their annual wage hikes.

"Workers' wages in manufacturing, in particular, have increased much quicker than their productivity," he asserted.

Tunky said that between 1985 and 1995 worker's salaries increased 170 percent while their productivity only increased 75 percent.

"In Malaysia and Thailand over that period, workers' salaries grew by an average of 100 percent and productivity increased 90 percent, providing a stable basis for industrial development," he said.

He said the annual growth rate of workers' wages in Indonesia between 1988 and 1993 was 14.3 percent -- higher than most Southeast Asian and South Asian countries.

In that period, Thailand increased its workers' salaries 9.5 percent a year, Sri Lanka by 5.4 percent and China by 5.9 percent, while India lowered its workers' wages 6.2 percent a year.

But Tunky admitted that, despite the rapid rise in wages, workers' wages in Indonesia were far lower than those in Thailand, India and Malaysia.

Wages in Indonesia, then 43 U.S. cents an hour, were among the lowest in South Asia and Southeast Asia in 1993. Thailand's were US$1.04 an hour and India's were 56 U.S. cents an hour.

Tunky said yesterday that productivity was determined by the technology applied by a company and the skills mastered by its workers.

"Low productivity is the result of minimum-technology, labor- intensive operations. To increase productivity, a company must make large investments in technology and human resources training," Tunky said.

He said the government's recent move to increase workers' wages should not decrease the competitiveness of products. Instead it should encourage companies to increase their efficiency and optimize production processes.

Last week, the government mandated an average minimum wage rise of 10.07 percent nationwide.

Many observers, including legislators at yesterday's hearing, considered the hike was insufficient to meet workers' basic daily needs.

According to the Ministry of Industry and Trade, the growth of plywood and wood product exports rose from 9.9 percent in 1991 to 14.3 percent in 1992 and 31.6 percent in 1993. But the growth of these exports fell to 5.6 percent in 1994, 3.7 percent in 1995 and 2.3 percent in the first six months of last year.

Meanwhile, textile, textile-related products and footwear exports grew 43.7 percent in 1991 and 45.1 percent in 1992. But this growth fell to 6.1 percent in 1993 and to minus 6.7 percent in 1994 before rising to growth levels of 6.1 percent in 1995 and 4 percent in the first half of 1996.

Exports of electronic products also grew steadily until reaching 149.3 percent annual growth in 1992 from 110.7 percent in 1991. This also dropped to 43.2 percent in 1993, 53.9 percent in 1994, 23.7 percent in 1995 and 18.1 percent in mid-1996.

Plywood, wood, textile and electronics industries are categorized as labor-intensive sectors.

The ministry said the annual increase in workers' wages in textile and leather industries, averaging 11.6 percent between 1989 and 1992, was higher than in other sectors.

But the annual productivity growth of this sector was only 6.8 percent.

By comparison, wage rises in the wood product industry averaged 0.2 percent while productivity growth was 2.5 percent.

In the food and beverage industry, wages rose 8.8 percent a year while productivity increased 14.9 percent. (pwn)

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