Page 38 - e-KLIPING KETENAGAKERJAAN 29 JULI 2020

The Indonesian Employers Association (Apindo) has suggested that the government replace the
current formula on determining the minimum wage with a scheme that boosts wages based on
worker productivity.

OMNIBUS BILL COULD BOOST PRODUCTIVITY: BUSINESSES
With Indonesia’s low worker productivity standing as a barrier to investment, some
businesspeople are expecting a proposed wage scheme in the government’s omnibus bill on job
creation to help reverse the tide of slow progress in bringing in investors.

The Indonesian Employers Association (Apindo) has suggested that the government replace the
current formula on determining the minimum wage with a scheme that boosts wages based on
worker productivity.

Apindo head of employment Bob Azam told The Jakarta Post on Tuesday that the change would
be in line with the omnibus bill on job creation, which stipulates that wages be determined based
on working hours and output.

“There will not be any reduction to the current minimum wage. But the raise should be set in a
more constructive manner according to any increases in productivity. Wages should not grow
faster than productivity,” Bob said in a phone interview.

At present, regional administrations set the provincial minimum wage every year based on the
inflation rate and economic growth rate under the prevailing 2003 Labor Law. However, many
businesspeople have criticized the increases for not resulting in greater productivity among
workers.

Indonesia’s manufacturing plants only scored 74.4 on productivity, compared with 86.3 for the
Philippines, 82.7 for Singapore, 80.1 for Thailand and 80 for Vietnam, according to a survey
released earlier this year by the Japan External Trade Organization (JETRO).

“As an investor, if I want to enter Southeast Asia, then Vietnam, Thailand, Myanmar, Malaysia
and the Philippines would be more preferable, not Indonesia,” said University of Indonesia
economist Fithra Faisal. “Wage [increases] have been high while productivity levels stagnate,
so the cost of production becomes very high.”

Fithra said the omnibus bill on job creation was expected to address the productivity problem.

President Joko “Jokowi” Widodo’s administration seeks to pass the omnibus bill to relax the
Labor Law to improve Indonesia’s ease of doing business and hence attract more investment,
which makes up around 30 percent of the country’s economy.
As the COVID-19 pandemic aggravated the country’s business climate, overall investment
realization declined 4.3 percent yearon-year to Rp 191.9 trillion (US$13.1 billion) from April to
June.

The omnibus bill contains 15 chapters and 174 articles that will revise 79 laws and more than
1,200 articles the government considers harmful to the business environment.

Shinta Kamdani, the deputy chairwoman at the Indonesian Chamber of Commerce and Industry
(Kadin), said discussions on creating fair articles within the bill had been taking place among
business groups and the government and labor representatives.

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