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The rampant strike action throughout Jakarta has been disrupting businesses and causing extensive damage as some workers turn to violence, holding colleagues hostage and forcing workers to join in the strikes against their will. The police are not taking strong enough action and have not been providing employers with adequate protection. In November 2012, APINDO held a hearing on the subject enabling cross sector industry associations, entrepreneurs from various provinces and representatives of foreign chambers of commerce to voice their opinions on the matter.
The impact of labour demonstrations is beginning to be felt by foreign investors. At the hearing, representatives of foreign chambers of commerce expressed their concern over the lack of police protection being given to the factories who are victims of anarchistic activities by unions. According to them, if this action continues and the Indonesian government fails to take a firm stand, foreign investors will be reluctant to invest and expand their businesses in Indonesia. Based on information obtained by APINDO, some foreign companies have even closed due to worker strike actions, including PT S (a cable plant from Indonesia), PT BHI (a plastic injection factory from Korea), PT DGW (an agro-chemicals plant from China), PT TP (a printing and packaging plant from Japan), PT SPI (a motorcycle parts manufacturer from Korea), and PT P (a manufacturer of heavy equipment for the mining sector originally from Japan).
According to reports received by APINDO, the practice of sealing factories is not usually carried out by workers themselves, but rather by organised groups brought in from outside the plant and even outside the region. In some areas, these actions have led to horizontal conflicts between demonstrators and workers who do not want to participate to the strike at the plant site and the community who feel their rights and interests are affected.
The strike action which has occurred in the provinces of Indonesia outside of Jakarta most recently is a continuation of the ongoing nationwide strikes which demanded the abolition of outsourcing, wage increases and the implementation of social security coverage. Responding to the growing labour unrest APINDO felt the need to respond to the demands of the workers from the perspective of Indonesia’s entrepreneurs.
The continuing debate centres on the system for differentiating core and non-core work (work that is not a core activity for the company) and therefore which types are authorised to use outsourced labour as stipulated in Article 66 of Law No.13 of 2003. It was previously agreed that core and non-core definitions would be discussed by the body of the National Tripartite LKS. However, due to the pressure of labour unions, the government has made its own interpretations. Therefore, APINDO refused for the new regulations and guidelines regarding outsourcing to be issued by the government as it violates the collective agreement that has been made to consult the National Tripartite LKS and Labour Law No. 13 of 2003.
Opposing the system of outsourcing does not guarantee the protection of workers' rights. Workers’ rights violations by the provider of the outsourced labour are caused by weak government oversight. APINDO therefore urged the government to tighten controls over the practice instead of abolishing outsourcing in such a way that companies can continue to utilise outsourcing for optimal activity and productivity.
Through the National Tripartite Cooperation Institution (National Tripartite LKS), APINDO also encouraged the formation of a committee / supervisory posts within the government, employers and trade unions. The Committee would be charged with monitoring the implementation of outsourcing in Indonesian businesses.
Chaotic wage determination is in part caused by regional heads who do not heed the necessary mechanisms and procedures for reaching agreements with the councils. Wages are therefore being determined by political interests related to upcoming local elections rather than proposals from councils. This is further exacerbated by the actions taken by anarchistic workers when the minimum wage increases do not correspond to their demands. APINDO is therefore demanding that the government commit to enforcing the wage-setting systems and procedures in accordance with the legislation.
The average increase in the minimum wage planned for 2013 is 30-50%. Employers are forced to accept the magnitude of this increase because the government tends to bow to the demands of labour unions. Minimum wages as a safety net have now come to be understood and imposed as a wage standard. This burden will undoubtedly fall on entrepreneurs directly. The planned minimum wage increases for 2013 will also weaken the competitiveness of Indonesia’s national industry in the era of liberalization of trade with the ASEAN Economic Community by 2015 and a number of FTAs or CEPAs with the EU, China, Japan, etc. As a result of weakening competitiveness, foreign investors will choose another country that is more conducive as their production base.
In wage setting, APINDO also asked that the government considers the industry's ability to pay wages and not only to grant the demands of home workers / employees for political reasons. The government is expected to examine the level of financial strain being faced by all companies from micro, SME, to multinational corporations. APINDO also urged the government not to raise the minimum wage for micro, small and medium sized businesses. For labour-intensive industries, APINDO requested that minimum wage increases are set at a reasonable amount as such industries have limited capital.
APINDO also assessed the demands of the workers that health insurance contributions are borne entirely by the employer. The demand is not in accordance with the principle of mutual cooperation in social security, in which the contribution is shared by workers and employers based on Law no. 40 of 2004 on the National Social Security System (Navigation). APINDO therefore urged the government to immediately establish policies related to determine the appropriate subsidies for social security contributions.
APINDO argues that formal sector health insurance contributions should be borne by the government. Imposition of health insurance contributions on employers will only add further strain on employers which have had to deal with the rise in electricity and gas prices thereby further weakening industry competitiveness.
The Government of Indonesia while acting as a mediator in this dispute has not shown a firm attitude in resolving the labour turmoil. This is creating a mood of pessimism among businesses as they continue to face legal uncertainty and police inaction on anarchistic labour strikes. Unions must respect collective agreements and play by the rules of the game. In this same vein, APINDO released a statement on 2nd November 2012 which was supported by 23 industry associations laying out the rules of engagement for the government and labour unions clearly stating that violence and vandalism are unacceptable. APINDO will have a consultation session with the government on these terms in order to gain a response from them and to avoid extreme measures which would have an adverse effect on the investment climate in Indonesia.
APINDO - 2013
Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)
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