Indonesia's Batam no longer promotes cheap labour to investors

Batam (The Jakarta Post/ANN) - Indonesia's Batam municipal administration and the Batam Free Trade Zone Authority have agreed to no longer promote cheap labour to investors who wish to do business in Batam, but instead to highlight the quality human resources found there as well as available manpower and infrastructure.

Debates on the city's annual minimum wage always tend to be difficult and favour workers' demands rather than employers' needs.

Based on a survey conducted by the Batam Remuneration Council, the Appropriate Living Needs (KHL) in Batam as of September this year were calculated at 1.83 million rupiah (US$203) per month, an increase of 28.06 per cent compared to last year.

The KHL figure will be the main reference for workers in negotiating Batam's minimum wage in 2013. Even the most radical trade union for wage increase demands, the Indonesian Metal Workers Federation (Fspmi), aims to set a minimum monthly wage for Batam at 2.6 million rupiah next year.

Batam Mayor Ahmad Dahlan told The Jakarta Post on Tuesday that his office would not base a decision about the minimum wage by comparing Batam to similar special economic zones in other Asian countries, such as Malaysia, Thailand and Vietnam.

He said the municipality's main consideration in attracting investors would be based instead on the KHL level compared to wage conditions in other countries.

"Minimum wage levels in Malaysia, Thailand and Vietnam will not be the main consideration for us in determining Batam's 2013 minimum wage. It will be based on the KHL survey, which will be the focus of discussion between the government, workers and employers," said Dahlan.

Dahlan added that "cheap labour" was no longer a good slogan to draw investors to Batam.

"I don't agree we should sell cheap labour to investors. It's not good because we diminish the dignity of our own nation. We must convince investors that the quality of our manpower is good. As for determining wage levels, leave that to the existing legal system," said Dahlan.

Batam free trade authority's publication and integrated services director, Dwi Djoko Wiwoho, expressed the same view. He said Batam's minimum wage was no longer in the cheapest category in the eyes of investors. Currently in Asia, Vietnam is ranked the cheapest in terms of workers' wages, despite the country's taxation system.

"Despite the current wage scheme, Batam remains competitive. We are now focusing more on services and prime infrastructure rather than cheap labour," said Wiwoho.

The minimum wage in Batam has gradually increased year-on-year.In 2011, it was set at rupiah 1.18 million per month with a KHL level of 1.29 million rupiah, while the workers demanded 1.2 million rupiah and employers were willing to pay 1.15 million rupiah.

In 2012, the minimum wage was set at 1.4 million rupiah per month set against a KHL level of 1.3 million rupiah, while workers demanded 1.3 million rupiah and employers offered 1.26 million rupiah. The dramatic increase in the minimum wage in 2012 was due primarily to security considerations following riots by workers demanding higher pay.

Head of the Batam chapter of the Fspmi, Suprapto, said his group had conducted a survey based on 80 components to determine the 2013 minimum wage. Based on the components, the KHL level amounted to 2.6 million rupiah. Therefore, the Fspmi is demanding the same amount for next year's monthly minimum wage.

US$1 = 9,589 Indonesian rupiah

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