TEMPO.CO, Jakarta - Ade Sudrajat, Chairman of the Indonesian Textile Association (API), said that dozens of textile companies will relocate their factories to Vietnam and Myanmar. Bureaucratic convenience and low labor cost attract the companies to those two countries. "Three factories have already moved to Vietnam," said Ade on Monday, November 24, 2014.
He explained that after a surge in subsidized fuel price, workers demanded for an increase in minimum wage. Therefore, companies have to bear larger costs. "It's a dilemma, whether we increase [the wage] or not," he added.
Based on a report received by API after the fuel price increase, Ade said that most of the labors asked for 15 to 20 percent increase in salary. Meanwhile, companies have set a limit of 11 percent increase, calculated with 7 percent of inflation and 4 percent of increase in salary.
As a result, some textile companies in Jakarta, Bogor, Depok, Tangerang and Bekasi are planning to relocate outside of Jakarta and even to other countries. According to Ade, Central Java and a number of areas in East Java will become popular destinations for textile factories. "Last year, there were 60 factories relocated to Central Java. There might be more than 100 factories now," he said.
Azhar Lubis, the investment control affairs deputy chairman at the Investment Coordinating Board (BKPM), appealed to business owners not to immediately relocate their factories to Vietnam and Myanmar. He asked them to negotiate the demand of an increase in minimum wage.
"There is no need to close or relocate [factories]. Demand of higher salary will also occur in Vietnam and other countries," he said. He added that a 10 to 15 percent salary increase was acceptable. "But if it is 30 to 100 percent, I don’t think it can [increase] that much," said Azhar.
According to Azhar, textile businesses should be able to anticipate an increase in labor cost, because a hike in subsidized fuel price had been discussed for some time. Moreover, the Indonesian Employers Association (Apindo) and the Indonesian Chamber of Commerce (Kadin) have been advocating for the subsidized fuel price to increase.
JAYADI SUPRIADIN | KHAIRUL ANAM