ASEAN KEY DESTINATIONS
Labor-intensive industries have yet to decide what to do next as they wait for further elaboration and actual implementation of the governments’ planned tax breaks.
On Friday, the government officially announced a package of economic stimulus measures, including reducing taxation costs for labor-intensive industries to boost exports, with an additional tax reduction for those labor-intensive industries with 30 percent of their total production given over to
However, industry players dubbed the package a panacea, maintaining that it would not address the root cause of the country’s economic problems.
Indonesian Footwear Association (Aprisindo) chairman Eddy Widjanarko said over the weekend that the economic stimulus package was just a “remedy for the wrong
“It is useless as it does not address the problem at hand,” he said over the phone.
“The root cause has to be fixed, and that root problem is the lack of a decision on a clear provincial minimum wage,” he added.
Eddy said that companies in his association could hire more people as long as the wage system was clear.
The annual wage structure, he went on, should be based on the rate of inflation plus a company’s discretion to add an additional 5-10 percent.
“How can that work when trade unions blatantly reject it?” Eddy asked.
Indonesia’s footwear industry, according to Aprisindo data, has so far laid off 44,000 workers this year due to increased production costs as a result of the higher minimum wage coupled with a rise in base electricity rates.
“We will be grateful if this year’s sales are as good as last year’s,” he said.
“We can only hope for the best, but we’ve seen weaker exports due to the economic slowdown,” he added.
Finance Minister Chatib Basri previously said that his ministry was preparing tax incentives to prevent further layoffs before the announcement of the economic stimulus package.
The incentives include tax holidays for companies and an increase in the level of non-taxable income so that companies that cover their workers’ income tax would not have to bear those costs.
Indonesian Textile Association (API) chairman Ade Sudrajat said that his association was awaiting further elaboration from the government as the government’s stimulus announcement was “vague”.
“If they are talking about tax breaks for income tax, there are five kinds; certainly [the breaks] are unlikely to be applied to all of them” he said.
Echoing Eddy, Ade said a fixed wage structure was needed to absorb more workers.
According to API data, there are 1.5 million workers in Jakarta, a drop from last year’s figure due to the increase in the minimum wage.
“But there has been a 16 percent increase of workers in Central Java. [The minimum wage] in Central Java is almost half that of Jakarta’s,” he said.
He added that the textile industry was currently “stagnant”.
With Indonesia’s current economic growth, the textile industry should be witnessing an additional 50-100 new factories each year but currently, only five to six new factories are being built.
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