Sign up | Log in



Home  >>   Daily News  >>   Indonesi News  >> Investment  >> Q1 investments boom, but jobs remain scarce
NEW UPDATES Asean Affairs   6 May 2014  

Q1 investments boom, but jobs remain scarce

Indonesia: Strong investment growth in Indonesia in the first quarter (Q1) failed to translate into greater job generation, as companies sidestepped rising labor costs by investing more in capital-intensive sectors than labor-intensive ones.

Only 260,000 jobs were created on total realized investments that grew by an impressive 15 percent to hit Rp 107 trillion (US$9.3 billion) in the first quarter this year, according to the Investment Coordinating Board’s (BKPM) latest statistics.

That was a 40 percent decline from 361,000 jobs created in the first quarter last year, and a far cry from the 430,000 jobs generated in the fourth quarter last year.

“We can now say that investments are now shifting into capital-intensive sectors,” BKPM chairman Mahendra Siregar noted.

The National Development Planning Board (Bappenas) targets to push down the unemployment rate to 5.7-5.9 percent by the end of next year, from 6.3 percent at the moment.

But the government might find it more difficult going forward to boost its economic growth amid a downward trend in Indonesia’s labor absorption over the past few years.

The 2012 state budget stipulated that every 1 percent of the gross domestic product (GDP) should create at least 400,000 jobs. But Bappenas’ latest study shows that the economy is currently only able to generate 220,000 jobs for the same level of economic expansion.

The situation is exacerbated by Indonesia’s annual GDP growth that sat at a four-year low level of 5.8 percent last year.

Deputy Finance Minister Bambang Brodjonegoro said the shift of investments from labor-intensive to capital intensive sectors was a normal trend occurring across the globe, notably in emerging countries like Indonesia that were moving to an upward economic level.

“However, I acknowledge that our industries are now finding it harder to survive amid competition with other countries in the region that are offering cheaper labor and other incentives,” he said recently.

Indonesia, Southeast Asia’s largest economy, has seen its competitiveness dwindle in part due to rising labor costs nationwide.

For example, Jakarta, which houses several textile, garment and footwear manufacturers, increased the minimum wage by 11 percent to Rp 2.4 million for this year after a 42 percent increase last year.

In comparison, in the Bekasi municipality, the minimum wage increased 16 percent to Rp 2.44 million this year, following a 43 percent increase from last year’s Rp 2.1 million. Meanwhile, Bekasi regency’s minimum wage rose 22 percent this year to Rp 2.44 million, whereas it rose 34 percent last year to Rp 2.00 million.

Both Bekasi municipality and regency are home to many mid-sized, capital-intensive industries.

“Given continually higher minimum wages, rigid labor regulations and slow growth in labor productivity, Indonesia’s labor is becoming less competitive — thus, investors are switching to capital-intensive projects,” noted Fauzi Ichsan, a senior economist with Standard Chartered.

Responding to the issue, Indonesian Employers Association (Apindo) chairman Sofjan Wanandi said he would propose a new wage differentiation scheme to the government in annual tripartite talks involving representatives of workers, employers and the government,

The proposal suggests the government allow different minimum wage schemes for different companies, depending on their wage capacities and business scales.

Sofjan said some companies preferred to expand by buying machines instead of recruiting new workers as they had grown tired of dealing with “noises” voiced by workers, whose wages continued to rise while productivity remained relatively stagnant.

Reach Southeast Asia!
10- Nations, 560- Million Consumers
And $1 -Trillion Market
We are the Voice of Southeast Asia Media Kit
The only Media Dedicated to Southeast Asia Advertising Rates for Magazine
Online Ad Rates

Comment on this Article. Send them to

Letters that do not contain full contact information cannot be published.
Letters become the property of AseanAffairs and may be republished in any format.
They typically run 150 words or less and may be edited
submit your comment in the box below

Today's  Stories                            May 6, 2014 Subsribe Now !
• Long Live the King Subcribe: Asean Affairs Global Magazine
• Government moves to draft conservative 2015 budget
• Malaysia to keep on searching for missing MAS flight MH370 - Najib
Research Reports
on Thailand 2007-2008

• Textiles and Garments Industry
• Coffee industry
• Leather and footwear industry
• Shrimp industry

•Thailand ready to be production hub for electric appliances
• Q1 investments boom, but jobs remain scarce
Asean Analysis                    May 2, 2014

• Asean Analysis May 2, 2014
Lao activist missing 500 days, wife seeks answers
Advertise Your Brand

Asean Stock Watch    May 5, 2014
• Asean Stock Watch-May 5, 2014
The Biweekly Update
• The Biweekly Update  May 2, 2014

ASEAN NEWS UPDATES      Updated: 04 January 2011

 • Women Shariah scholars see gender gap closing
• Bank Indonesia may hold key rate as inflation hits 7 percent
• Bursa Malaysia to revamp business rules
• Private property prices hit new high in Singapore • Bangkok moves on mass transport
• Thai retailers are upbeat
• Rice exports likely to decline • Vietnamese PM projects 10-year socioeconomic plan


This year in Thailand-what next?

AseanAffairs   04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

The first issue that can’t be answered is the health of Thailand’s beloved King Bhumibol, who is now 83 years old. He is the world's longest reigning monarch, but elaborate birthday celebrations in December failed to mask concern over his health. More






1.  Verifier

1. Verifier

For security purposes, we ask that you enter the security code that is shown in the graphic. Please enter the code exactly as it is shown in the graphic.
Your Code
Enter Code

Home | About Us | Contact Us | Special Feature | Features | News | Magazine | Events | TV | Press Release | Advertise With us

Our Products | Work with us | Terms of Use | Site Map | Privacy Policy | Refund Policy | Shipping/Delivery Policy | DISCLAIMER |

Version 5.0
Copyright © 2007-2015 TIME INTERNATIONAL MANAGEMENT ENTERPRISES CO., LTD. All rights reserved.
Bangkok, Thailand