Hariyadi Sukamdani, chairman of Apindo and CEO of Sahid Group. (GA Photo/Defrizal)

Earn Your Pay, Business Chief Tells Labor


JANUARY 04, 2015

Workers demanding wage hikes took to the streets in November. (Antara Photo/Lucky R.)

Jakarta. The Indonesian Employers Association is one of the most important voices of the business community, with a major role in batting for companies during annual minimum wage negotiations.

Hariyadi Sukamdani, the new chairman of the association known as Apindo, says the issue of labor productivity is critical to Indonesia's success, and the country cannot continue handing out wage rises without increases in productivity.

Hariyadi takes over the association as long-time chairman Sofjan Wanandi assumes a new job leading Vice President Jusuf Kalla's team of economic advisers.

Apindo appointed Hariyadi, a veteran businessman with experience in the hotel, textiles and media industries, to lead the group, which is the foremost business lobby on issues such as industrial relations.

Hariyadi is by no means a new figure in the business community. He continues to serve as a deputy chairman at the country's other leading business lobby, the Indonesian Chambers of Commerce and Industry (Kadin), where he deals with issues including wage policy, monetary, fiscal and public policy.

Hariyadi, the president director of Hotel Sahid Jaya International, one of the first local hotel chains in Indonesia, welcomed GlobeAsia for an interview at his office at Hotel Sahid in Jakarta. The veteran businessman said he realized that he would face tough challenges this year to assist his colleagues amid trends of a more demanding workforce, a high interest rate environment, and a rupiah that has been in free fall -- all factors that can only lead to higher costs for companies operating in Southeast Asia's largest economy.

"What we want is the economy to grow at a healthy pace, we want to see a good investment climate and business certainty," said Hariyadi, the son of Sukamdani Sahid Gitosardjono, the founder of the Sahid Group, who through his family's property, hotel and industrial holdings is estimated to have a net worth of $400 million, earning him a ranking in GlobeAsia's rich list.

Soft-spoken and relaxed, Hariyadi often used Javanese to express his thoughts during the interview.

That did not blunt his message: the biggest problem at the moment for the business community in Indonesia is that labor productivity is too low to compensate for the higher wages being demanded.

"What we have been complaining about all this time is that wage increases are not accompanied by rising productivity output. Compared to Vietnam, for example, our labor is far less competitive," said Hariyadi, who began his career as president director of Sahid Detolin Textile in 1992.

Hariyadi Sukamdani, the chairman of the Indonesian Employers Association (Apindo) and the president director of Hotel Sahid Jaya International, one of the first local hotel chains in Indonesia. (GA Photo/Defrizal)

As the official business community representative in the three-way forums that every year set the minimum monthly wage from region to region, Apindo is constantly at the front line of the battle over wages.

The forum facilitates negotiations between workers, represented by labor unions, and the business community, represented by Apindo, with assistance from local governments.

"This is what people need to know about the concept of the regional monthly minimum wage: It is just like it literally means, it is the lowest wage an employer can give. It is set for a single, unmarried worker," Hariyadi said.

Hariyadi himself is an employer. He sits on the boards of directors at labor-heavy Sahid-affiliated textile companies Indotex LaSalle College International, Spinindo Bina Persada, and Sahid Detolin Textile.

The minimum wage, he said, should serve as the safety net for workers to avoid being paid too little by companies.

"The problem now is that people tend to associate the minimum wage with the average wage the worker should receive. That's completely different to the real concept of the minimum wage as the safety net," said Haryadi, who graduated with a degree in civil engineering from Sebelas Maret University in Solo, Central Java, and holds a management degree from the University of Indonesia.

The issue often turns into a lengthy debate at the annual tripartite meetings, with some workers' representatives arguing that the minimum wage should reflect the average wage in a given industry, as often workers who have spent years in a company still only receive a wage equal to the minimum wage.

"But if we look at the rise in the minimum wage in recent years, the growth is quite fantastic," Hariyadi said, adding that the minimum wage is often politicized by the local governments for voter sympathy, especially ahead of local elections.

According to a World Bank development policy report titled "Indonesia: Avoiding the Trap," the country is fortunate to have abundant labor.

The Washington-based lender says that between 2013 and 2020 the working-age population will grow to 189 million, up from the current 174 million.

About 50 percent of the population is under the age of 30, and with the right policies in place to utilize this pool of labor, Indonesia is poised to benefit from a demographic dividend before the population starts to age between 2025 and 2030.

The downside is that workers are demanding higher wages without any increase in productivity. According to data from the World Bank and the International Labor Organization, Indonesia's minimum wage increased by an average of 5.5 percent a year between 2000 and 2011, but productivity only rose by 3.4 percent a year.

In China, the minimum wage and productivity increased by 7.2 percent and 10.1 percent respectively.

According to ILO data, minimum wages in Indonesia increased by 30 percent on average from 2010 to 2013, the highest compared to other Asian countries such as China (8.4 percent), Vietnam (6.7 percent), Cambodia (5.2 percent), Malaysia (3.3 percent) and the Philippines (3.1 percent).

In Jakarta over the past two years, companies have had to bear rapid wage increases. Monthly wages in 2014 were set at Rp 2.4 million ($192) for the capital, up 10 percent from the previous year. That was relatively modest growth compared to the 2013 increase when wages jumped 44 percent when then-governor Joko Widodo responded generously to an increase in the price of subsidized fuel.

In the interview, Hariyadi also unveiled his plans to join forces with the regional wage councils that set the Reasonable Living Cost Index, or KHL, which is the main gauge for determining the minimum wage, to survey companies' compliance with minimum wage pay agreements.

"We will be targeting small and medium enterprises in marginal areas. The big companies usually comply with the minimum wage standard, but the question is can the minimum wage be met by the SMEs? They are the ones that suffer most from all of the rising cost pressures," Hariyadi said.

By collaborating with the wage councils, Hariyadi hopes the survey will capture the real conditions on the ground and be acknowledged by workers, since labor union representatives are also members of the wage councils.

"My bet is that more than 70 percent are not complying with the minimum wage. If that is so, then everyone will realize that there is something wrong in this country," he said, adding that he expected the survey to take four months, with sampling starting in January.