Bandung. The West Java branch of the Indonesian Employers Association (Apindo) has expressed strong criticism of the governor’s recent decision to implement sectoral minimum wage increases, arguing that it was based on flawed considerations and could deter investors from Indonesia’s most populous province.

The gubernatorial decree, issued on December 27, has drawn concern from Apindo West Java Chairwoman Ning Wahyu Astutik, who highlighted its potential negative impact on labor-intensive industries.

“Labor-intensive sectors, which are highly vulnerable to wage increases, face serious risks to their business survival and job creation initiatives under this policy,” Ning Wahyu said in a statement on Sunday. She added that this move contradicts President Prabowo Subianto’s focus on supporting these sectors as key pillars of the national economy.

Misclassification of Multinational Corporations
One of Ning Wahyu’s primary criticisms is the inclusion of labor-intensive sectors within the new wage scheme, although it specifically limits the scope to multinational corporations (MNCs). She argued that the definition of an MNC in the gubernatorial decision is misleading and could unfairly affect local businesses.

“For example, a local company supplying sportswear to international brands like New Balance, Nike, or Adidas shouldn’t be classified as an MNC if it doesn’t operate in multiple countries,” Ning Wahyu explained.

She said an MNC should be defined by its operations across borders, not merely by its international brands or products. The current classification risks conflating local vendors with global companies, leading to inaccurate policy applications.

Timing and Legal Concerns
Ning Wahyu also questioned the timing of the decision, which comes amidst declining purchase orders, heightened competition, and economic challenges.

The policy, she warned, could erode investor trust in West Java’s legal framework, making the province less attractive to both local and international investors. It could also prompt businesses to relocate to other provinces or countries with more favorable investment climates, potentially resulting in mass layoffs and worsening unemployment in West Java.

From a legal perspective, Ning Wahyu pointed out that the decree violated the Ministry of Manpower’s Regulation No. 16/2024 by missing the December 18 deadline for wage decisions. Moreover, the regulation explicitly excludes labor-intensive sectors and certain other industries from wage hikes, a stipulation the governor’s policy ignored.

Ning Wahyu criticized the lack of consultation with the Wage Council before the decree was issued, calling the process unilateral and dismissive of key stakeholders.

“The decision-making process ignored principles of good governance, public benefit, impartiality, and transparency,” she said. “Should we really implement a policy that has legal flaws from the outset?”

She also warned that such policies, perceived as being influenced by external pressures, could harm the government’s independence and set a troubling precedent for future wage decisions.