Indonesia must head off industrial unrest

ABOUT two million workers across Indonesia were to have gone on strike last week to demand the government increase their wages by 50 per cent. It was intended that workers would down tools across 22 provinces and the action would be extended if the government did not respond to their demands. The call for the strike action by the Confederation of Indonesian Workers Union failed to draw millions. Several thousand workers did, however, go on strike. There were some demonstrations on the streets of Jakarta and in neighbouring industrial estates.

The workers demanded a 3.7 million rupiah (S$410) monthly wage for 2014. The Indonesian Employers Association held that the workers' demand would be tantamount to a 50 per cent wage increase and warned that many foreign investors would relocate if the government accepted such a demand. Besides, the demand would not address the needs of those in the informal sector, where about 40 per cent of Indonesians work. Only seven million out of a population of 240 million are union members. A repeat of last year's 44 per cent wage rise could have jeopardised jobs, although it is true that inflation, which soared following a sharp rise in fuel prices in June, has eroded some of the workers' gains.

Another concern is that Indonesia's economic growth is slowing. The economy expanded 5.8 per cent in the second quarter - the first time since 2010 that the economy has failed to grow by at least 6 per cent. The country's trade account unexpectedly swung back to a deficit in September. The external deficit is expected to pile further pressure on the ailing rupiah, which plummeted earlier this year as investors fled on fears that the US Federal Reserve was set to "taper" its huge stimulus programme.