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Indonesia national strike fizzles, giving government, employers a break

Kanupriya Kapoor
Thursday, 31 Oct 2013 | 3:48 AM ET

JAKARTA, Oct 31 (Reuters) - A national strike demanding higher wages for Indonesian workers failed to win much support on Thursday, handing some welcome breathing space for the government, employers and investors just as Southeast Asia's biggest economy begins to stumble.

Police said fewer than 50,000 workers gathered in industrial centres in and around the capital Jakarta to demand an increase in minimum wages and improved social welfare, a tiny fraction of the number who turned out a year ago.

Unions had predicted up to 3 million workers would join the walkout.

After years of stellar growth, Indonesia's economy is looking less robust with the government repeatedly trimming its outlook for this year because of a softer global economy and a dip in domestic demand.

After earlier predictions of growth at well over six percent, the central bank now says it could be as low as 5.5 percent.

All Indonesia Workers, one of the country's biggest unions, decided to stick to negotiations with the government and employers and not strike.

"There have been job cuts this year and if we anticipate more problems for the industries we work in like garments or textiles, then ... we have to limit the damage to our workers," union head Andi Gani told Reuters.

The strikers were demanding a 50 percent rise in wages, which employers said would only further erode Indonesia's already declining competitiveness in labour intensive industries.

Manufacturers, including foreign investors, have repeatedly warned that one of the world's biggest workforces - Indonesia is the world's fourth most populous nation - risks pricing itself out of the market if wages continue to surge.

Last year, labour unions mobilised hundreds of thousands of workers to push the government to raise minimum wages by an average of 44 percent in greater Jakarta to 1.9 million rupiah ($172) a month.

"If wage increases are too high, if we can't compete with imported goods or labour costs in other countries, then we'd have to surrender and close our factories," said Sofjan Wanandi, head of the Employers' Association of Indonesia.

"This year, the unions felt some job cuts already, so they understand what it means to keep raising wages."

The government has said it plans incentives for labour-intensive industries such as textiles to prevent layoffs. But it has yet to implement the measures and there is widespread concern that Indonesia's manufacturing industries are losing out to more competitive neighbours.

A number of analysts had expected unions to try to take advantage of next year's general and presidential elections to win demands for higher wage increases.

Only about 7 million workers are union members. The majority of the workforce is part of the informal sector in a country where 40 percent of the population survives on around $2 a day.

Local governments are set to announce new minimum wage levels next month.

(Additional reporting by Jakarta bureau, Editing by Jonathan Thatcher and Nick Macfie)