Export Performance Down in Early 2023, Manpower Minister Allows Industries to Cut Workers' Wages

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Adi Ahdiat 16/03/2023 11:30 WIB

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Indonesia's export value has fallen for six consecutive months from September 2022 to February 2023. Amidst this situation, the Minister of Manpower has permitted affected industries to reduce employ

Indonesia's Monthly Export Value (January 2020 - February 2023)

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Export Performance Down in Early 2023, Manpower Minister Allows Industries to Cut Workers' Wages

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Indonesia's Monthly Export Value (January 2020 - February 2023)

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Indonesia's Statistics Agency (BPS) recorded Indonesia's export value in February 2023 at approximately USD 21.4 billion, a 4.15% decrease compared to the previous month (month-on-month/mom).

This decline in national export value has occurred for six consecutive months since September 2022, as shown in the graph.

In the non-oil and gas commodity group, export declines in February 2023 occurred in precious metals/jewelry/gems, metal ore/slag/ash, footwear, machinery/mechanical equipment and parts, and mineral fuels.

There were also non-oil and gas commodities that saw an increase in export value, namely animal and vegetable fats and oils, iron and steel, electrical machinery/equipment and parts, chemical products, and tin and its derivatives. However, the increase in sales of these commodities was not enough to boost national export performance.

The decline in Indonesia's export performance was previously predicted by the World Bank.

In its Indonesia Economic Prospects (IEP) report, December 2022 edition, the World Bank projected that Indonesia's economic growth in 2023 would weaken due to reduced global demand.

"Weakening global demand could harm Indonesia's export performance and reduce foreign investment flows. Global monetary tightening could also trigger larger capital outflows and rupiah depreciation, which would then trigger inflation," said the World Bank.

Amidst this situation, the Minister of Manpower (Menaker) Ida Fauziyah has allowed a number of industries to make adjustments, one of which is cutting workers' wages by a maximum of 25%.

The details are stipulated in Article 8 of the Manpower Minister Regulation Number 5 of 2023, which reads:

(1) Certain labor-intensive export-oriented industries affected by global economic changes may adjust the amount of workers' wages, with the provision that wages paid to workers are at least 75% (seventy-five percent) of the usual wages received.

(2) The adjustment as referred to in paragraph (1) is carried out based on an agreement between the employer and the workers.

The certain labor-intensive export-oriented industries referred to in the regulation are the textile and garment industry; the footwear industry; the leather and leather goods industry; the furniture industry; and the children's toy industry.

Labor-intensive industries allowed to cut workers' wages must meet the following criteria:

* A minimum of 200 workers;
* Labor costs account for at least 15% of production costs; and
* Production depends on order requests from the United States and European countries, evidenced by order requests.

Editor : Adi Ahdiat

"Disclosure: This is an AI-generated translation of the original article. We strive for accuracy, but please note that automated translations may contain errors or slight inconsistencies."