Minimum wage increase to harm cigarette firms

Jakarta (ANTARA News) - Indonesia`s policy on the minimum wage hike will harm small and medium sized cigarette firms since most of them are labour-intensive in nature, said an official from the Indonesian Cigarette Manufacturers Association (Gappri).

"There will be a significant impact of minimum wage hike on small and medium sized cigarette firms, especially those that are labour-intensive in nature," said Hasan Aoni Aziz, a spokesperson for Gappri, on Wednesday.

Aziz denied that an increase in the minimum wage will result in massive layoffs by cigarette firms.

"But there is a possibility of layoffs, especially for companies that are facing financial problems," he said.

According to him, another difficulty that cigarette firms will face in 2013 is with regard to the cost of operating production machines, since the electricity base tariff (TDL) will increase next year.

"If the policies on the minimum wage hike and the electricity base tariff are in place in 2013, it will definitely be a burden for the industry," he stated.

Earlier, the Chairman of the Indonesian Workers Assembly (MPBI), Said Iqbal, stated that suspension of the wage increase can only be submitted individually or by respective companies.

"It cannot be done collectively because each company must meet its requirements. It is against the law to submit the suspension collectively," he said on Saturday (November 1).

In addition, the MPBI rejected a statement by the Minister of Industry, MS Hidayat, who claimed that the ideal wage increase for labour-intensive industries is 15 percent.

The MPBI has set some requirements for companies that are seeking suspension of the minimum wage increase. Each firm has to show that it has been in losses for two years in a row, an audit by a public accountant has to be submitted and the labour union has to approve it, before the firm can seek suspension of the minimum wage increase.