• Bloomberg


Indonesia’s capital girded for a potential turnout of millions of protesters asking for a bigger increase in minimum wages in the world’s fourth-most-populous nation, a test of President Joko Widodo’s pro-business image.

The two-day national protest, starting Dec. 10, will involve four trade union groups, said Muhammad Rusdi, a secretary general at the Indonesian Trade Union Confederation (KSPI), on Wednesday. Workers have seven demands, including renegotiating last month’s minimum-wage deal and scrapping outsourcing in state-owned companies, he said.

“Jokowi,” as the president, who took office in October, is known, has pursued a two-pronged economic strategy of addressing income inequality and boosting Indonesia’s appeal for investment. Faster wage gains would erode a competitive advantage against China as manufacturers look for alternative production locations and contribute to inflation as Jokowi boosts fuel costs.

“The government and employers are likely to tough it out,” said Keith Loveard, head of political risk at Jakarta-based security company Concord Consulting. “Employers are genuinely squeezed by higher costs and high logistics costs at a time when the market, both domestic and export, is relatively weak.”

The planned strike follows smaller demonstrations against the move to raise gasoline prices about 30 percent last month, with the president’s ability to weather the opposition hinging on convincing the public that billions of dollars in savings will be spent to improve their lives. Minimum wages in Jakarta are set to rise 11 percent next year, less than unions wanted.

“We can’t accept the decision on minimum provincial wages,” said Rusdi. “It can’t cover the fuel price rise.”

Jakarta Gov. Basuki Tjahaja Purnama last month approved a 2015 minimum wage of 2.7 million rupiah ($219) a month, while unions were seeking at least 3 million rupiah. Such levels would spur job cuts, as companies couldn’t afford the labor cost, the country’s main employer group has said.

“When added to the rises over the past two years, workers in Jakarta have received a boost of 70 percent in wages, many multiples of inflation in the same period,” Loveard said.

A labor representative on the Jakarta Wage Council, Dedi Hartono, said at least 5 million workers will join rallies, including outside the offices of the governor and president. The unions want to add phone credit, refrigerators and perfume to essential items in a basket of goods used to calculate worker living costs.

Widodo took office after campaign pledges to scale back fuel subsidies and reduce inequality by investing the proceeds in rural infrastructure. While the fuel move has been welcomed by investors, efforts to raise prices over the years have often been met by public outrage, forcing plans to be diluted or canceled.

“China is not the problem, but Vietnam and Bangladesh are,” Loveard said. “Indonesia is competing with them to grab a share of Chinese manufacturing, which is no longer economic due to higher wage costs there.”

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