Jakarta – President Prabowo Subianto has raised the Provincial Minimum Wage (UMP) by 6.5%. Will this policy impact investment?
Minister of Investment and Head of the Investment Coordinating Board (BKPM), Rosan Perkasa Roeslani, believes that the UMP increase will not affect the investment climate. He stated that with the UMP increase, productivity among workers should be encouraged so that investors remain confident in doing business in Indonesia.
“I believe it won’t, because again, our productivity is what we need to encourage and improve, especially for many companies entering Indonesia,” he said when met at Bank Indonesia (BI) in Central Jakarta, quoted on Saturday (November 30, 2024).
According to Rosan, the key is ensuring that the increase in UMP does not result in Indonesian human resources (HR) failing to meet investors’ expectations. The goal is for Indonesia’s workforce to be recognized as skilled and capable of earning not just Indonesian wages, but wages that meet international standards.
“For example, in manufacturing, they usually have a timeline for their investment, like building a factory in two years. In these two years, we need to prepare our human resources to meet their expectations, so the wages received by our workers are not only in line with Indonesian standards but can also meet international standards,” he explained.
Rosan also mentioned that this is no longer the era of cheap labor. With the UMP increase, worker productivity becomes very important in maintaining a healthy business climate.
“It’s no longer about cheap wages; it should correlate with increased productivity. That’s the most important thing, because we might pay low wages, but it may require two workers, whereas higher wages might only require one person if productivity is better. So, the key is really about how to increase productivity,” he concluded.
As information, President Prabowo Subianto announced a 6.5% increase in the UMP for 2025. He emphasized that the increase is intended to boost workers’ purchasing power while also considering the competitiveness of businesses.
Initially, Prabowo mentioned that the Minister of Manpower, Yassierli, had proposed a 6% UMP increase. However, after meeting with labor leaders, he decided that the UMP should be raised by 6.5%.
“After discussions and meetings with labor leaders, we decided to increase the national average minimum wage by 6.5% for 2025,” Prabowo stated in a press release at the Presidential Office in Central Jakarta on Friday.
