Jakartass Home thoughts from abroad. Alien thoughts from home.

That’s as may be. Yes, call me stupid if you like, but I’ve never understood the myth, the holy grail as some call it, of economic growth as exemplified in this Jakarta Post editorial.

Taking advantage of the current benign inflation outlook, Bank Indonesia surprised most analysts last week by cutting its policy rate by 25 basis points (bp) to a record low of 5.75 percent in a concerted bid to invigorate domestic consumption and further boost the economy which last year grew a respectable 6.5 percent.

Just what does “respectable” mean? Consider this: the average Indonesian spends nearly half of his/her income on food.

The informal sector and women’s poverty
The minimum wage in Jakarta for 2012 is set at Rp 1,529,150 (US$170) per month, or an average of Rp 305,830 per each household member. So, if only the breadwinner of a family of five works, all family members would be categorized as poor given the government’s poverty line benchmark of Rp 355,480 set in 2011.

Give Indonesian women workers a reason to stay
According to the National Authority for the Placement and Protection of Indonesian Overseas Workers, women make up about 90 percent of all Indonesian migrant workers, bringing the number of women overseas to an estimated 6 million.

With push factors such as low educational qualifications and a lack of job opportunities in their areas of origin, in combination with pull factors such as the lure of better wages abroad, a large proportion of Indonesian female labor migrants migrate to Saudi Arabia to work as domestic workers.

In the Malaysian Economic Report 2010/2011 compiled by the Finance Ministry, it is stated that of the 1.8 million registered migrant workers in Malaysia, 38.2% were employed in the manufacturing sector, 16% in the construction and 14.2% in the plantation sectors and that 50.9% were from Indonesia. Women work predominantly as housemaids or as cleaners.

Malaysian Trade Union Congress deputy president Mohd Jafar Abdul Majid says, “It goes without saying that foreign workers have indeed contributed to the growth of our economy, especially in sectors where we have an acute shortage of workers such as construction.”

What is more, a case study in Sragen Regency, Central Java, states that according to data from 2007, foreign exchange from Indonesia migrant worker remittances is estimated at $5.9 billion, which contributed significantly in Indonesia Balance of Payment (BOP). And, it should go without saying, to the welfare of a large percentage of those struggling at or below the poverty line.

Yet children continue to suffer.

The plight of Balinese child workers (2008)
“On normal days I make around Rp 10,000 (c.$1.10) per day. On busy days, I can make Rp 20,000 per day.”

Badung Market’s child workers (2012)
“If we don’t work our families are hungry. US$5 a day is possible if the customers aren’t stingy. Most of the time I earn less than that each day.”

Not much change in four years then!

In 2007, according to statistics reported to the World Health Organisation (WHO), 19.6% of children under 5 years old in Indonesia were underweight and the country ranked fifth in the world for the number of children with stunted growth.

I agree with friend Oigal when he suggests that the country’s elite have stunted minds.

Consider this paradox: firstly. respondents to this survey were unanimous in their view that Indonesia lacks the funds to invest, so obviously foreign investments are to be welcomed.

Example 1: US firms want a piece of Indonesia
Buoyed by strong economic growth and a relatively stable political environment, Indonesia is poised to become a key investment destination for US companies, provided that the historical impediments to investment in the country are addressed.

Example 2: Shinsei Bank eyes RI for offshore expansion 
Senior managing executive officer Hitomi Sato said last week after meeting Industry Minister MS Hidayat that the bank was looking into the possibility of entering the local banking sector by setting up a representative office and establishing a leasing firm in Indonesia to tap into the expanding demand for financing in the domestic market.

Yet RI firms invest heavily abroad.

As of the end of December 2011, Indonesian companies had invested a whopping US$7.7 billion in a variety of business sectors in Asia, the Americas and Africa. The investment value grew by 185 percent compared to $2.7 billion in 2010.

In comparison to the investments made abroad, domestic businesses spent a total of $8.4 billion on direct investments in the country, or a 25 percent increase from $6.7 billion invested in 2010.

Sofjan Wanandi, chairman of the Indonesian Employers Association (Apindo), said that legal uncertainties in Indonesia and the usual impediments in the domestic investment climate also factored into the decision to invest abroad. Indonesian companies are struggling with high production costs, particularly logistics, with a lack of infrastructure development the biggest obstacle.

On top of the infrastructure bottle neck, companies suffer from deals made by politicians in regional governments with workers unions. Recently Apindo was forced to agree to a 23 percent increase in the minimum wage in Tangerang and Bekasi.

Apindo argues that regional governments abuse their power by disregarding policy recommendations from the National Wage Council (DPN), claiming that many companies will have to relocate due to the new salary standards.

Example 1: Korean companies
Chairman of Indonesia Employers Association (Apindo) West Java Deddy Wijaya said there are lots of South Korea investors who invest their shares in more than 1,500 companies. He said since the beginning, the South Korean investors have asked about worker minimum wage (UMK) which has infringed the procedures. Even, they have talked South Korea Ambassador to ask about this problem to provincial government of West Java.

“At least 200 plants owned by South Korea investors ask for relocation.”

Example 2: Indonesia Keen on Investing in Malaysia
The businessmen of Indonesia are waiting with keen eyes to grab the chances to invest in Malaysian manufacture, health and tourism sectors.

Yet, as I wrote a short while ago, the Indonesian tourism sector is in dire need of investment in infrastructure.

So, let me summarise.
- Indonesian migrant workers, who are from the poorest sector of the population, and foreign investors contribute significantly to Indonesia’s income whilst Indonesian businesmen prefer to invest abroad a couple of.billion dollars more than the migrant workers bring in.
- Indonesian business folk, the fat cats who exploit workers here, are considering investing abroad, thus ensuring that more poor folk will lose even their subsistence level income – unless they find work abroad, separated from their families..

That’s not very patriotic in my view.

Just don’t mention the economy to me, stupid.