Foreign Companies Leave West Java on Higher Wages and Electricity Price
Indonesian newspaper Bisnis Indonesia reported that a number of foreign companies in West Java are ready to leave Indonesia because of increasingly higher operating costs. Chairman of West Java's branch of the Indonesian Employers Association (Apindo) Dedy Widjaja said that the main factors that are driving these investors away are higher regional minimum wages and the government's plan to raise the price of electricity. In May 2014, the Indonesian government intends to cut electricity subsidies for medium and large industry groups.
Widjaja said that foreign companies prefer to move their business to countries like Cambodia, Vietnam or Bangladesh where minimum wages are lower than in Indonesia. Moreover, these companies are focused on export markets, not on domestic sales, and therefore moving the production bases to countries with lower wages is logical. Apindo also detects a trend where domestic companies move further away from the cities in West Java toward the borderline with Central Java (such as Majalengka) where regional wages are lower. As these domestic companies sell their products to the local market, they will have no interest to move their business outside Indonesia.