In the upcoming year of 2019, UMP (Upah Minimum Provinsi) will undergo a reestablishment for every region covered by UMP under the KHL (Kebutuhan Hidup Layak). This matter is affirmed within the Surat Edaran Mentri Ketenagakerjaan as per October 15th 2018, based on Section 63 of Governmental Law (PP) Number 78 of 2015 regarding Payments state that for the areas whose minimum wage (UMP and/or UMK) is still below the KHL standard, is mandatory to adjust their minimum wage in accordance with KHL latest by 2019.
The calculated increase of UMP in 2019 for the provinces that have met with KHL or have not, varies. If it has complied with KH, therefore the calculation increase of UMP in the coming year will be multiplied by 8,03%. Whereas for those who have not, will need to satisfy accordingly with the KHL. It is reported that eight provinces are still yet to conform UMP with KHL, among those are Central Kalimantan, Gorontalo, West Sulawesi, West Nusa Tenggara, West Papua, Maluku, and North Maluku. The mentioned provinces may also face a higher UMP compared to other provinces.
Due to that, an increase in cost will surface for every company in Indonesia which will perceptibly affect the economic conditions of the automotive industry. Players within the automotive industry will face a difficult challenge with the rise of the provincial minimum wage (UMP) of 8.03% if perceived from the perspective of growth within the automotive industry of which has been under 3% and even less hitting negative numbers.
PT. Visi Globalindo Data Utama has predicted that by the end of 2018, the automotive industry will show a growth rate of only 3.19%. Meanwhile, in 2019, it will only rise to 4.60%. With the presence of having UMP raise the value to 8.03%, it will undoubtingly rise operational costs to 8.03%, where the business growth will be insufficient to cover the costs. This will result in lowering company performance, therefore, a consequence of profit loss. Especially still having IDR exchange rates at its weakest condition.
The Kadin Deputy Chair Person of DKI Jakarta has stated that the upsurge of 8.03% will worsen the conditions for companies who are already oppressed by the plummeted exchange rate of IDR towards USD. Current conditions validate that the surge will highly overburden the players. If the government were to commence with this choice when the economic state of Indonesia is stable, it would be more ideal. He explained that the entrepreneurs are in need of a lower rate of around 5% so that it will still be possible to commence.