Indonesia palm sector may face strikes despite wage hikes -trade union

JAKARTA Tue Jan 8, 2013 1:53am EST

JAKARTA Jan 8 (Reuters) - Indonesia's palm sector, the world's largest producer of the edible oil, faces the risk of wildcat strikes this year despite increasing minimum wages, a trade union said on Tuesday, as employers eye redundancies and benefit cuts to fund the hikes.

Both domestic and international plantation companies have benefited from a large, young and cheap workforce that has helped power Southeast Asia's largest economy to grow at more than 6 percent in recent years.

However, last year saw a spurt in industrial disputes as unions in many cities rallied to demand a greater share of the benefits from the boom and protest against employers' use of contract labour to skirt employment regulations.

To quell the unrest, provinces across the country offered workers varying levels of increases in monthly minimum wages in 2013.

Palm oil firms have responded by talking about redundancies or fewer employee benefits, such as free housing or subsidised electricity and food, said Khoirul Anam, president of the Indonesian Forestry and Allied Workers' Union (KAHUTINDO).

"Palm workers are quite cheerful about the increases but it is not over or finished yet," said Anam, whose union has 126,000 members in forestry industries, including palm oil.

"Companies say the wage increases are not logical or are outside their wage structure," he added. "Strikes could occur at any time, should a company not wish to abide by the minimum wage or as a consequence of reducing benefits."

Any industrial action by palm oil workers could hurt output, which is forecast to hit 27 million tonnes this year, or exports to top buyers India, China and Europe.

Palm oil is used mainly as an ingredient in food, such as biscuits and ice cream, or as biofuel.

BIGGEST HIKE IN EAST KALIMANTAN

While the average minimum rate rise is less than 15 percent, Anam said the palm-producing region due to implement Indonesia's biggest such hike was East Kalimantan, on the island of Borneo, with an increase of 49 percent, to 1.752 million rupiah ($180).

The differing scales of increases are prompting workers to move to provinces offering bigger hikes, stepping up pressure on plantation firms to offer equal pay regardless of location.

Only 25 of Indonesia's 33 provinces have approved the increases in minimum wages, Anam said, which would make close monitoring of implementation necessary from the end of January.

Palm plantations usually employ workers on renewable contracts running from three months to a year, or through subcontractors, he added.

The Indonesian Palm Oil Association (GAPKI), which represents plantations, said it had received no complaints and that industrial action was unlikely, as most firms now paid the minimum wage, or more.

"With regard to the crude palm oil industry, there are no complaints of protests from employees," said Executive Director Fadhil Hasan, brushing aside the prospect of sudden strikes.

"The ones who fight for the increase in the minimum wage are mostly workers in urban areas, such as the textiles industry in Jakarta."

GAPKI had participated in regional talks about the minimum wage levels, Hasan added. "The increases are rational and we can accept them." ($1=9,667.5 Indonesian rupiahs) (Reporting by Michael Taylor; Editing by Clarence Fernandez)

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