JAKARTA: Foreign workers are leaving Indonesia at an increasing rate due to the slump in commodity prices that has forced resource companies to slash jobs at a time when the government has also introduced tighter regulations on expatriates in Southeast Asia’s biggest economy. The number of temporary residential permits issued to foreigners, including renewals, has fallen for the past few years to 171,944 in 2015 from 194,162 in 2013. In the first five months of this year, there were 72,399 issued but many of those who provide services to expats say they expect a further drop over the whole of 2016 as they are seeing very few new arrivals.
As a result, rents on upmarket homes in Jakarta have plummeted and enrolment at international schools has fallen. “The expat drought has been really noticeable in 2016,” said Deborah Minicola, a Jakarta-based technical advisor at international relocation company Allied Pickfords. “This time the expat community has been hit from so many angles.” The outflow is likely to dent higher-end consumption and drive up unemployment, economists say, as big-spending expats tend to hire multiple workers ranging from housemaids and drivers to gardeners and bodyguards.
Some workers who recently lost their jobs are finding it difficult to get new employment. Christiana Ambar Putriani is one example. She has been looking for a job as a part-time housekeeper in Jakarta after her former bosses left for South America a few weeks ago. She hopes to work for an expat family again as foreigners tend to pay higher wages but it is getting tougher to find such jobs, she says.
The Australian Independent School in Balikpapan, a city in Indonesia’s resource-dependent province of East Kalimantan, expects a 36 percent reduction in its student body this year, said human resources officer Ni Ketut Novia. Three international schools in the city have shut over the past 2-3 years due to the mass layoffs at mining contractors and a drastic cut in expat allowances, she said. The expat exodus will also create skill shortages that could hold the country back when the commodity downturn is reversed.
Low resource prices and a slowdown in demand from China, one of Indonesia’s top export markets, have reduced the incentive for exploration or production in the oil and gas and mining sectors, forcing companies to hack back on staff costs. The mining, oil and gas and geothermal sectors accounted for 7.62 percent of Indonesia’s gross domestic product in 2015, down from 11.81 percent in 2011. Drilling contractors and exploration site surveyors are among the worst-hit, industry experts say.
Oil and gas companies operating in the country include Chevron Corp, Total SA and Exxon Mobil Corp . Total’s Indonesia spokesman said the company has “manpower planning which is in line with our evolution of activities.” Chevron, which is selling assets in Asia including some in Indonesia, declined to comment. Exxon also did not comment.
A PwC survey of 53 firms in the oil and gas sector, released in May, found that almost three-quarters of respondents expected a smaller expat workforce in future, partly because of tighter controls on hiring foreigners. Indonesia opened up dozens of business sectors recently to foreign investors in a move described by President Joko Widodo as a “Big Bang” liberalization of the economy. Yet business groups say there are mixed signals from the government, which imposes restrictions apparently under pressure from protectionist voices around the president.
The manpower ministry is encouraging companies to hire more Indonesian workers and is tightening its scrutiny of the work permit applications from foreigners, said Ratna Agustina, a director at a firm that provides services to expats. The government also sets an age ceiling of 55 years for foreigners employed by oil and gas contractors, downstream businesses and supporting service providers – with certain exemptions for top executives or those with skills deemed crucial. “If they are above 55, the assumption is that many have ailments and are less productive,” said Taslim Yunus, a spokesman for the energy regulator.
Adding to the regulatory uncertainty, the government last year introduced requirements for foreigners to be proficient in Indonesian and for companies to hire 10 locals for every expat, only to backtrack less than 12 months later after businesses raised strong protests. The manpower ministry did not respond to requests for comment. The expat exodus hasn’t hit the rest of the region as hard.
In neighboring Singapore, the number of foreign professionals, managers and executives earning at least S$3,300 ($2,500) a month actually rose 5 percent to 187,900 as of December 2015 from a year earlier, the latest official data show. Banks are hiring more compliance professionals in the city-state, but many condominium units have been left empty and office vacancy rates are near their highest level in almost a decade, partly due to the departure of expats from the energy and commodities sector, property agents say.
The gloom is evident on the streets of Kemang, a ritzy neighborhood in south Jakarta where opulent homes are now festooned with “for-rent” signs. The rental price of one house there, with a garden and swimming pool, has fallen by a third to $3,000 per month, says property broker Julizar. “I’ve been trying to market this house for six months but there has been no taker.” A British national who provides training for energy executives in Indonesia has been hit by a 60 percent decline in revenue over the past 18 months. This slump, he says, is the most pronounced throughout his 20 years in the industry. He declined to be named, citing company policy.
The long-term impact of the restrictions in hiring foreign workers will be “an exacerbation of an existing acute skills shortage”, said Lin Neumann, managing director of the American Chamber of Commerce in Indonesia. Widodo has taken steps to move the economy away from its dependence on commodity exports and build a manufacturing base, but Neumann said that isn’t enough to offset the shrinkage in mining and oil and gas. – Reuters