Misperceptions plague Indonesian outsourcing industry

Outsourcing industry in Indonesia has been under severe debate especially from the labor unions. The perception is that outsourcing is a severe threat to the workers of Indonesia and its economy as well. However, Suryo Bambang Sulisto, chairman of the Indonesian Chamber of Commerce and Industry, notes that outsourcing is a concept that has been in vogue for half a century. Outsourcing is merely a newer term for the old practice of sub-contracting which is in rampant use all over the business landscape.

He cites the example of the Indian outsourcing industry to substantiate the importance of outsourcing. The $100 billion Indian IT services and outsourcing industry in India was built when the cost of back-office operations of Western industries escalated. India entrepreneurs took this opportunity to create the flourishing Indian outsourcing market. Even with the ever-changing market forces, the industry seems to be evolving accordingly to meet the changing demands. This adaption towards rapid changes makes such an industry survive in a marketplace with immense pressure.

However, the misperception that the growth of the outsourcing industry in Indonesia will curb its economic development and result in job losses will prove to be a noose to the actual development of the country.

Misperceptions of outsourcing in Indonesia

The misperception about the outsourcing industry in Indonesia has spread to all roots causing widespread debate in the country.

  • Senior cabinet ministers have voiced their opinions against the outsourcing industry.
  • Government is on its way to enact some new regulations which will restrict outsourcing to just a few areas such as cleaning, security and catering services.
  • The very term ‘outsourcing’ is referred to as ‘alih daya’ in Indonesia which translates to transferring control. Suryo Bambang Sulisto says that the actual term that should be used is ‘sumber luar’ which means the utilization of resources from outside when the necessary resources are not accessible or available in-house.
  • This misperception has gripped the core of the opposition to the concept of outsourcing.

indonesia map

Probable consequences of the misperception

The misperceptions of outsourcing in Indonesia that is now rampant across the nation can pull down the economy drastically. If it is not recognized and countermeasures taken, it might become too late. Curbing the outsourcing industry can have a number of negative consequences.

  • It can choke the growth potential of Indonesian economy and curb creativity and innovation.
  • If outsourcing is limited to only certain services, the emergence of new services as well as industries can never happen.
  • If the proposed law comes into effect, it can adversely affect some of the existing industries. For example, the government had mooted an idea of setting up an IT park in Bali which would have helped young entrepreneurs to begin a number of startups. But the new law might just render such an action illegal.
  • The flourishing wed-design sector will also undergo degradation if the companies are not allowed to outsource their work.

Source of problems

The source of problems is not actually outsourcing itself, but is the unfair contracts which are mooted by the companies.

  • Many companies follow the practice of employing workers based on short-term contracts. These contracts offer no benefits to the workers such as the medical benefits.
  • Current labor laws also deter companies from hiring people in bulk on permanent basis which make them resort to contracts on short-term basis.

Therefore, the labor laws that exist today hurt both workers and employees. The government should address this problem by consulting with the private sector companies and come up with a viable solution rather than throwing out outsourcing altogether. As a short term solution, the Ministry of Manpower could offer some rules that have to be incorporated in the short-term contracts.

The government, labor unions and people should understand that outsourcing does not mean giving up control but hiring expertise from elsewhere in order to fill certain gaps. The misperceptions of outsourcing in Indonesia have to be cleared immediately and outsourcing should be promoted as one of the pillars of Indonesian economy in order to help it compete with the other emerging economies.

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