2014 Vol.2

Current State of Human Resource Management in Indonesia

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Since around the 1970s, many Japanese firms have opened locations in Indonesia. The expansion of Japanese firms in Indonesia was temporarily flat due to the 1997 Asian financial crisis, but growth resumed around 2004. In recent years, the expansion has proceeded at a higher rate because Japanese firms expect growth in Indonesia’s middle-class market. Many of the Japanese firms in Indonesia are manufacturing firms that produce mainly vehicles (both four- and two-wheel) and electric appliances. Although this tendency continues today, there are a growing number of firms in service-related industries locating in Indonesia. In terms of human resource management, many firms are facing constant problems such as steep upward trends in wages, labor laws that favor workers, and high worker turnover. Examining the current state in Indonesia, this paper discusses the trends in human resource management in that country.