Aiming to increase labor competitiveness in the country's free trade zones, the government is formulating a mechanism for the establishment of local tripartite labor committees within each FTZ.
It is expected that the committees, which will consist of representatives of the local government, employers and labor unions, will serve as local forums that can successfully address labor-relations problems.
"We haven't come up with an exact formula for the tripartite committees as yet. However, the aim is clear, to make the labor relations situation as competitive as possible," said Bambang Susantono, a deputy at the Coordinating Ministry for the Economy, on Monday.
Last week, the government issued three regulations to establish FTZs on Batam, Bintan and Karimun islands in Riau Islands province (not special economic zones/SEZs as previously reported), for a period of 70 years), with the zones actually coming into effect by not later than early January.
The difference between an FTZ and SEZ lies in the tax treatment applied to businesses.
Under this FTZ concept, tariffs on imports, value added tax, luxury goods tax and excise duty on the three islands will be eliminated. Under the scheme, the government hopes to double investment, exports and the number of jobs by 2009 compared to the figures for 2006.
As a member of the central tripartite committee, Indonesian Employers Association (Apindo) chairman Sofyan Wanandi confirmed that the structure of the new tripartite committees was being discussed.
He also said that the local tripartite committee setup would eventually be extended to other regions outside the FTZs.
"The suggestion came from Vice President Jusuf Kalla. He wanted cooperation between the government, employers and workers at the local level so that problems can be contained and resolved locally before spreading and damaging the overall investment climate," Sofyan said.
Specifically regarding the FTZs, the purpose of establishing the tripartite committees was not to undermine workers' salaries as feared by labor activists, but rather to ensure improved knowledge and skills, he said.
"Many investors say that labor costs in Batam are already on a par with other places, such as China and Vietnam, but productivity is much lower."
Bambang confirmed that one of the aims of the FTZ tripartite committees was to resolve the productivity issues hampering labor competitiveness in Batam, Bintan and Karimun.
"Even prior to the signing of the regulations, the central government has been cooperating with the Singaporean government for the training of government officials and workers to prepare them for the introduction of the FTZs," he said.
On Aug. 29, officials from both countries participating in the Indonesia-Singapore Joint Steering Committee will meet in Bali to discuss progress and outstanding issues concerning the three FTZs.
According to analysts, the problems hampering FTZ implementation include overlapping licensing and regulatory powers as between the FTZ authorities and municipal authorities, inadequate infrastructure in Bintan and Karimun, bureaucratic delays, lack of security, piracy, harassment by officials, land rights issues and, most of all, labor issues.
Between January and June of this year, six foreign investors closed up shop on Batam and Bintan, putting more than 8,000 people out of work.