Foreign investors' flight

Foreign investors' flight

From Media Indonesia

Labor movements constitute the main reason why foreign investors are leaving Indonesia, according to a Media Indonesia editorial, Aug. 28, 2002. Is this view correct?

First, a survey of productivity has indicated that when Indonesian workers' productivity increases, their wages stay low, but when wages rise slightly, higher productivity is demanded of them. Meanwhile, the Central Board of Statistics has found that in the period of June 2001 to December 2001, wages in real terms declined by 4.4 percent on average from Rp 230,200 to Rp 222,220 (Kompas, June 4, 2002).

Labor conditions today are inseparable from political, social and economic affairs. In the New Order period, Indonesia provided tax facilities for investors, along with the campaign to promote the country's cheap labor.

The history of capital movement shows that some industries in Japan, Europe and the U.S. moved to Korea and Taiwan in the 1970s for lower costs, and later to Indonesia, Malaysia and Thailand in the 1980s for the same reason. At present, the investors are turning to Vietnam, China and Cambodia with the same argument, i.e. the issue of labor movements and wages.

In fact, foreign investors can leave the country any time. They should not blame the workers. If they find fewer facilities and make less profit in Indonesia, they can go as long as labor rights are respected and liabilities settled pursuant to the existing laws.

ESRA NABABAN

Jakarta