Indonesia's labor problems scare off Japanese investors: Sato
By Kornelius Purba
TOKYO (JP): A senior Japanese economist and an Indonesian envoy to Japan have warned that it would be difficult for Indonesia to attract new investment from Japan if no solution is found to solve the labor problems in the country.
Yuri Sato, a senior economist at the Institute of Developing Economies, under the powerful Japan External Trade Organization (JETRO) who specializes on Indonesia, said that Indonesian neighbors in Asia are offering much more attractive conditions for Japanese investors, including a better labor environment.
Sato pointed out that other Asian countries, like Vietnam, Laos, Bangladesh, and especially China, offered more attractive incentives for foreign investment, including cheap and skilled workers.
"Japanese companies might maintain their presence in Indonesia. But for new investment they prefer to wait and see," told The Jakarta Post on Thursday.
Since the downfall of former authoritarian leader Soeharto in 1998, labor protests have become a common sight in the country's labor intensive industries. When negotiations falter, labor unions resort to strikes, which often turn violent, to force the management to bow to their demands.
Sato said she fully empathized with Indonesian workers' complaints and demands, because in the past they were often abused and their rights ignored. In the climate of reform and democratization they have had a much better chance to express their aspirations.
"However there must be a process of give-and-take to reach a compromise," Sato told the Post.
Indonesian Ambassador to Japan Soemadi Brotodiningrat said it would be difficult to attract new investment and even to maintain the current foreign investment in Indonesia if labor disputes could not be settled amicably.
Soemadi said the Japanese private sector and government fully understand that Indonesian workers, in the spirit of reform, are fighting to get better treatment and welfare from the companies where they work, and they are ready to negotiate with the workers for the sake of both sides.
Emphasizing that it is understandable that many workers are disappointed and impatient because their employers often fail to fulfill their commitments, the senior diplomat however warned the workers not to turn violent and become involved in vandalism.
"The Japanese business community acknowledges that workers have the right and freedom to fight for their rights, however they cannot accept violent protests and damage to the company assets. They are ready to face peaceful protests," Soemadi told the Post on Thursday.
Soemadi, who prior to his current position held the position as director general of Foreign Economic Cooperation at the Ministry of Foreign Affairs, said the Japanese businessmen had repeatedly voiced their concern about the labor conditions to President Abdurrahman Wahid, Coordinating Minister of the Economy Rizal Ramli and other Indonesian ministers during their visit to Tokyo.
Putting aside labor problems, Sato said Japanese companies in Indonesia acknowledged that their production activities have significantly improved, especially in the automotive and electronics sectors.
Their main concern about corporate debts, and the slow resumption of banking lending activities, and the economic restructuring however are still not resolved.
According to her, many Japanese companies and Chinese businessmen in Asia are closely following the settlement of the problems between the Indonesian Banking Restructuring Agency (IBRA) and the Salim Group.
Despite the gloomy labor conditions, the Indonesian ambassador however said trade activities between the two countries have shown encouraging signs, although the figures still are not able to match those of pre-1997 levels before the economic crisis in Indonesia.
"According to my own data, non-oil and gas export to Japan increased 29 percent last year compared to 1999," said Soemadi.
The bilateral trade volume from January to October last year showed that Indonesia enjoyed a big trade surplus of over US$6.28 billion. The total volume of trade between the two countries reached US$19.70 billion, with Indonesian exports at about $13.42 billion.
In 1999, the trade volume was about $17.56 billion, including exports worth $12.65 billion, he noted.
The most important export products include seafood, plywood, engine components, and copper. Imports include engines, automotive and electronic components which are needed by Japanese manufacturers in Indonesia.
On investment, the ambassador disclosed that last year the Indonesian government approved 88 projects worth $1.9 billion from Japanese investors, mainly from medium and small scale enterprises. This figure is much higher compared to only $664.3 million in 1999, and $1.23 billion in 1998.
"I share the concern about new investment from Japan, but this trend is quite encouraging," the diplomat noted.