Investors watch handling of riot, warn businessmen and analysts
Investors watch handling of riot, warn businessmen and analysts
By Hidayat Jati
JAKARTA (JP): Leading businessman and economic analysts,
skeptical about the government's handling of the recent riots in
Medan, North Sumatra, warn that the incident might deter foreign
businessmen from investing in Indonesia.
Sofjan Wanandi, owner of the Gemala Group and spokesman for
some of Indonesia's largest Chinese conglomerates, said the Medan
riots have already scared off potential investors.
"I know some Japanese and American business people have had
second thoughts about investing here since the riots broke out,"
he told The Jakarta Post here on Saturday.
Christianto Wibisono, the president of the Business
Information Center (PDBI), said potential investors from Japan,
Taiwan and Hong Kong are closely monitoring developments related
to the riots.
Christianto said international mass media have already set
their eyes on the handling of the riots. "Investors will base
their business decisions on their reports," he said.
The government's reactionary stance is viewed with skepticism
by analysts and big businesses, he said.
Medan, the biggest city in Sumatra, was rocked last month by
workers' protests and ethnic violence in which a Chinese
businessman was killed. The riots have been judged by some
analysts as an outburst of long suppressed, complicated problems
of workers' rights, uneven distribution of income and ethnic
conflicts.
The biggest corporations in Indonesia, one of the fastest
growing economies in the world, are primarily controlled by the
ethnic Chinese, who barely make up 3.5 percent of Indonesia's 183
million population.
One union
Adding to the tension is the fact that the government only
recognizes one union representing the workers, the SPSI (All-
Indonesia Labor Union) which is lead by an appointee of the
Ministry of Manpower.
This policy has been the source of mounting foreign pressure
on the Indonesian government. The United States has given Jakarta
until August to improve workers' rights before deciding whether
to revoke GSP (Generalized System of Preferences) trade
privileges.
As a result of the American threat, the government quickly
adopted new labor policies that raised the minimum wage by 46
percent, abolished military intervention in labor disputes and
allowed SPSI to adopt a federation system aimed at increasing the
workers' bargaining positions.
Unfortunately, these measures have not been sufficient to
silence the workers' frustrations, as was evident in Medan.
The country's leaders, always anxious to maintain Indonesia's
investment lure, have stated that the riots will be dealt with
"thoroughly." They have also rejected the workers' demand for the
establishment of an independent union.
Some executives of an unofficial union, SBSI (the Prosperous
Labor Union of Indonesia), were immediately arrested after the
riots broke out. The rebel union's Medan branch chairman, was
handed over to the Armed Forces last Thursday by his own
colleagues after they received guarantees he would not be
mistreated.
Christianto expressed disappointment that the government,
especially local administrations, reacted too defensively in
handling the riots.
"I read a Japanese report stating their reporters were barred
from entering Medan," he said. "This will only make the
international press more suspicious."
The business analyst, who is ethnic Chinese, also criticized
the government's stance on allowing just one union. "This will
only encourage frustrations that can easily turn violent," he
said.
Sofjan, who was a student activist in the 1960's, blamed the
conflict on the current "defensive psychology" he believes is
plaguing the government and the local press.
"We always look for scapegoats and not real solutions," Sofjan
said. "One day we blame the big business; the next we blame the
labor activists."
"The labor issue is important," he said. "Numerous mid-sized
companies in this country are dependent on cheap labor,
especially in assembling."
"Sadly, many of these companies totally view labor interests
and unions from a negative point of view," Sofjan said.
The solution, he said, lies in "open and healthy
communication" between the management and the workers.
"It is obvious that the SPSI fails to represent the workers,"
Sofjan said bluntly. "This must be changed."
The tycoon, who is an ethnic Chinese, also believes the
government's labor polices could be better coordinated.
"It's fine for the government to instruct conglomerates to
increase workers' minimum wages, but please, do not shock the
business community," he said.
The government should warn capital owners in advance of plans
to increase wages, he said. "They should also give the business
sector some limited time to adjust to the new wage."
Too early
Meanwhile, noted economist Hadi Soesastro from the Center for
Strategic and International Studies (CSIS), who is also an ethnic
Chinese, told the Post that it is too early to tell whether the
Medan riots have damaged business confidence and affected foreign
investment.
"If there have been any cancellations of investment plans,
they have probably been just an immediate reaction," he said. "It
is too early to say that the riots have caused a certain economic
trend."
The economist said that because international capital movement
in the world economy today is "very volatile," the government
must assure investors of Indonesia's attractiveness.
Hadi also said that to improve labor conditions, the
government must adopt new policies to "overhaul the whole
Indonesian labor organization."
"It is clear that the official union (SPSI) does not
function," he commented.
"We cannot deny that working conditions in some companies,
including some foreign joint ventures, are just preposterous,"
Hadi said.
The analysts also criticized the government for immediately
singling out a "mastermind" in all labor disputes.
"Of course there is a mastermind," Hadi added. "But he or she
will get nowhere if the soil is not fertile."
Minister of Manpower Abdul Latief, a former retail tycoon, has
persistently tried to promote the government's concerns for the
workers.
Latief has rejected charges made by the International
Confederation of Free Trade Unions (ICFTU) that the Indonesian
government has "pressured workers."
"I think the ministry of manpower has been at the forefront in
fighting for the workers' interests," the minister said.
Latief also stated that he will not disband SBSI because he
never recognized its existence in the first place.