Labor conflicts turn away foreign investors: Rini

A'an Suryana, The Jakarta Post, Jakarta

Minister of Industry and Trade Rini Soewandi said on Friday that many foreign manufacturers had shut down or relocated their businesses here to other countries due to lingering labor conflicts and a high cost economy resulting from illegal fees.

Rini said there had been fears that labor conflicts could disrupt the delivery of goods for the export market.

Foreign manufacturers are mainly export-oriented companies, which must assure their buyers that they can meet delivery targets.

"Illegal fees are also a problem ... We must resolve all these problems," she was quoted by detik.com as saying during a visit to a textile company in Sukoharjo, Central Java.

Rini also acknowledged, however, that the global economic slowdown was also a factor that caused the companies to shut down their operations because of weaker demand.

As an example, she pointed out how U.S. giant shoemaker Nike had cut down its orders from a local factory.

The Korean Chamber of Commerce (KOCHAM) warned earlier that more South Korean manufacturers operating here would shut down their operations or relocate to Vietnam or Myanmar, which have better investment climates, if the government of Indonesia failed to quickly address the various problems hurting their businesses.

KOCHAM said that some 36 companies had either shut down or relocated their operations during the past year, leaving some 32,000 workers jobless. More companies are preparing to pull out of Indonesia. Among the reasons stated for the mass exodus were unfavorable labor policies, an irrational increase in labor wages, labor strikes, low productivity and poor law enforcement.

The warning is expected to serve as a wake-up call for the government to immediately take measures to improve the investment climate here. This is vital particularly because foreign investment is badly needed to help push economic growth so that jobs can be created for the huge number of people who are unemployed, which according to one estimate reaches a staggering 40 million.

Chairman of the National Economic Recovery Committee (KPEN) Sofjan Wanandi said that the issue of the exodus of foreign manufacturers from the country was at the top of the agenda of the new crisis center.

Sofjan helped set up the crisis center, an agency led by Rini to help resolve various problems faced by businesses here.

He said that the center would soon arrange a round-table meeting comprising foreign investors, labor unions and government officials to help address the problem of labor conflicts and other labor-related issues.

"The meeting will be held within the next few days," he said.

According to Sofjan, the second priority of the crisis center was to address security problems faced by businesses, including extortion by local thugs.

Djimanto, an executive at the Indonesian Businessmen's Association, said that rampant labor protests and illegal fees had created serious difficulties for local manufacturing firms.

He said that labor protests had not only threatened the timely delivery of goods but was also affecting worker productivity.

"Not only the delivery time, but labor protests have also reduced the productivity of workers," said Djimanto.

But chairwoman of the National Front for the Struggle of Indonesian Workers (FNPBI), Dita Indah Sari, dismissed the suggestion that labor protests had caused foreign investors to abandon the country.

She said the exodus of foreign manufacturing firms was mainly due to the global economic slowdown as foreign buyers had been cutting down import orders from Indonesia.