Labor factor seen as hindering FDI

Labor factor seen as hindering FDI

Ridwan Max Sijabat, The Jakarta Post, Jakarta

The emergence of numerous labor unions and the high severance
payments for workers have been blamed for the reluctance of
foreign businesspeople to invest in Indonesia, and for the
relocation of their factories to other (more competitive)
countries.

Minister of Manpower and Transmigration Fahmi Idris said the
number of labor unions continued to increase but this was not
followed by an improvement in their skills in bipartite
negotiations with their employers.

"As a result, most labor unions have encouraged workers to
stay out of the workplace or to go strike after they are unable
to fight for their interests in bipartite negotiations with the
management," he told a business forum on strategic steps toward
economic recovery here on Thursday.

There are at least 86 labor unions registered with Fahmi's
office.

The minister admitted that many investors, especially those
from South Korea, frequently complained about the expensive
severance pay they had to give for their dismissed or laid-off
workers.

"It is quite a dilemma because laid-off workers would have
difficulty in meeting their daily needs and sending their
children to school, unless they receive higher severance payments
since there is no guarantee they will get new jobs after being
laid off," he said.

Fadmi said the country's high unemployment rate was linked to
the poor development in the real sector, while calling on the
government to review the investment law and procedures to make
the country more conducive to foreign investors.

The government has accelerated labor export to help contain
the unemployment problem that has affected the national education
program as unemployed parents cannot afford to send their
children to school and contributed to the increasing crime rate.
Open unemployment has reached almost 12 million people, while
disguised unemployment or underemployment has reached 48 million.

Sofyan Wanandi, chairman of the Indonesian Employers'
Association (Apindo), supported Fahmi's call and said the
government should review the labor policy to attract new
investment.

"The government should review Law No. 21/2001 on labor unions
and Law No. 13/2003. Many employers are confused by the numerous
labor unions in their companies, especially when they have to
hold bipartite negotiations to prepare collective labor
agreements (PKBs).

"Besides, the labor law also requires employers to pay
severance and service payments that could be 20 times higher than
their monthly salaries. Such regulations are not found in any
other countries," he said.

He pointed out that many labor-intensive factories have moved
to other countries and that no new labor-intensive firms have
entered Indonesia since the economic crisis hit Indonesia in
1997.

New investors have invested only in capital-intensive
investment projects and the mining sector to avoid non-investment
friendly labor regulations, Sofyan said.

However, National Front for the Struggle of Indonesian Workers
(FNBI) leader Dita Indah Sari said the labor factor was not to
blame for the low investment in the country.

The lack of new investors in Indonesia has more to do with the
global crisis and the rising prices of imported raw materials,
she argued.

"Many labor-intensive factories have stopped operations or
moved to other countries because of the rising prices of raw
materials and the high-cost economy," she said.

Dita conceded that the existing laws do favor workers because
they have been in a weak position in bipartite and tripartite
negotiations.

Labor unions would support the proposed review of anti-
investment chapters in the two labor laws, if the government was
serious in providing social security for laid-off workers and
jobless people.