Labor 'terror' a blow to investor confidence

JAKARTA (JP): The government's decision to shelve the implementation of labor decrees will only deepen foreign investors' negative perception of the country's legal certainty, a noted foreign analyst said here on Saturday.

The president of PT Harvest International Indonesia, Harvey Goldstein, said the decision indicated that the government's policy could be dictated by "terror" from a rioting mob.

The eruption of street violence also made clear to foreign investors that Indonesia was unsafe and that political interests remain on top of economic ones.

"It's a double jeopardy, a double danger to attracting foreign investment," he told The Jakarta Post over the weekend.

Last week several cities across the country were hit by a wave of labor protests, which in some cases turned violent as police lost control over rioting mobs.

Workers demanded the government revoke revisions made to a ministerial decree on severance payment on the grounds that the revised versions violated their rights.

The protests have been going on for several weeks, but have only recently grown out of control as more workers joined the protests.

Following a meeting with the military last Friday, Minister of Manpower and Transmigration Al-Hilal Hamdi decided to postpone the implementation of the new decrees.

Goldstein said that apparently fears of more unrest had prompted the government to override its earlier policy. This, however, smacked of inconsistency, he warned.

In the same week, the government decided to delay the new decrees, it delayed plans to hike fuel prices, citing security concerns.

But as the fuel price hike came into effect on Saturday, thousands of protesters took to the streets again demanding the decision be canceled.

The mass anti-government riots signal the eroding public confidence in the administration of President Abdurrahman Wahid.

Loosing public support may spell disaster for the embattled President, who is facing the threat of impeachment in August.

"The government is taking decisions based on politics," Goldstein said.

Ministerial Decree No 78 and No 111 were issued as revisions to Decree No 150, which required employers to provide severance payment to workers leaving their place of employment, even if they were dismissed.

Local and foreign investors have decried the old decree as overprotecting workers' rights.

With the delay of the two ministerial decrees, a tripartite forum comprising employers, trade unions and government representatives will deliberate the issue next month.

Chairman of the Indonesian Textile Association (API) Lili Asdjudiredja said Ministerial Decree No 150 dealt another blow to the labor intensive textile industry.

He said the textile industry, with its high turnover rate, would be hit the most by the old decree.

Low-skilled workers, he said, can easily move from one textile company to another, forcing employers to fork out huge amounts in severance payments.

Earlier, he also warned that this year's rise in fuel and electricity prices would send many textile companies to bankruptcy, leaving thousands of workers jobless.

Elsewhere, secretary general of the Indonesian Employers Association, Djimanto expressed his disappointment over the delay.

"There is no consistency in the government's regulations and its actions; it will be very difficult for companies to plan their business," he said.

According to him, it was very clear that workers' representatives had used intimidation to force the government into accepting their demands.

The threat is that if the government ignored workers' demands, they would continue to rally and prolong the street violence.

Chairman of the Indonesian Prosperity Trade Union Muchtar Pakpahan welcomed the government's decision, but added that a delay is unsatisfactory.

"We will continue to struggle to have the new decrees revoked," he said.

He said if he had his way, the government should reinstate Law No 12/1964 on manpower, which bans companies from firing workers other than due to criminal acts.

"If the law causes a company to go bankrupt, so be it. In a case of bankruptcy workers' rights must be prioritized," he said.

Confirming Djimanto's fear, he warned that workers would return to the streets to protest if the government fails to heed their demands.

"We have allowed workers to be abused for far too long," he said. (bkm)