Layoffs loom on plan to revoke oil worker decree

Moch. N. Kurniawan, The Jakarta Post, Jakarta

Executives at foreign oil firms warned the Indonesian government against revoking a decree that allows them to retain temporary workers for an indefinite period, saying revoking the decree would increase costs and could lead to layoffs.

The president of U.S.-based PT Caltex Pacific Indonesia, Humayunbosha, said canceling the decree would burden oil firms with expenditures not related to their core business.

"This situation will force oil and gas firms to slash their workforces to offset the increase in expenditures," he told The Jakarta Post over the weekend.

Last week, Minister of Manpower and Transmigration Jacob Nua Wea suggested revoking Ministerial Decree No. 5/1995 on temporary workers at oil and gas companies.

The decree allows oil and gas firms to employ workers on a temporary basis over a virtually indefinite period, a situation which Jacob said stripped workers of their respect as human beings.

Under a previous 1993 decree, oil and gas firms could employ people as temporary workers for two years, plus a one year contract extension.

The Indonesian Prosperous Trade Union (SBSI) has lambasted oil firms and their subcontractors for using the 1995 decree to prevent workers from gaining permanent employment status.

But Pertamina and foreign oil firms oppose a revocation of the decree, contending such a move would make the oil industry less efficient.

"It will hinder investment because it would makes companies less competitive," Humayunbosha said.

Oil companies face a high failure risk during the exploration stage, a stage which is marked by huge capital expenditures.

To minimize costs, the companies, as is often the case within the manufacturing and service sector, outsource some of the work to subcontractors.

According to data from Pertamina, oil and gas companies here employ approximately 17,700 permanent workers and 2,600 temporary employees.

But permanent workers hired by subcontractors reportedly outnumber those employed directly by the oil and gas companies.

Caltex data shows that its subcontractors have 23,000 permanent workers, as compared to 6,500 employed by Caltex.

According to the company, it granted all of its workers permanent status last November. But only after a string of protests which disrupted production several times.

U.S.-based ExxonMobil Oil Indonesia Inc. employs some 1,250 employees, of which only 360 are temporary.

The company's subcontractors reportedly have over 2,400 workers, but their status is unknown.

According to Humayunbosha, there is no quick solution to the problem of temporary workers, and revoking the decree could backfire by leading to layoffs.

The corporate executive at American oil and gas firm VICO Indonesia, Hasanuddin, agreed with Humayunbosha, but admitted that the 1995 decree put workers at a disadvantage.

"I understand Pak Jacob's concerns, as what he fears is happening," he said.

But Hasanuddin suggested that before revoking the decree, Jacob first consult with oil and gas companies to try and reach a compromise.