New labor bill adding to investors' jitters

New labor bill adding to investors' jitters

The Jakarta Post, Jakarta

PT Indomobil Sukses Internasional, the country's second largest
automaker, had planned to hire some 2,000 new workers this year
in response to growing demand at home for automobiles. Now it has
put these plans on hold because of increasing uncertainty in
employing workers here.

Indomobil president commissioner Subronto Laras said on
Tuesday this uncertainty was mainly due to unfavorable government
policies, which were overly protective of workers at the expense
of employers, as reflected in the proposed labor protection bill.

"We were planning to hire more workers ... because demand for
automobiles will continue to increase, but with the current
uncertainty in government policies we decided to postpone the
hiring of 2,000 new workers," he told The Jakarta Post.

Subronto was commenting on the much criticized labor
protection bill proposed by Minister of Manpower and
Transmigration Jacob Nuawea.

The House of Representatives Commission VII for people's
welfare and manpower affairs held a hearing with businesspeople
on Tuesday to discuss the bill. Representatives of several
business associations and investors attended the hearing.

During the hearing, the Indonesian Employers Association
(Apindo) proposed revisions to 31 of the bill's 208 clauses,
which the association considered to be damaging to the business
climate in the country.

The clauses stipulate, among other things, that employers must
continue to pay the full salaries of striking workers; provide
severance pay to workers who voluntarily resign; and cut night-
shifts to 35 working hours per week. The clauses also provide for
jail terms for violations of labor rulings.

Businesspeople said such overly protective rulings would
further damage the investment climate at home and scare off
investors from the country, which has been struggling to attract
foreign investment since the devastating 1997 economic crisis.

Foreign investors have already been discouraged by the
political, security and regional autonomy problems that have
plagued Indonesia over the past several years.

"The bill on workers is a substantial issue for investors. If
the bill is approved by the House and implemented, then it will
be a huge problem for us since the bill provides too much
protection for labor at the expense of employers," the secretary-
general of the Korean Chamber of Commerce, C.K. Song, told the
Post on the sidelines of the hearing.

Song runs a footwear manufacturing company here. Currently,
his company employs over 10,000 workers at its factory in
Tangerang, Banten province.

Indomobil's Subronto said that over the past two years, many
companies here, including Indomobil, had avoided hiring permanent
employees to try and avoid any labor difficulties, and were
instead outsourcing their labor needs.

He said that of Indomobil's some 8,000 employees, about 1,000
were outsourced.

He explained that most companies actually disliked the
outsourcing alternative because they had to spend money training
workers they would not keep on a permanent basis.

Nation in waiting for labor law

For more than four years the nation has been waiting for a
reliable and trouble-free labor law.

In 1997, in the waning days of the Soeharto regime, then
minister of manpower Abdul Latief proposed a controversial labor
bill, which was roundly criticized by activists for stifling
workers' rights. There were also accusations that Latief bribed
legislators with money taken from the workers' social security
program, Jamsostek, to pass the bill into Law No. 25/1997.

After the fall of Soeharto in 1998, then president B.J.
Habibie issued Law No. 11/1998 revoking this earlier law until
October 2000.

In 2000, during the tenure of president Abdurrahman Wahid,
then minister of manpower Bomer Pasaribu, along with the House of
Representatives, drafted two worker bills to replace the
controversial Law No. 25/1997.

The two bills dealt with labor protection and the settlement
of industrial disputes, and allowed for the establishment of a
labor court.

However, deliberations of the proposed bills were not
completed by the deadline of October 2000.

The government and the House then issued Law No. 28/2000,
which extended Law No. 11/1998 until October 2002.

And now, under President Megawati Soekarnoputri, the
government is proposing a new labor protection bill.

If the House fails to complete the deliberation of the bill by
the October deadline, then Law No. 25/1997 will again come into
effect.