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.