New labor bill could turn foreign investors away

New labor bill could turn foreign investors away

Dadan Wijaksana, The Jakarta Post, Jakarta

Businessmen criticized the new bill on labor protection and
development as "overly protective" and at the expense of
investors, saying that if it is passed into law, it will further
deteriorate the country's business climate.

"If the bill is passed into law, many investors will leave the
country and look for other places to invest in," chairman of the
National Economic Recovery Committee (KPEN) Sofjan Wanandi told
The Jakarta Post last week.

Minister of Manpower and Transmigration Jacob Nua Wea is
lobbying the House of Representatives to complete the debate on
the bill quickly so President Megawati Soekarnoputri can sign it
in October.

The House is scheduled to separately meet with businessmen and
workers this week to discuss the matter.

"The bill is overly protective (on workers)," Sofjan said.

According to the bill, companies must continue paying workers
their wages, even if they were on strike.

Under the draft, when a worker stages a strike or is facing
criminal charges in court, it means the worker is failing to
fulfill their daily duties, yet the company will still have to
pay the worker's salary during a strike or for the duration of a
trial until the court's verdict.

Also uncommon by any standards is a clause stating a company
has to pay severance payments to workers who voluntarily resign.

Night-shift workers will not be allowed to work more than 35
hours per week, which is five hours shorter than the current
regulation, which in turn will lower productivity, eventually
making companies less competitive.

Sofjan said that with such a ruling, Indonesian manufacturing
industries would become even less productive than their peers in
the region, which have been calling for more than 40-hours per
week work for their workers.

Another clause that could scare off investors is that the
violation of all labor regulations could risk a jail term.

"This is unbelievable. No such regulations exist in other
countries. With this regulation who would come here and invest
their money, they would be better off looking to invest in
neighboring countries, such as China or Vietnam," Sofjan said.

Anton Supit, chairman of the Indonesian Footwear Association,
agreed.

"(Minister) Jacob thinks our country is already wealthy so it
has proposed a sophisticated labor bill," he said.

Analysts have said that in addition to security issues, legal
uncertainty and disputes over the new autonomy law, labor issues
were a significant factor in scaring away investors.

All these factors have resulted in approvals for foreign
direct investment (FDI) and domestic investment during the first
five months of this year dropping by between 59 percent and 30
percent, respectively, compared to the same period in 2001.

The Investment Coordinating Board (BKPM) disclosed last week
that as of May 30, FDI approvals stood at US$1.67 billion, far
below the $3.98 billion posted during the same period last year.
As for domestic investment, it dropped to Rp 9.4 trillion from Rp
12.7 trillion.

Meanwhile, Sunarty of the Indonesian Prosperity Trade Union
(SBSI), brushed aside the concerns saying the new bill was a
result of discussions with various parties, including
businessmen.

However, she urged both businessmen and workers to sit
together and hold talks more often to produce better
understanding.