Police warn of unrest over Riau layoff

Haidir Anwar Tanjung, The Jakarta Post, Pekanbaru, Riau

Massive layoffs may occur in the immediate future in Lobam Industrial Park, Riau Islands, Riau province, as some 40 investors plan to relocate their businesses to other countries, an official has warned.

Riau Police chief Brig. Gen. Deddy S. Komaruddin said that the plan, which would affect 1,200 employees working in the area, was poised to create social instability in Riau.

"We plan to invite the Riau Island regent to meet us immediately, in order to anticipate possible riot breakouts in Riau if the plan is executed," said Deddy on Tuesday.

According to Deddy, red tape and sluggish bureaucracy were cited by the companies as two factors that had encouraged them to relocate their businesses from the industrial park.

"We hope that the government can persuade them to cancel the plan in order to prevent other investors from following suit," he added. He asserted that the plan was serious.

He said that the plan was divulged to him following the recent exodus of four companies, two of which were garment and electronic factories based in Singapore, he said.

The relocation plan was also confirmed by chairman of Riau Islands Employers' Association Rudy Chua.

He stated that not four foreign companies had pulled their investment from Lobam Industrial Park, but five.

They relocated to Myanmar, Vietnam and the People's Republic of China due to the weakness of the bureaucracy in Indonesia.

"Other companies will apparently follow suit. They are upset at the Indonesian bureaucracy," Rudy said.

He said that illegal charges, for example, were still demanded when investors tried to arrange permits.

The regional autonomy drive, which began two years ago, has complicated problems for the bureaucracy.

The regional autonomy, which shifted power from the central to regional governments, has created more opportunities for regional governments to produce bylaws that enhanced revenues for the regions, but at the expense of companies.

The bylaws impose an additional burden on companies, discouraging new entrants from investing in the regions, while also discouraging existing investors from remaining there.

The new bylaws created confusion for investors because some of them were in conflict with regulations issued by the central government, said Rudy, without elaborating.

"This creates legal uncertainty among investors, discouraging them from pouring investment into Indonesia," said Rudy.

Another problem concerned wage hikes. After regional autonomy was implemented, regional governments often upped the regional minimum wage, adding to the burden on investors.

"The minimum wage in China and Vietnam is much less than it is in Indonesia. That encourages investors to relocate, as in this case, from Lobam to those countries," he said.

He added it was imperative that the exodus was stopped because the total investment in Lobam Industrial Park was quite significant.

In the second semester of 2001, for example, total investment in the park amounted to US$350 million.