RI should improve labor conditions: WB

RI should improve labor conditions: WB

JAKARTA (JP): While acknowledging the Indonesian export boom,
the World Bank has advised Jakarta to revamp its labor law and
modify industrial relations practices in order to improve its
international competitiveness.

Speaking on Indonesian labor policies at an international
seminar on the Indonesian economy yesterday, World Bank economist
Nisha Agrawal said that the Indonesian government should not only
create a conducive climate for foreign investment but also
improve the labor conditions. She said that, by doing so,
Indonesia would enhance the competitiveness of its products on
the international market.

Agrawal said that the policy measures adopted by Jakarta in
the 1980s had led to a boom in both the exports of manufactured
products and also foreign direct investment. The measures had put
Indonesia on the road to rapid export-oriented, labor intensive
growth, she said.

But there were increasing signs that the country's
competitiveness was currently being eroded because of a number of
factors, she said, which included rapidly increasing labor costs
and the opening-up to foreign trade and investment of new low-
cost economies in India, Vietnam and China.

The World Bank official said Indonesian labor conditions were
unsatisfactory because of poor compliance with government
legislation.

She said poor working conditions were likely to be an
important factor in explaining why labor productivity in
Indonesia was low compared with that of neighboring countries.

The seminar, which featured both local and foreign experts,
was jointly organized by the Association of Indonesian
Economists, the University of Indonesia and the World Bank to
commemorate the golden jubilee of Indonesian independence this
year.

Agrawal said the situation in the Indonesian labor market in
this decade appeared to be one of rising labor costs, low labor
productivity and increasing labor unrest.

She said that instead of allowing workers to organize
themselves and to negotiate a social security package with their
employers, the government had taken it upon itself to provide
certain benefits to workers through legislation.

Agrawal said that Indonesian labor legislation was a mixed
bag, with legislation protective of workers' welfare and, at the
same time, legislation controlling workers' activities.

She said that the government's domination of the All
Indonesian Workers Union (SPSI), the only trade union allowed in
the country, was its response to a perceived threat to political
and economic stability.

"Such a situation is making SPSI ineffective, as is reflected
in the fact that unionization rates in the country are amongst
the lowest in the world," she said.

According to Agrawal, unionization would certainly rise if
workers were free to choose independent unions. (rms)