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)