Wed, 31 Aug 1994

RI told to learn from multinational firms

JAKARTA (JP): Indonesian companies should learn from multinational companies in developing human resources, says noted economist Djisman S. Simandjuntak.

Djisman said yesterday that multinational companies are much more competitive and efficient than local firms, despite the expense of better treatment of the labor force.

"We have to learn from them if we want to enter the more integrated world economy," he said in his comment to the UNCTAD's (United Nations Conference on Trade and Development) annual report about multinational corporations, employment and work places.

According to the report released here yesterday, multinational corporations now have global sales in excess of US$4.8 trillion, a larger volume than the world trade.

The number of multinational corporations is rising, with some 37,000 parent firms controlling more than 200,000 foreign affiliates.

The 100 largest multinational corporations, excluding those in banking and finance, ranked by foreign assets, held $3.4 trillion in global assets in 1992, of which about 40 percent were located outside their home countries, according to the report.

The report also said that the workforce directly employed by foreign affiliates typically -- but not always -- enjoy better wages, conditions at work and social security benefits relative to those prevailing in domestic firms. Those corporations often provide labor with the opportunity to acquire additional knowledge and skills, particularly in the case of affiliates operating in developing countries.


Djisman said that workers at host country employers and the host economy as a whole can benefit from the upgrading of skills through the employment in multinational corporations especially in the transfer of skills through formal on-the-job training.

He also called on the Indonesian government to further improve the business climate in order to attract more multinational corporations into the country.

"We have to compete not only with China, but also Vietnam and India to attract direct investments of those companies," he said, adding that many multinational companies are still reluctant to enter Indonesia due to its high-cost economy.

Djisman said that in the coming years foreign direct investment would continue to flow into countries where the business profitability is high.

The business profitability is not solely determined by low labor costs but more on the overall economic efficiency, he said, adding that the business profitability in Indonesia might be still lower than that in India.

Foreign direct investment in the world increased from $171 billion in 1992 to $195 billion in 1993 but lower than the $232 billion peak recorded in 1990. Developing countries attracted $80 billion, representing 40 percent of the total, with China alone accounting for $26 billion of the overall volume.(hen)