'Labor law revision benefits all'

The Jakarta Post ,  Jakarta   |  Sun, 04/09/2006 9:47 AM  |  Life

Ary Hermawan, The Jakarta Post, Jakarta

With a population of more than 200 million and a workforce of more than half of it, Indonesia is definitely an attractive place for doing business, especially for players in labor-intensive industries.

However, investors are reluctant to come here because as soon as they arrive here they are faced with labor regulations that could jeopardize their businesses, Indonesian Footwear Association chairman Harijanto told The Jakarta Post on Thursday.

Employers have been concerned over the detrimental impact of the law on the country's business climate, since the enactment of the 2003 Labor Law under former president Megawati Soekarnoputri's administration.

The issue of dismissal has been the most controversial as the law, in a bid to protect workers, requires that employers give a severance and service pay to dismissed workers equivalent to 30 times their monthly salaries.

The Indonesian Employers Association (Apindo) has strongly opposed the law, saying that the chapter on severance pay makes business unquestionably uncompetitive.

As a comparison, China provides severance and service pay equal to 10 times the monthly salary and Vietnam five times, Apindo secretary-general Djimanto has said.

""I fully realize that the then manpower and transmigration minister Jacob Nuwawea was only trying to protect the workers with the current law, but the fact is employers are the ones who suffer losses,"" Indonesian Textile Association secretary-general Ernovian G Ismy told the Post.

Jacob, a member of the Indonesian Democratic Party of Struggle, was once a prominent labor activist.

Now that the government has vowed to improve the country's investment climate by relaxing regulations in several sectors including labor as stipulated under Presidential Instruction No. 3/2006, employers and the government are currently drafting a revision to the current labor law.

The proposed revision covers five chapters deemed to be inimical to investors: contract based work, labor protection, leave, remuneration, industrial action and dismissals.

Under the draft bill, employers are, for example, obliged to pay severance pay the equivalent of seven times the monthly salary for those employed for six years or more. The employers are not required to pay any severance pay to employees who have been working for fewer than six years.

The draft bill also rules that workers taking part in illegal strikes can be dismissed without severance pay and can be prosecuted.

The planned revision has sparked anger and protests from workers, even though it has not even been filed with the House yet.

Employers claim that workers who left their jobs to join demonstrations against the draft law in major cities on April 4 and 5 caused billions of rupiah in losses to businesses.

West Java's Apindo chairman Dedi Wijaya claimed that 90 percent of 4,000 plants in West Java halted their operations due to the massive strikes with losses estimated to exceed Rp 70 billion (US$7.7 million).

Harijanto stressed that the planned revision was not aimed solely at favoring employers, but more at reviving the country's economy.

""This is for long-term advantages,"" he said, adding that more than 10 million people were still unemployed and ""the country surely needs to provide more jobs for them"".

He said that low wages no longer attracted investors to do business here. ""Along with China and Vietnam, Indonesia is still an attractive labor intensive country,"" he reminded.

""And we have to admit that many of our brothers and sisters are willing to work in labor intensive industries.""

Ernov said that the planned revision, if realized, would surely boost the country's competitiveness among Asian countries.

""We're now talking about competitiveness and the workers must be able to improve their skills and productivity in order to survive,"" he said, adding that many workers with poor performance were not motivated to improve as they knew under the current law, their employers would deem it too costly to dismiss them.

According to him, wages are something that should be decided on the basis of bipartite agreement between employers and workers. ""If workers produce more, we pay more,"" he said.

Nevertheless, employers are willing to talk with workers to reach a win-win solution on the matter.

""We have to protect workers, but we must also protect employers,"" Indonesian Food and Beverage Association chairman Thomas Dharmawan said, adding that the most important thing was that the government was able to provide more jobs.

""After all, the planned revision is not approved yet,"" he said.

Vice President Jusuf Kalla has said the government would seek a balance between the interests of workers and employers in connection with the revision of the law.

Thomas expressed concern that the controversy over the draft law, which resulted in nationwide rallies, would only worsen the nation's image.

He said that out of 965,000 companies in the food and beverage industry, only 4,450 with 800,000 workers have unions that were likely involved in the protests.

The rest of the companies with 2.5 million workers, he said, were small entities whose employees were not involved in the rallies.

Harijanto, meanwhile, suggested that the government maximize the use of social security funds paid monthly by workers to improve their welfare.

""The fund should be used for the benefit of the workers,"" he said, adding that regulations on workers' welfare placed the burden solely on employers.

The government, he said, was supposed to guarantee workers' welfare by providing them with houses and hospitals.

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