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ndonesia’s economy will unlikely expand by more than 6 percent next year, contrary to government expectations, as unresolved labor issues will continue to hamper new investment activities, a prominent businessman says.

The chairman of the Indonesian Businessmen Association (Apindo), Sofjan Wanandi, said Friday that legal uncertainty over labor problems were turning off foreign investors.

“Given this problem, it would be good if we could maintain this year’s growth next year,” he told the The Jakarta Post.

The World Bank revised its estimate for Indonesia’s economic growth in 2010 from 6.0 percent to 5.9 percent. However, the government says it is still optimistic growth can reach 6.0 percent by the end of this year, and 6.4 percent in 2011.

The first factor impeding the country’s economic growth and now a major constraint for investments to enter the country, Sofjan said, was legal uncertainty, particularly concerning labor regulations.

“Laborer demonstrations in the country have been getting more extreme recently. The problems appear to be due to uncertainties in regulations on labor such as outsourcing and minimum wages,” he said.

Actually both businessmen and laborers dislike outsourcing, but there is no regulation that ensures the productivity of laborers if they are made permanent employees of companies, he added.

“Once laborers get permanent employment, their productivity sharply declines and we [businessmen] can do nothing about that,” he said.

The second classic problem that has for a long time been stalling Indonesia’s real sector growth is poor infrastructure, especially insufficient power supply, he said.

He said many local businessmen and foreign investors had backed out of plans to open businesses in Indonesia due to this problem.

“This year state electricity firm PT PLN will add around 2,000 megawatts, another 3,000 megawatts next year and a final 5,000 megawatts in 2012. The government has taken too much time in realizing its promises to build new power plants across the country with a total capacity of 10,000 megawatts to support industries [and households],” he said.

PLN launched Thursday a new 1,600 megawatts connection for businesses and industries in Jakarta, Bogor, Depok, Tangerang and Bekasi, Gunung Putri, Kawawang and North Banten. Another 1,000 megawatts for industries in Central and East Java will be launched in May 2011.

Land acquisition is another major factor slowing down the country’s industrialization and infrastructure development, Sofjan said. He said he hoped the House of Representatives would fulfill its promise to pass a bill on land acquisitions next year.

“The last factor is the government’s bad bureaucracy that has made all business processes in this country complicated,” he said, adding that the government needed to strengthen inter-department coordination to optimize its performance.

The central government must also improve cooperation with regional governments nationwide to ensure that they do not apply counter-productive policies that could hamper business development, he said.

Sofjan also said that the country’s economy would suffer if oil prices exceeded US$100 a barrel, and food prices were driven up by poor weather.