Ridwan Max Sijabat, Jakarta – The Indonesian Employers' Association (Apindo) has warned the government of an increase in the unemployment rate and poorer labor conditions in 2008 if no measures are taken to attract foreign investors and revise the export policy.

Apindo chairman Sofjan Wanandi said many companies, particularly small- and medium-scale enterprises (SMEs), would find it difficult to raise by at least 10 percent their workers' salaries in compliance with the increase in minimum wage, mainly because they feared raising product prices as a consequence of the rising price of world crude oil.

"Indonesian products will not be viable on the international market if their prices are raised, and international buyers will turn to Indonesia's competitor countries. Small companies will likely pay more for raw materials to maintain operations," he told The Jakarta Post on Wednesday.

Sofjan said despite regional autonomy, national and local efforts to improve labor conditions would not attract the attention of the government and regional administrations, which were busy with preparations for the 2008 regional elections and the 2009 general elections.

"These (elections) will turn regions away from accelerating their economic programs and generating jobs and addressing poverty," he said.

He said unemployment problems in the last three years would give rise to a serious national problem that could jeopardize political stability.

"If the government's claim of having generated one million job opportunities this year is true, then 2.5 million of the (previously unemployed) 3.5 million remain unemployed. If the figure is taken cumulatively with those from previous years, unemployment could reach an alarming level next year.

"Besides, the government's list of foreign investors ready to invest in the country is only on paper," he said.

He said Apindo questioned the government's claim of 6.3 percent economic growth this year and a projected 6.8 percent in 2008.

He added he regretted the workers' weak bargaining power due to internal frictions in national labor unions, which he said strengthened employers' positions in collective bargaining on the one hand but disrupted the industrial relations at the company level on the other.

Apindo Secretary General Djimanto, speaking alongside Sofjan, said the government should allocate more from the 2008 state budget to encourage job seekers to set up SMEs and create new employment opportunities in the informal sector.

"The government should also revise the export policy to encourage mainstream industries to process their products before being exported. The establishment of processing industries would help create more job opportunities and ease unemployment levels," he said.

Chairman of the Confederation of Indonesian Prosperous Labor Union, Rekson Silaban, said he was concerned by the internal conflicts in the Confederation of All-Indonesian Workers Union and the Confederation of Indonesian Trade Union, saying the emergence of rival camps in the two major unions' leadership had tarnished the labor movement's image and weakened workers' bargaining power.

"But the labor movement is not as bad as employers have described. The main problem is the government has no political will to improve labor conditions and, as in other sectors, the law does not rule in the industrial sector," he said.