Jakarta – Many foreign manufacturers have shut down or relocated their businesses in Indonesia to other countries due to lingering labour conflicts, Industry and Trade Minister Rini Suwandi has said.

They also did this because of high economic costs resulting from illegal fees, she added during a visit to a textile company in Sukoharjo, Central Java, on Friday. The minister said that there had been fears that labour conflicts could disrupt the delivery of goods for the export market.

Foreign manufacturers are mainly export-oriented companies who must assure their buyers that they can meet delivery targets.

Ms Rini also acknowledged that the global economic slowdown was a factor that caused the companies to shut down their operations because of weaker demand, citing as an example the US shoemaker Nike that had cut down its orders from Indonesia's local factory.

The Korean Chamber of Commerce had earlier warned that more South Korean companies operating here would shut down their operations or relocate to Vietnam or Myanmar, which have better investment climates, if the Indonesian government failed to address the problems hurting their businesses.

Several Korean firms had either shut down or relocated their operations during the past year, leaving some 32,000 workers jobless. More companies are preparing to pull out of Indonesia.

Among the reasons stated for the mass exodus were unfavourable labour policies, an irrational increase in labour wages, labour strikes, low productivity and poor law enforcement.

Indonesia needs foreign investment badly to help push economic growth so that jobs can be created for the large number of unemployed, which according to one estimate is around 40 million.

Chairman of the National Economic Recovery Committee Sofjan Wanandi said the exodus of foreign manufacturers from the country was at the top of the agenda of a new crisis centre.

He said the centre would soon arrange a meeting between foreign investors, labour unions and government officials to help address the problem of labour conflicts and other related issues.