Jakarta – The business community warned Monday the government's decision to review proposed changes to the labor law at the urging of workers would jeopardize investment prospects amid still high labor costs.
"We have to admit we are disappointed with the government's decision," Indonesian Employers Association (Apindo) secretary-general Djimanto told The Jakarta Post. "It will be a setback for the implementation of the government's own policy package to improve the investment climate."
The government officially put on hold Saturday its plan to submit the bill to the House of Representatives, following more than two weeks' of massive protests by workers that brought industry to a standstill. Labor unionists have decried the bill, revising the 2003 Labor Law, as pro-business and diminishing their rights and welfare.
The government said the content of the bill should be thoroughly rehashed in a three-party forum of employers, represented by Apindo, labor unions and the government.
President Susilo Bambang Yudhoyono also asked independent experts to give their opinions, expecting the deliberation to address the protection of workers through the enhanced role of state workers insurance firm PT Jamsostek. He also hoped it would help ease unemployment through higher business growth and economic expansion.
The revision, which includes lower severance pay and easier outsourcing schemes, is part of the government's package of policies to create a more flexible labor sector to improve the investment climate.
As the revisions were scheduled for deliberation this April, with implementation to follow within the year, Djimanto said any delay would be a setback, especially when the content had already been discussed and agreed upon twice – in January and November last year.
Labor union leaders have denied agreeing to the revisions, claiming they felt sidelined from the earlier three-party talks.
Djimanto said the revisions were crucial, because continual minimum wage increases and similar severance pay schemes for all salary ranks exerted a significant financial burden on business. Subcontracting workers outside a company's core business was also to comply with the antimonopoly and business competition law, which forbids upstream-to-downstream businesses.
"Many companies are facing insolvency due to these high labor costs, discouraging business start-ups and investments." He urged the expert consultants to analyze the issue from corporate finance's point of view and compare Indonesia's labor sector with China, Vietnam, Thailand and Malaysia, all of which are considered more competitive.
Indonesian Textile Association chairman Benny Soetrisno hoped the review would bridge the interests of employers and workers to create a more productive labor sector.
Economist Revrisond Baswir, meanwhile, urged the government not to sacrifice the welfare of the labor sector to attract foreign investment. "We actually have potentially large domestic and government investment resources," he said. "The problem is they have been sapped by a chronic high cost economy climate and for paying our foreign debts."
Referring to a recent World Economic Forum survey, Revrisond said labor was only seventh on the list of deterrents to investment, below such problems as the red-tape bureaucracy, corruption and illegal fees. "The government has, however, always opted to attract foreign investment at the expense of the lower-bracket society, including this time in labor," he said.