EDITORIAL

FOR a country that desperately needs foreign investment, Indonesia has a habit of scaring away investors with some onerous regulations and laws. For example, investors have for some time now cited existing labour regulations - which compel companies to compensate workers who resign on their own or are dismissed for disciplinary reasons - as a key reason for not setting up operations in Indonesia.

The Labour Law, which was passed during President Megawati Sukarnoputri's term, was meant to protect worker rights and strengthen their bargaining position vis-a-vis employers. In fact, it is now clear that these laws have hurt workers more than protecting them. Many companies end up hiring workers on short-term contracts to circumvent the laws and avoid the financial burden. Even President Susilo Bambang Yudhoyono's government is attempting to bypass the legislation in the recently established Special Economic Zones (SEZs) in Batam, Bintan and Karimun so as to facilitate foreign investment. Jakarta announced last week that it will relaxthe implementation of the law within the SEZs.

While investors will no doubt be cheered by this news, more comprehensive changes need to be undertaken. And the starting point should not be the government but the labour movement itself. Rather than focusing on protecting a shrinking membership, the unions should instead be looking at how they can facilitate the creation of new jobs. More than 40 million Indonesians are currently underemployed or unemployed; about two million enter the workforce each year. To create enough jobs to absorb these workers, the trade unions must work with the government to improve the country's investment climate. They can only do so if they change their mindset.

While they should continue to fight for worker rights in areas such as healthcare and training, they must also be cognizant of the fact that competition for labour is the surest way to improve wages and conditions.

The establishment of the SEZs is a great opportunityfor Indonesia to reverse the recent downward trend in foreign direct investment. The government has shown its desire to improve the country's investment climate by moving quickly on the idea, which was first mooted in February. Batam, which was set up in the early 1990s to attract multinational companies that found Singapore too costly for manufacturing operations, was one of Indonesia's great economic success stories until recent times. Over the past few years, however, investors have been relocating to other countries. The government has stated that if the SEZ concept works in Batam, Bintan and Karimun, similar zones will be established in other parts of the country. Hopefully, this will create hundreds of thousands of new, better-paying jobs.

If Indonesia's labour leaders truly care about the welfare of the workers, they should not object to the government's intention to apply different labour regulations for the SEZs. Indeed, they should also work towards changing the Labour Law altogether so as to bring it closer into line with international norms and practices.