From Bloomberg http://quote.bloomberg.com/apps/news?pid=20601039&refer=columnist_mukherjee&sid=aqGduuy.LjIE Want to Job-Hop in Comfort? Move to Indonesia:
June 29 (Bloomberg) -- A newspaper editor in Jakarta recalls his experience a few years ago when he resigned from a job to take another and the human-resources officer asked him to come and collect five months' pay before he left.
It wasn't that the journalist's departure so delighted the employer that the latter decided to open the purse strings and make the divorce a joyous occasion for both parties.
As a banker in Indonesia told me last week, resignations are a serious business cost in the country.
It seems someone had simply forgotten to write into the labor code that employees were to be compensated if they're fired, not if they quit of their own accord.
That oversight, of course, makes Indonesia an ideal place for job-hoppers. Except for company directors, everyone else is covered by a ``we-pay-as-you-go'' norm. With luck, one might even get a signing bonus from the new employer, making switching jobs an incredibly rewarding experience.
I don't think I can begin to describe just how bizarrely one-sided the Indonesian labor laws are.
Sandiaga Uno, who was until recently running a private- equity fund in Jakarta, said he walked away from a buyout opportunity in a semiconductor company because 40 percent of the cost of acquisition would have gone to workers as ``severance'' pay. And this is when Uno didn't want to fire anyone.
So what happens when someone is really sacked?
The costs for firing a worker who has put in 20 years of service amount to 145 weeks of wages in Indonesia. That makes the Southeast Asian nation the world's sixth-most-expensive place to dismiss workers, after Sierra Leone, Zambia, Sri Lanka, Brazil and Egypt, according to ``Doingbusiness,'' a World Bank ranking of economies by the ease of doing business in them.
The government of President Susilo Bambang Yudhoyono is fully aware of the impact of labor costs on the nation's competitiveness. However, his administration's efforts to amend the labor law have been a disaster.
The draft law, which had to be withdrawn amid noisy street protests by labor unions in April, was so pro-employer that even businessmen were taken by surprise.
``It offered to give us much more than we had asked for,'' says Sofjan Wanandi, chairman of the Indonesian Employers' Association. ``It tried to swing the employer-employee relationship from one extreme to another.''
And that was its undoing. The draft law, which will now be recast with input from labor unions, businessmen, the government and academia, had sought to curtail severance pay to 12 months. It would have allowed employers more latitude in hiring contract workers.
Solution Not in Sight
Businessmen had expected much less. They would have been happy with some concession from labor on severance pay. What they wanted the most is the right to fire workers -- without compensation -- for misconduct. That's a reasonable demand if labor can be assured of judicial recourse against wrongful termination.
Wanandi is pessimistic about the possibility of a solution acceptable to both labor and business emerging by the end of this year, the government's target.
That's because there are 188 labor unions in the country, of which at least 68 are active. There are four confederations. The fragmentation makes it almost impossible for labor to agree on a common agenda for dialogue with business.
Adding to the confusion, many provincial governments have begun to use their autonomy to buy votes by mandating minimum wages that are out of line with the national average and much higher than they would be in a more flexible labor market. Meanwhile, investment suffers.
Foreign-direct investment in the $276 billion economy was less than $2.3 billion last year; and this followed a six-year period in which foreigners sold their Indonesian assets to the tune of almost $9 billion. It's strange to see an emerging market of 238 million people, rich in resources and manpower, struggling to attract long-term investments from overseas.
Indonesian workers must not be made to bear the entire responsibility of reviving investment. Indonesia is in many ways a high-cost economy and will remain so until the authorities get a better grip on inflation. A credible track record in inflation control will stabilize the volatile exchange rate, another perennial problem for investors.
Then again, the entire energy of the Indonesian business class seems to be devoted to buying and selling assets, rather than creating new businesses and jobs.
A Leaky Tap
Following the Asian financial crisis of 1997-98, which toppled General Suharto's 32-year-old dictatorial regime, all of Indonesia has resembled a merger-and-acquisitions mart. The good news is that distressed assets have finally started becoming rare, thanks in a large measure to the global commodities boom.
Indonesia's draconian labor laws are like a leaky tap in a bombed-out hotel where the former employees have pillaged all the crockery: They're just one more thing for the new manager to fix.
On this count at least, investors have to be patient with Yudhoyono.
(Andy Mukherjee is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column:
Andy Mukherjee in Singapore email@example.com.
Last Updated: June 28, 2006 16:06 EDT