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Home arrow Latest News arrow The Labor Law Inhibits Investment from Entering Indonesia


				
			
			
The Labor Law Inhibits Investment from Entering Indonesia PDF Print E-mail
Written by Maizer   
Monday, 15 July 2019

The government is asked to be able to revise the Labor Law. This step is to attract investors to plant their capital in the country.

 

According to Director of PT Ashmore Asset Management Indonesia Arief Cahyadi Wana law or labor law in Indonesia is less competitive by a number of investors. This makes investors less interested in direct foreign investment (FDI) in Indonesia.

 

"One of the critical ones is labor law. This is the government's homework on how to reform existing regulations, so that FDI enters, "said the event‘ Bank OCBC NISP Coffee Morning.

 

According to him, foreign investors have invested heavily in financial service instruments, such as bonds or in the capital market. Seen from the swift inflow to the bond market of Rp 107 trillion and Rp 12 trillion to Rp 13 trillion in shares.

 

"We tried a survey with several companies. The biggest obstacle to entering Indonesia is the law labor, "he said.

 

In the future, it is expected that the government can improve the regulation, so that more FDI will come. One of the improvements is by conducting a comparative study with labor law abroad.

 

"The government can do a comparative study between Indonesian labor law and its productivity, there is also one of the compensation factors for working. In essence, how to make FDI comfortable and competitive, for example in Vietnam, why there are more FDIs there," he explained.

 

While Labor Sentencing Practitioner Linna Simamora added that the renewal of the Labor Law is needed if the government wants to return the interest of foreign investors to invest in Indonesia. At present, said Linna, the Labor Law contains several important things that are not flexible for foreign investors who will invest in Indonesia.

 

"For example, the issue of the termination of employment that requires the issuance of warning letters one, two and three before the termination of employment (FLE) is considered to be less flexible and complicated," he said.

 

According to him, the Manpower Law limits the types of work that can be done using a contract scheme, also known as a certain time employment agreement (PKWT). Apart from the type of work, the working period of a PKWT is also imposed a maximum limit and without a trial period.

 

Then, Linna's problem regarding the increase in the UMR in Indonesia was also felt as a problem that had not been adequately addressed.

 

"It takes an appropriate formula to regulate the increase in UMR so that the increase can be precise and measurable," he said.

 

The Investment Coordinating Board (BKPM) recorded FDI reaching 7.2 billion US dollars in the first quarter of 2019. This figure fell 11.11 percent compared to the first quarter of 2018 which reached 8.1 billion US dollars.

 

The biggest investors for FDI include Singapore with 1.7 billion US dollars, China with 1.2 billion US dollars, Japan with 1.1 billion US dollars, Malaysia 700 million US dollars and Hong Kong with 600 million US dollars.

 

 

 
		
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