APINDOS ROLE IN IMPROVING INVESTMENT IN INDONESIA

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APINDOS ROLE IN IMPROVING INVESTMENT IN INDONESIA
By Djimanto Deputy Chairman National Board of
APINDO

• Jakarta, April 28, 2008

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I. Introduction to APINDO

• Emerging needs of a solid and strong employers
  organization to achieve a harmonious industrial
  relations for better economic growth and social
  welfare
• APINDO was established on January 31, 1952 in
  Jakarta.

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Employee Trade Union
Owner
Employer
KADIN
APINDO
FEDERATION
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Strategic Alliance with KADIN
APINDO
KADIN Indonesian Chamber of Commerce (business)
STRATEGIC ALLIANCE
APINDO become a member of KADIN
KADIN gave full authority on IR aspect to APINDO
Industrial Peace Oriented
Business Oriented
APINDO is the only employers representatives on
IR in Bipartite and Tripartite forums
Owner and Company Management
(Commissioners and Direction)
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APINDOs Challenges

• Global changes
• Technology development and trade liberalization.
  Competition, efficiency, and productivity as well
  as networking are key words to success in facing
  the global changes.
• Unstable National Economic Condition with multi
  dimensional crises
• Reformation Era

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OLD PARADIGM (BEFORE MAY 2003) TENDENCY OF
INDUSTRIAL RELATIONS/BIPARTISM
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NEW PARADIGM (AFTER MAY 2003)
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VISION AND MISSION

• New Vision
• To create a better business environment for
  the entrepreneurial community
• New Mission
• - To enhance harmonious industrial relations,
  especially at
• a plant level
• - To represent the Indonesian business
  community within
• manpower institutions
• - To protect, defend, and empower all
  business players,
• especially those who are members

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Organizational Structure

National Board (DPN)
Provincial Board (DPP)
Preferred members of DPN
District Board (DPK)
Preferred members of DPP
Ordinary members
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APINDOs Services

• Regular Service
• Member Gathering
• Two hours free consultation concerning manpower
  affairs
• Discounted tariff (as well as extraordinary
  service)
• Updated information
• (website mailing list)

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APINDOs Services.

• Extraordinary Services
• Protection in General for Business Community
• Proactive and participative in discussions on the
  drawing up of manpower regulations at the
  national, provincial, or district/municipality
  level. Socialization of manpower regulations at
  the national, provincial, or district/municipality
  level.
• Proactive in discussions concerning the Minimum
  Provincial Wages/Minimum District Wages.
• Creating a harmonious Industrial Relations
  climate for the business community through
  Bipartite Cooperation Institutions and the
  National Tripartite Cooperation Institution

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APINDOs Services

• 2. Advocacy
• Legal assistance at plant level within the
  courtroom process whether in the nature of
  consultation, Legal opinion, or Legal actions.
• Advocacy in drawing up, drafting and formulating,
  or extending Company Regulations, as well as
  Collective Labour Agreements (CLA).
• Settlement of problems concerning
  layoffs/dismissals.
• Negotiations with workers/labourers or with
  government.

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APINDOs Services

• 3. Empowerment
• Providing available information on manpower
  matters
• Training/workshop/seminars within Indonesia and
  overseas
• Consultations concerning manpower from the
  recruitment stage, administrative affair stage,
  up to the post-career stage

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APINDO Extraordinary Service

• Service fee based on hourly bases, will be
  calculated from the starting process of legal
  opinion or action given until it done based on
  actual bases.
• For the National APINDO Preferred Member, the
  consultation fee will be charged after they have
  applied their 2 hours free consultation on one
  condition that the consultation will be done in
  APINDO.
• All Services fee calculated as a whole package
  (net) and the tax will be borne by client (if any)

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Rights Obligations ofAPINDOs Preferred
Members

• Preferred Members Rights
• Getting information about newest rules and
  regulations on manpower issue, in a form of soft
  copy as well as hard copy
• Getting consultation, assistance and protection
  on Industrial Relations dispute settlement
  (inside or outside the courtroom) or others
  manpower matters according to SK
  No.41/SK-DPN/V/06 about APINDOs National Board
  extraordinary service.
• Joining workshop, training, discussion and
  seminars carried out by APINDO along with
  APINDOs local and international partners.
• Attending monthly members gathering
• Getting special rate for training, seminars and
  workshop fee, carried out by APINDO.
• Having opportunities to submit their opinion,
  suggestion, idea about manpower policy through
  APINDO
• Other extraordinary services as stated on SK No.
  41/SK-DPN/V/06 about APINDO National Board
  Extraordinary Services

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Rights Obligations ofAPINDOs Preferred
Members (Cont)

• Preferred Members Obligations
• Bound in honour of APINDO good name
• Paying membership fee according to the rule
• Membership fee Rp. 1.000.000,- / month
• Rp. 6.000.000,00 (fees for the first 6 months
  will be paid in advance)
• Regular monthly fees will be paid 3 months at the
  same time according to the agreement on the
  application form
• The membership fee will be transferred to
• Permata Bank Cabang Pembantu Plaza GRI
• Acc. No. 0701979648
• (By mentioning the name of the company and the
  period of the payment)

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APINDOs Membership Flow of Process

• Applicants have to submit the filled membership
  form (page 2-6) to APINDO
• Applicants receive acceptance letter and invoice
  of membership fee from APINDO
• After making the payment of the membership fee,
  the applicants officially stated as Preferred
  Members of National Board of APINDO
• Preferred Members receive Certificate of
  Membership

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II. Current Investment Climate in Indonesia

• Less competitive, sits at no. 115 (World Bank
  Report) due to business procedure, license,
  hiring firing, registering property, taxes, low
  enforcement, inflexible manpower regulations
  infrastructure.
• Contribution to world export in 2006 only 0.83
  (Department of Trade)
• High cost economy in Indonesia makes
  manufacturing / labour intensive investment moves
  to China, Vietnam, India and other countries.

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(No Transcript)
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Efforts to Improve Investment Climate

• In order to improve investment climate, the
  Indonesian Government has issued the Presidential
  Instruction No. 3 Year 2006 on Policy Package for
  the Investment Climate Recovery covering
• General, including synchronization of regional
  and
• national policy
• b. Customs
• c. Taxes
• d. Manpower
• e. SMEs and cooperatives
• In addition, the Government is also improving
  infrastructure, investment, monetary law
  enforcement

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III. What APINDO Does to Improve Investment
Climate

• Proactively involve in manpower / employment
  labour labour policy making process
• Strongly propose recommendation to the amendment
  of labour laws (Manpower and Jamsostek Law)
• Deliver inputs for the amendment of laws on
  taxes, customs, investment, monetery,
  infrastructure, law enforcement, etc.
• Empower business player on Industrial Relations
  issues

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Manpower Reform

• Create Industrial Relations that support job
  creation (Amendment of Labour Law No. 13 of 2003
  and its implementation regulations)
• Settlement of various Industrial Relations
  Disputes effectively, efficiently and fairly
  (Implementation of Labour Act No. 2 of 2004 on IR
  Disputes Settlement)
• Enhance the issuance of labour licence as well as
  expatriates
• Create flexible and productive labour market

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CREATING CONDUCIVE BUSINESS CLIMATE INCLUDING THE
AMENDMENT OF LABOUR LAW NO. 13 OF 2003
REVISION OF LAW NO. 13 OF 2003
OTHERS
PRESIDENTIAL INSTRUCTION NO. 3 of 2006
PRESIDENT GENERAL ELECTION 2004
GOVERNMENT (TRIAS POLITIKA)
NATIONAL ECONOMY RECOVERY COMMITEE
REGIONAL AUTONOMY WATCH
PUBLIC OPINION
KADIN INDONESIA

• IMPROVEMENT
• INFRASTRUCTURE
• INVESTMENT BUSINESS CLIMATE
• MANPOWER LABOUR
• TAXES
• DECENTRALIZATION REGIONAL AUTONOMY
• EMPLOYMENT PERFORMANCE
• LAW ORDER/ENFORCEMENT/CERTAINTY

APINDO SINCE 2003 VISION CONDUCIVE BUSINESS
CLIMATE MISSIONHARMONIOUS INDUSTRIAL RELATIONS
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Problems in Law No. 13 of 2003 from Business
Perspectives

• Termination process and its compensation
  (severance pay, reward for service (UPMK)
  compensation pay for rights UPH)
• Determination of wages minimum wages
• Strikes
• Labour relations (Contract workers Outsourcing)
• Employment of expatriates

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Termination and Its Compensation

• Long and complicated termination process
• Length to revise Labour Act No. 2 of 2004
• High severance pay compared to other countries
• Certain benefit is risky and ineffective
• Overlapping with other laws especially law on
  Pension
• High Past Service Liability
• Plan to harmonize Service Reward (UPMK) Program
  within Jamsostek Program
• Ability of employers to increase Jamsostek fee
  for Service Reward (UPMK) is only 2 3

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APINDOs Position on Termination Compensation

• Calculation of dismissal compensation is only
  based on severance pay which is maximum six-month
  wages based on years of employment
• Maximum of severance pay is 3 times of
  non-taxable income
• Management of compensation reward for service
  (UPMK) is stipulated by Law No.11 of 1992 on
  Pension Fund and Law No. 3 of 1992 on Jamsostek
  Law No. 13 of 2003 on Manpower should be
  harmonized
• Right Reward Fund (UPH) is normative, not
  necessarily regulated in Law
• Labour intensive companies and SMEs only pay 1
  time severance payment. Meanwhile for big
  companies, it is up to each company policy.

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APINDOs Position on Wages

• Stipulation that sectoral minimum wages is 5
  higher than minimum wages is contraproductive to
  job security (including income security and
  social security)
• Minimum wages is not based on Decent Living
  Components (KHL) but labour productivity.
• Determination of wages above the minimum wages
  and the postponement of minimum wages is
  determined by bipartite mechanism
• Period of minimum wages is for two years.

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APINDOs Position on Strikes

• Strike is a right of worker, not basic right as
  mentioned in Article 137 of Law No. 13 of 2003.
  Meanwhile basic right is stipulated in Basic Law
  1945.
• Regulation on strikes is not clear especially on
  the consequence for illegal strikes.

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APINDOs Position on Labour Relations

• Outsorching needed to be socialized to all
  stakeholders .
• Outsorching is legal based on Law and final
  decision of Constitution Court.
• Work Agreement for Specified Time (PKWT) is not
  limited for certain jobs.
• Unlimited period of Work Agreement for Contract
  Worker (PKWT) is based on the need

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APINDOs Position on Employment of Expatriates

• Work area of expatriates is accross regions,
  according to the operational area of the company.

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Labour Situation in 2004
?
Source BPSMOMT
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Labour Situation in 2005
?
Source BPSMOMT
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Labour Situation in 2006
?
Source BPSMOMT
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APINDOs Contribution to SMEs

• SMEs Empowerment (Management training, technical
  training, bridging access to credit
  partnership, database)
• Advocacy to address affordable Regional Minimum
  Wages for small enterprises

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IV. What Companies Can Do

• Utilize APINDO as the instrument to create
  favorable business in Indoensia
• Utilize APINDO to obtain information on labour as
  well as to settle labour disputes
• Maintain APINDOs capacity and competency by
  joining APINDOs membership and its derivatives

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Thank You!