Some companies in labor-intensive sectors are holding back on expansion plans because they don't want to be hit with high severance costs in case they have to cut back later. The president faces a fight from labor groups, which say the regulation makes employers think twice before shedding staff. The business forum also frets about a plan to tax worldwide income. Castle says the proposal, which will apply to Indonesian nationals and foreign residents alike, has prompted some expatriates to refuse assignments to Indonesia. The U.S. and Canada tax worldwide income, but they have the infrastructure for the complex task.
Foreign businesses view a proposal for an employer-funded health care scheme with equal skepticism.
They argue that companies with their own medical insurance plans will still have to pay into the government plan. The government counters that workers deserve better benefits. No investor, foreign or domestic, could expect Indonesia to clean up a corrupt legal system or achieve political and economic stability overnight. But the business community would be happy if the government would at least stop making a bad investment climate even worse. All Rights Reserved.