A new law aimed at simplifying Indonesia’s labor and investment rules has been met with a rally in local markets, and concern from global investors, as well as labor unions.
The Indonesian parliament agreed to pass the omnibus jobs creation bill in a plenary session on Monday, sending the rupiah and stocks to gain as much as 1.3 percent the next day.
The vote was brought forward from tomorrow, preempting a three-day strike by about 2 million workers who sought to reject it.
Photo: Reuters /Antara Foto / Raisan Al Farisi
Thousands of Indonesians yesterday took the streets of several cities to protest the bill which they say is too pro-business.
Demonstrations began in industrial areas around Jakarta, including Tangerang and Karawang and on Batam island, home to many electronics plants, local media reported.
Kompas TV footage showed thousands of people protesting in Bandung, West Java, wearing masks, but without observing social distancing.
So far, workers have been unable to protest in front of parliament in Jakarta as planned. Police have sought to block protesters, citing the need to contain COVID-19.
The law, which revises more than 70 existing regulations, has aroused controversy since Indonesian President Joko Widodo announced it last year.
While it cuts red tape and simplifies overlapping rules, labor unions and activists said the revisions would erode workers’ rights and environmental protection.
Global investors with US$4.1 trillion of combined assets under management have also warned that the law could have a negative impact on deforestation and climate change.
“Economic development and protection of the environment need not be mutually exclusive,” the investors wrote in an open letter, while requesting a video call with the government to discuss the matter.
The bill’s passage could help Jokowi shore up an economy that is set to slip into another contraction in the third quarter, as the continued spread of COVID-19 dampened household spending and investments.
The government has sought to speed up state spending, while warning that growth cannot come from the public sector alone.
The Indonesian Chamber of Commerce and Industry welcomed the law as it is able to answer and resolve various issues hampering investments that would create jobs, chairman Rosan Roeslani said in a statement.
The law also sets out a more centralized decisionmaking process, which could simplify layered and conflicting requirements from central and local governments, and so reduce investment uncertainty, economists at PT Bahana Sekuritas in Jakarta wrote in a note.
The government is setting up an unemployment fund to allay workers’ concern over the reduction in severance pay and the introduction of indefinite labor contracts.
The fund would give cash payments, provide access to the job market and pay for training, with the premiums paid for by the state budget.
“The law will definitely affect the status of our employment,” said Anwar Sanusi, a member of FSPMI trade union in Tangerang, who took part in a rally with 400 others.
People fear losing pensions and insurance if they are made contract workers for life due to the law, Sanusi said.
The law removes the three-year maximum duration of contracts and reduces severance benefits — provisions the government said are intended to promote formal hiring.
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