Indonesia President Joko Widodo defies protests to push forward with labour reforms

Indonesian President Joko Widodo was poised to sign the contentious ‘omnibus’ economic reforms bill into law on Wednesday.

Indonesian mounted riot police chase rock-throwing protesters as clashes erupted following a demonstration against the new omnibus law. Picture: Getty Images

Indonesian President Joko Widodo was poised to sign the contentious “omnibus” economic reforms bill into law on Wednesday, insisting it would bring ­desperately-needed jobs and ­investment to the country amid ongoing protests and rising pressure to wind back the legislation.

The Jobs Creation bill is the centrepiece of the President’s second-term agenda that he says will improve Indonesia’s attractiveness for the anticipated rush of foreign businesses seeking to move from China as a result of its escalating trade war with the US.

But it has provoked furious ­opposition from workers, environmentalists and even Islamists in recent weeks who have railed against the law in sometimes violent protests, variously declaring it pro-capitalist, communist, anti-worker and bad for the environment.

The bill, which amends more than 70 existing laws — largely to eliminate red tape and streamline licensing regulations — was passed on October 5 under what critics say was an opaque and rushed parliamentary process and delivered to Jokowi (as he is known) on Wednesday for signing.

Seven out of nine political parties have backed the pro-business reforms, which are aimed at helping create jobs for more than 10 million unemployed during the worst economic downturn in more than two decades.

The International Monetary Fund warned this week that the downturn was likely to be worse than anticipated, with Indonesia’s annual GDP likely to shrink 1.5 per cent as the country struggles to contain the pandemic.

Jokowi has urged Indonesians to get behind the bill.

“New jobs are urgent, especially during the pandemic. This law is to provide as many jobs as possible for job seekers and unemployed people,” he said in a recent televised address.

“The government believes that through this law, millions of workers can improve their and their families’ lives.”

Still, protests have continued with the hardline Islamic Defenders Front the latest to rally against the bill on Tuesday, bringing central Jakarta to a standstill as it urged followers to continue protesting until the President was ousted.

Trade unions have savaged labour law changes that cut Southeast Asia’s most generous severance pay entitlements, allow regional rather than sectoral minimum wage, and which they say enables employers to keep workers on a contract basis indefinitely.

Environmentalists warn that the bill scraps requirements for provincial governments to maintain minimum forest cover of 30 per cent, as well as existing corporate liability clauses over environmental damage. Economists counter the bill will lift many current restrictions on foreign investment, simplify corporate tax law and remove cost disincentives for investing in labour-intensive industries.

Still, there seems broad agreement the government has botched the handling of the bill by failing to widely consult or effectively communicate its benefits to the public. Three “final” drafts of different lengths have been circulated with no clarity as to which is the correct one.

“If you’re trying to sell a major reform, which this really is, then you have to bring the public with you and lay out the case because there are some big changes, ­especially on labour laws, and ­Jokowi does not seem to have done that,” ANU emeritus professor of Southeast Asia economics Hal Hill told The Australian.

“The content is generally pretty good. The big change is to labour laws, which is really important. The law is not anti-worker but pro-jobs because in Indonesia’s labour market right now it is really only a minority that benefit from those protections whereas the great majority of workers are locked out.”

Close to 70 per cent of Indonesians work in the informal sector with little or no access to entitlements or benefits. The government hopes the bill will create more jobs in the formal sector, ultimately bringing job security and benefits to more Indonesians.

Foreign investment into Indonesia has lagged behind other ASEAN nations in the past decade thanks to a maze of overlapping licensing regulations, corruption and high labour costs.

Arianto Patunru, an economist and fellow at the ANU Indonesia project, said he too believed the bill was generally good law — apart from its regressive environmental provisions — but warned without streamlined implementing regulations it would have minimal impact.

“Another worrying thing is that the government has been very weak in dealing with corruption so, even if this Omnibus Law is passed and is supposedly good for attracting foreign investment, the corruption issue is a major put-off factor to investment.”

Additional reporting: Chandni Vasandani