Warwick ASEAN Conference

The passing of one of Indonesia’s most controversial job creation bill

Despite the backlash which the Indonesian government has faced from labour unions, observers and NGO’s, the controversial Omnibus bill on job creation was passed on Monday, 5th of October 2020. The bill is expected to bring a radical change in the country’s labour system and natural resources management, whilst boosting foreign direct investment and job creation within Indonesia. Yet the bill is met with mounting resistance from labour unions and environmentalists, coupled with rejection from House factions of the Democratic Party and the Prosperous Justice Party. A large number of protests have broken out in the various cities of Indonesia because of this law, many of which are becoming increasingly violent. On the surface of it, many may be confused as to why this bill has inspired so many protests across the nation. Please carry on reading to find out more on what this Omnibus bill is, and the effects, both bad and good, that it will have on the nation. 

If you don’t want to read the whole article for whatever reason, we have included several infographics right at the bottom of the article! These infographics provide a succinct summary of the Indonesian protests, so do scroll down to the bottom of the page!

What is the Omnibus Job Creation Bill?

This bill is aimed at relaxing Indonesia’s complex web of business, labour and environmental laws in an attempt to attract investment and stimulate the economy. This bill has amended 9 previous laws and is intended to improve bureaucratic efficiency as part of efforts by President Joko Widodo’s administration to attract more investment to the country. 

In addition to removing red tape, the bill also makes significant changes to Indonesia’s labour regulations. It abolishes the sectoral minimum wage, in favour of minimums set by regional governors. The bill will also reduce severance pay to a maximum of 19 months salary, when the maximum was previously 32 months’ pay, though this is dependent on how long the employee has had the job for. The reduction in severance pay will, however, be supported by a new government fund that will provide an additional 6 months of pay to the newly unemployed. Allowable overtime pay will also be increased to a maximum of 4 hours in a day and 18 hours a week, businesses will only be required to give workers one day off a week instead of two. Restrictions on outsourcing have also been reduced, alongside restrictions on the jobs in which expatriates can work. Expatriates will now be able to work in more functions than only diplomatic affairs, which should boost foreign direct investment within Indonesia. Worryingly, licenses for safety, structural requirements, protection against fire and lightning strikes, as well as requirements for health, air, lighting, sanitation, building materials and accessibility for disabled visitors are also set to be revoked. 
This bill has also significantly relaxed environmental standards, amending Article 23 in Law 23/2009 on environment protection and management that businesses need to follow before requesting an environmental impact analysis (Amdal), which is needed prior to the commencement of business operations. The bill now only stipulated that businesses are to file an environmental impact analysis if their projects are considered to be of high risk to the environment. The amendments brought by the bill also means that those who live in surrounding areas of business activities that require an Amdal will no longer be able to submit an appeal against the document. 

Why has the Omnibus Job Creation Bill been introduced?

Whilst Indonesia’s ranking in the World Bank’s Ease of Doing Business index has significantly improved in the past five years, it has remained stagnant at 73rd in 2019, lagging behind Vietnam and is still far away from meeting the government’s target for Indonesia to be ranked 40th. Furthermore, Indonesia’s annual economic growth also slumped to a 3 year low of 4.97% in the fourth quarter of 2019. President Widodo has blamed this stagnancy on the complicated and lengthy business permit issues in Indonesia, which he has said could take up to 13 days, whilst in China it would only take approximately nine days. The Indonesian government and businesses believe Indonesia is over-regulated, with a total of 43,511 central government regulations, coupled with ministerial, agency and regional level rules. President Widodo has been very keen to lure companies that want to move manufacturing out of China, the government and lawmakers have also been very willing to speed up the law deliberation process so as to tackle those investment problems. 

Coordinating Economic Minister -Airlangga Hartarto- said that the bill will be beneficial to Indonesian workers, as the regulation would ensure safety nets for employees. He has stated that this bill is necessary, citing the need for Indonesia to increase employment and improve the business climate, following the Covid-19 pandemic. There were already 43,600 regulations that needed to be amended before the pandemic had occurred, and now Indonesia has little choice but to ensure the amendments of such regulations, to prevent any further lagging on the competitiveness between ASEAN countries. The Covid-19 pandemic should be a time to reform Southeast Asia’s largest economy, especially after it has contracted by 5.32% in the second quarter of 2020, inspiring fears of an imminent recession. President Widodo stated: 

“We want to simplify the licensing and bureaucracy, we want speed, so a harmonisation of law is needed to create speedy services, speedy policymaking so that Indonesia would be faster to respond to every world change”

Why are Indonesian’s protesting against the Omnibus Bill?
  • Lack of transparency

The Omnibus job creation bill has sparked criticism from academics, members of civil society, and grass-roots movements, all of which have called for more transparency. The popular consensus is that the Indonesian government failed to sufficiently engage with the public when discussing the proposed law’s contents. The Demographic Bonus Network coordinator -Yoki Yusanto- has recently told the Indonesia newspaper -Koran Tempo- that his organisation paid 22 celebrities and influencers between 1.5million and 10million rupiah (approximately $101 to $677) each, for them to show support for the Omnibus Law on social media using the hashtag: #IndonesiaButuhKerja and #IndonesiaNeedsJobs. This budget came from joint funding by young entrepreneurs and academics, though no other details were disclosed. Furthermore, Bivitri Susanti, who is the co-founder of the Indonesian Centre for Law and Policy Studies, mentioned that the bill’s drafting stage has been “kept secret” from the general public; he stated that those who came up with the contents of the bill only comprised entrepreneurs and a “very small circle of people”. 

  • Environmental Concerns

Environmental watchdog -Greenpeace Indonesia- has said that the bill would threaten the country’s environment since investments will set aside such protections as well as worsen forest fires and the impact of climate change. The environmental impact analysis required for companies would be “weakened”, resulting in indigenous communities being increasingly marginalised. 

35 investment firms, who manage a total of $4.1tn in assets wrote to the Indonesian government raising environmental concerns over the bill. In a letter, the firms said the bill could have serious repercussions that could “impact the attractiveness of Indonesian markets”. Instead of reducing and simplifying environmental regulations, they urged the Indonesian government to do more to protect the country’s forest and “adopt a ‘green’ recovery plan to address the economic devastation caused by the pandemic”. Environmentalists say the wide-ranging bill eliminates environmental protections for many new projects, weakening laws aimed at stopping companies from using fire to clear forests in order to make way for plantations. Phelim Kine, from the campaign group -Mighty Earth, said the Indonesian government had made a “tragic miscalculation” and warned that the bill would “effectively legitimise uncontrolled deforestation”.

  • Worker’s Rights

There are huge amounts of concerns about how this bill could affect blue-collar workers, especially considering President Widodo’s economic policies are based, in part on natural resource extraction -an industry that holds the jobs of many blue-collar workers. Palm oil workers are particularly at risk. According to the World Bank report, the palm oil industry in Indonesia is a key player in the national economy, it creates 17 million jobs for communities and smallholder farmers in Indonesia, with 4 million of them highly dependent on this industry to sustain their livelihoods. The Omnibus Bill now takes away the safety net of such workers, weakening their labor protections. Previous Indonesian law deemed a temporary worker who had been in continuous employment for more than 2 years a permanent worker, however, this protection has now been revoked, denying such workers permanent status. The denial of this opportunity is inextricably linked to the denial of job security and social security benefits, such as pensions and severance pay. 

The International Trade Union Confederation (ITUC) said the bill would cut wages, remove sick leave provisions and other protections, and undermine job security. This bill will simplify the process of unskilled foreign workers entering Indonesia, who will now be able to enter without written permission from the minister responsible, leading to more competition amongst the unemployed. 

“It is staggering that while Indonesia is, like other countries, facing the devastation of the Covid-19 pandemic the government would seek to further destabilise people’s lives and ruin their livelihoods so that foreign companies can extract wealth from the country”

What’s the other side of the story?

On the other end of the spectrum, many businesses and business people are showing tremendous support for the enactment of this bill. Glenn Wijaya, who is an associate at the law firm -Christian Teo & Partners- described the bill to be “a very effective piece of legislation”. She believes that the Omnibus Bill will cure some of the deficiencies of Indonesia’s current business laws, thereby helping Indonesia to not only increase its ease of doing business but to also remain competitive within Southeast Asia. It has been said that foreign investors, such as China, who invested US$4.7 billion in Indonesia through 2,130 projects in 2019, would welcome this bill, which will no doubt simplify and expedite its investments and trade flows. 

According to the manpower minister -Ida Fauziyah, there is little need for workers to worry about the availability of jobs and job security. Companies are still made to follow previous procedures on employment termination under the labor law, the bill also gives room for labor unions to fight for their members who are dealing with employment termination issues with their employers. It is a popular consensus amongst supporters, that the bill will help Indonesia escape the middle-income trap. Indonesia has at least 2.9 million young people in need of a job, though the figure has been heightened since the outbreak of the Covid-19 pandemic.

Approximately 87% of workers are middle to lower educational levels, whilst 39% have only studied in elementary schools. It is said that the Covid-19 pandemic has brought along a golden moment for Indonesia to restructure its business regulations, thereby boosting foreign direct investment, creating new jobs, Indonesia should therefore not let such an opportunity pass by so lightly. This is particularly so, as Indonesia is expected to record the first economic contraction since the 1998 Asian Financial Crisis. 

Scale of Protests

A coalition of 15 activist groups including trade unions, condemned the bill on Sunday, 4th of October, and called on workers to join a planned national strike. The protesters have demanded the government revoke the bill and international unions and many human rights groups have condemned it. In addition to unions, Indonesia’s largest Islamic organisation, Nahdlatul Ulama (NU) has also voiced opposition. NU’s leader KH Said Aqil Siroj said it would benefit only capitalists, investors, and conglomerates and would “trample” on ordinary people. 

Source: Thousands protest against Omnibus job creation law

Protests in Indonesia turned violent on Thursday, 8th of October, as thousands of enraged students and workers criticized this bill, that they have said will cripple labor rights and harm the environment. Clashes between rock-throwing demonstrators and riot police broke out near Jakarta’s presidential palace as police tried to disperse the protesters, including workers and high school and university students. Police fired tear gas at the protesters from several high schools and universities as they tried to approach the palace compound, turning roads into a smoke-filled battleground. The protesters hurled rocks and bottles. As night fell, some protesters set fire to a subway shelter in downtown Jakarta, causing the area to turn an eerie orange color. Demonstrators also burned road barriers, several cars, a cinema and damaged several government offices. Andi Khiyarullah, a protest organizer from the Indonesia Alliance’s student executive body says: 

“We vow to continue returning to the streets until the new law is revoked”

Indonesia’s top security minister Mohammad Mahfud told a televised news conference late Thursday the government would not tolerate any action of damaging public facilities and physical attacks on police and community members. Mahfud has said that such acts are incredibly insensitive to the conditions suffered by those who are struggling against Covid-19 and financial difficulties. The Indonesian government is thus expected to take a very firm stand against anarchist actions aimed at creating chaos and fear in society. Police in Jakarta have blocked streets leading to Parliament, preventing labor groups from holding a mass rally there, whilst also detaining at least 200 high school students who attempted to reach the compound. 

Source: Indonesian protestors fear a rollback of rights

National COVID-19 task force spokesperson Wiku Adisasmito has expressed concern about the virus spreading in the crowds of protesters, who stood close together in images from the scenes, many of them without masks. The government then reported on Thursday, that Indonesia’s total coronavirus cases have risen to 320,564, including 11,580 deaths, which is the highest death toll in Southeast Asia. Cases in Jakarta alone stood at 83,372 with 1,834 deaths.

Conclusion

The supposed aim of the Omnibus job creation bill was to utilize the ‘golden moment’ provided by Covid-19 to boost Indonesia’s economy, stimulating economic growth through the decrease in bureaucratic regulations and the subsequent increase in foreign direct investment. However, the many violent protests that have since occurred has left many wondering whether it was at all appropriate for the Indonesian government to pass such a controversial bill during a time of such hardship. Will this bill have succeeded in only making matters within Indonesia worse? Or will it revolutionize Indonesia’s economy? 

Listed below are a number of infographics providing you with more information regarding Indonesia’s Omnibus job creation bill. 

Source: Indonesia’s Omnibus Bill on Job Creation 
Source: Omnibus Bill divides Unions 


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