Indonesia halts job creation bill targeting foreign investment

Linda J. Dodson

JAKARTA — The Indonesian parliament suspended discussions Monday on a key job creation bill led by President Joko Widodo, as the coronavirus outbreak heightens concerns about the proposed legislation’s impact on workers’ rights.

The omnibus bill on job creation limits increases in the minimum wage and eases conditions for firing employees in an attempt to attract foreign investment in previously protected fields. The government submitted the bill to parliament in February. But many Indonesians have since lost jobs as the coronavirus squeezes the economy.

Key labor unions had been threatening to hold massive rallies on Thursday in Jakarta and the rest of the country to protest the bill. Some in the ruling party had also been pushing to amend parts of it.

In response, Widodo, popularly known as Jokowi, announced Friday that deliberations on labor-related sections would be delayed. “This is an opportunity to closely evaluate the contents of the bill and incorporate feedback from stakeholders,” he said.

Indonesia aims to join the ranks of advanced economies by 2045, the 100th anniversary of its independence. Widodo said the goal was to raise per capita gross domestic product to 320 million rupiah ($20,700), five times the 2018 figure, in an address to the nation at his second inauguration in October.

Widodo also said Indonesia will overcome the middle-income trap, where labor-intensive developing economies become stuck at a certain income level. The Indonesian government was eager to pass the omnibus bill so the country could attract foreign investment and know-how, which are key to taking the economy beyond its reliance on cheap labor.

Indonesia’s extensive labor protections, introduced as part of its democratization process following the fall of a long-term dictatorship in 1998, have long been seen as hampering foreign investment in the country. Indonesia was ranked 73rd in the world on ease of doing business by the World Bank in 2019. Common complaints include administrative obstacles to starting a business in Indonesia, as well as the slow speed in which contracts are fulfilled.

Widodo hopes that labor reforms will help attract high-tech industries such as artificial intelligence and precision machinery. Indonesia accounts for 40% of the GDP of the Association of Southeast Asian Nations. But it relies heavily on the domestic market, and the exports it does have are mainly low-value-added products such as natural gas, apparel and food items.

Indonesia’s workforce is expected to continue growing, allowing the country to take advantage of cheap labor for some time. The government hopes to attract investment and promote innovation while the country has this cushion.

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