JAKARTA — Indonesian President Joko Widodo asked parliament on Friday to delay debate on changes to labor laws that were part of a sweeping bill to remove red tape and increase foreign investment in the county.
The move, announced in a YouTube video, came after unions last week threatened to hold mass rallies to block the bill in defiance of a ban on large gathering because of the coronavirus outbreak.
The backpedaling on the legislation is another sign that Widodo is in a make-or-break moment. Already under fire for the country’s slow response to the COVID-19 pandemic, the president now risks having some of his signature policies scuppered by the outbreak.
Widodo is keen to put Southeast Asia’s largest economy on the map for international investors and boost the country’s economic growth. Business owners and economists say the current version of the labor law hampers investment because it makes it hard for companies to fire underperforming employees and require them to pay large severance packages — some, in months of salary, can be more than two times the years of service.
The unions were angry at deliberations over changes that they say diminish their rights. Adding fuel to the fire was the fact that parliament was still debating the bill as millions of people lose jobs as a result of the outbreak.
The delay in deliberation “is in accordance with the wishes of the government. This is also to provide an opportunity for us to explore the substance of the relevant articles,” Widodo said.
The committee for discussing the omnibus bill will meet on Monday to formally decide whether to follow the government’s wishes.
Meanwhile, another of Widodo’s key second term policies, the $33-billion project capital relocation project, has also been called into question amid the spread of the virus.
Finance Minister Sri Mulyani Indrawati said on Thursday that the some of the budget for the new capital, to be located in East Kalimantan in the Indonesian part of Borneo island, has been diverted for the handling of the outbreak, according to local media.
The Ministry of Public Works and Housing, which is responsible for the project, has reallocated some of its 120 trillion rupiah ($7.7 billion) budget for this year for preparing hospitals, the finance minister said.
While the budget reallocation will not mean a cancellation of the mega project, it will undoubtedly lead to a delay in the original plan to relocate in 2024. It will also come as a blow to companies such as SoftBank Group, which had promised to invest in the new capital.