The Turmoil of Indonesia's New Job Creation Law and International Responses

It has been one week that political turmoil getting increases after The House of Representatives of the Republic of Indonesia ratified the Omnibuslaw bill (Job Creation Law) on Monday, October 5th, 2020. Hopefully, it will attract investors by cutting regulations on businesses, speeding approval of projects and eliminating many permit requirements.

Indonesia aims to join the ranks of advanced economies by 2045, the 100th anniversary of its independence. The goal was to raise per capita gross domestic product to 320 million rupiah ($20,700), five times the 2018 figure. Indonesia will overcome the middle-income trap, where labor-intensive developing economies become stuck at a certain income level. The Indonesian government passed 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. The President, Joko Widodo hopes that labor reforms will help attract high-tech industries such as artificial intelligence and precision machinery. 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.

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. Moreover, it would harm workers by reducing severance pay, cutting mandatory leave, allowing longer work hours, and permitting the hiring of contract and part-time workers in place of full-time employees.

The omnibus law on job creation neglected women's reproductive rights. The bill amended a number of special leave or permit provisions stipulated in Law No. 13/2003 on Manpower.

Among the changes is the removal of leave for women on their first-day of menstruation. In addition, the new policy also removed the provisions of leave for marriage purposes, organizing marriage, circumcision, baptism of children, giving birth or having a miscarriage, and the passing of a family member, as noted in Article 93 of the Labor Law. Article 93 stipulated that employers are obliged to pay the workers’ wages if they do not perform work due to sickness, while for female workers due to menstrual periods on the first and second days.

Ahead of Monday’s plenary, social media users expressed their frustrations over the bill by writing posts with the hashtags #DPRRIKhianatiRakyat (House betrays the people), #BatalkanOmnibusLaw (cancel the omnibus law) and #MosiTidakPercaya (vote of no confidence). People are betrayed as it's disgraceful to pass an act all of a sudden, in the middle of the night without any consultation with people from both sides. It is very disappointing as we live in a country that upholding democratic values. The aftermath of public ire, clash and riot in various cities and regions couldn't be avoidable and unfortunately, some of them became anarchist and destroyed public facilities and wishing that the Representatives Parlement will hear the voice of people (particularly small people from the lower economic society).

In Jakarta for example, as the city where I was born and not so far away from the place where I live currently. The massive demonstration rejecting the newly enacted Omnibus Law had caused damages to 18 TransJakarta shelters throughout the capital city, 8 of them already burnt. The damages are estimated to amount up to IDR 45 billion in total. Several MRT facilities were also damaged, including the glass entrance door of HI Roundabout Station and Setiabudi Astra Station. The Grand Theater in Senen, Central Jakarta also had gone up in flames after areas around the old theater were used by demonstrators as meeting points for the anti-omnibus job creation law demonstration.  It is still unknown how the Grand Theater caught fire in the first place. The stones and rocks were still scattered on the street in the vicinity of the theater. Many vehicles parked at the area sustained numerous damages and fire also engulfed the Pasar Senen market bus stop.

An economic observer from the Institute for Development of Economics and Finance (Indef), Ahmad Heri Firdaus, opined that the strong objection voiced by people to the Job Creation Omnibus Law which led to mass strike would make investors reevaluate plans to enter Indonesia. Heri argued a regulation should be implemented based on common aspirations. Yet many rejections to the newly-passed regulation showed that its substance was not yet solid as it had not accommodated the interests of workers. This surely will be detrimental for entrepreneurs, industry, and the government, as well as workers who may lose their income for staging a demonstration.

An economist from the University of Indonesia Fithra Faisal conveyed similar statements. According to him, the government’s motivation to draft the policy was quite positive, and Indonesia needed it as a supporting basis for future industrial production. However, public participation was not involved in the drafting so it resulted in protests voiced by all elements, including global investors. The government must address this condition. He acknowledged that the government could not satisfy all parties in making policy. However, they could at least be able to create a consensus that would be carried out by all stakeholders.

International Responses

35 investors expressed their concerns, including Aviva Investors, Legal & General Investment Management, the Church of England Pensions Board, Netherlands-based asset manager Robeco and Japan’s largest asset manager, Sumitomo Mitsui Trust Asset Management. 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. The investors said they feared the legislation could hamper efforts to protect Indonesia’s forests, which would in turn undermine global action to tackle biodiversity loss and slow climate change. The omnibus bill aims to streamline the issuance of mining permits by centralizing the process with the government. At the moment, regional leaders have the power to issue mining permits and create regional mining regulations, many of which contradict national-level regulations

According to Usman Hamid, Amnesty International Indonesia Executive Director saying that the bill in its current form has the potential to violate human rights and have a regressive effect on Indonesia’s international human rights obligations, namely on the right to work and rights at work. It has the potential to let human rights abuses go unchallenged and give dangerous leeway for employers to exploit workers. This is a serious threat to workers’ rights and human rights, full stopThe drafting process of the bill was overly opaque. The Government claims to have involved 14 trade unions as part of the public consultation process – a claim rejected by those unions, stating that they were not included from the beginning. That means there was no open and honest interaction between public authorities and all members of society in producing the bill.

This year alone, Amnesty International has recorded the arrest, attach and intimidation of at least 61 human rights defenders, including indigenous community leaders, for defending their rights in conflicts with corporations and state institutions. With the omnibus law laying a red carpet for corporations to extract the country’s natural resources with minimum, if not zero, hindrance, we believe human rights abuses against local communities will only increase in the years to come if the new law stays intact.

The Council of Global Unions (CGU) delivered a letter to President Joko "Jokowi" Widodo's administration regarding the Job Creation Law (UU Cipta Kerja) and urging the government to revoke the Job Creation Law. The letter was signed by nine international workers' union leaders. Overall, the law appears to put the interests and demands of foreign investors ahead of workers, communities, and the environment. The procedure and substance of the Omnibus Law on Job Creation are not in line with Indonesia's human rights obligations under international human rights law. Although the CGU acknowledges that trade unions were involved in the discussions with the legislative body, yet they fear that no changes have been made to reflect their range of concerns. CGU believed that stable and constructive industrial relations are the essential base for the national development, and thus calls on the Indonesian government to rethink its current priorities and the Omnibus Law on Job Creation.

A recently published biography of President Joko Widodo describes the former furniture seller as a “man of contradiction”. Given his political decisions in the past few years, ranging from crippling the Corruption Eradication Commission (KPK) to appointing people with chequered human rights records to his Cabinet, the depiction could not be further from the truth. For many Indonesians, the president is clearly on the wrong side of history. A human rights crisis is on the horizon for the country already stricken by a pandemic. Only President Jokowi has the power to prevent Indonesia from plunging into it.

According to Bland, Jokowi has been nationalizing some of the country’s biggest energy projects, and prioritizing the development of state-owned enterprises, many of which are badly managed and riddled with corruption. And while foreign investment has helped power ahead economies such as Singapore, Malaysia, and Thailand, Indonesia still sees it as a tool of colonial oppression, the immense power of Indonesia’s oligarchs and military is the main factor blocking foreign investment. It is hardly surprising that the GDP per capita of a country such as Thailand, which has suffered from much greater political instability, is some 55% higher than that of Indonesia, according to World Bank data. Indeed, the Indonesian economy has been trundling along with a growth rate of 5–6%, about half that of countries such as China and Japan in their high-growth periods. And while a demographic youth bulge can create a “demographic dividend”, Indonesia is wasting its opportunity by not creating enough jobs.

source :

- https://www.thejakartapost.com/news/2020/10/06/indonesia-passes-jobs-bill-as-recession-looms.html

- https://en.tempo.co/read/1393980/omnibus-law-rejection-could-drive-away-investors-says-observer

- https://en.tempo.co/read/1307750/omnibus-law-on-job-creation-neglects-womens-rights-labor-unions

- https://asia.nikkei.com/Politics/Indonesia-halts-job-creation-bill-targeting-foreign-investment

- https://www.thejakartapost.com/news/2020/10/05/global-investors-raise-environmental-concerns-over-indonesia-jobs-bill.html.

- https://en.tempo.co/read/1393545/global-unions-urge-indonesia-to-repeal-job-creation-omnibus-law

- https://www.newmandala.org/indonesias-omnibus-law-is-a-bust-for-human-rights/

- https://www.lowyinstitute.org/the-interpreter/debate/man-of-contradictions