Jakarta – Indonesia's parliament, under pressure from powerful labour unions, said on Tuesday it had postponed a plan to pass a draft labour law this week due to fears of fresh unrest in the impoverished country.

Under the proposed law workers would not be allowed to strike during negotiations with employers, prompting worries among unions that their bargaining position would be significantly weakened.

"After getting criticism from labour unions, the parliamentary special committee in charge of the draft bill has decided to postpone passing it," Surya Chandra Surapaty, head of the special committee, told Reuters. Surapaty said lawmakers would hold further discussions with labour unions over the controversial draft bill.

Some labour unions that took part in large protests in the middle of the year over a separate ministerial decree have said they would not rule out massive protests if parliament passed the bill. "There were large worker protests when the ministerial decree was issued therefore we can conclude what will happen if the bill is passed," said Rita Olivia, a labour activist.

The government agreed to postpone implementation of the decree, which had abolished severance pay for retiring and resigning workers, following violent protests across the country.

Labour unrest has been one of the many headaches that have best several administrations trying to drag Indonesia out of crisis since it was savaged by the Asian financial storm of the late 1990s.

Worker rights were largely subordinated to former President Suharto's drive for rapid economic growth during his three-decade iron rule that ended in chaos in 1998. Since then, unions have grown in clout.