Mardika Parama, Jakarta – Key business groups have expressed opposition to the decision to delay deliberation of the labor provisions in the omnibus bill on job creation, saying it will create an unfavorable environment for investment amid the increasing risk of a recession.
The Indonesian Employers Association (Apindo) issued on Monday an official public statement, claiming that without the labor provisions, the bill would reduce the opportunity to attract labor-intensive investment as well as weaken job creation efforts, undermine the dispute mechanism in labor-intensive companies and lead to a lack of flexibility with regard to nonpermanent workers.
"The COVID-19 pandemic has caused a huge spike in the number of layoffs and furloughs and these are expected to continue to rise until the end of 2020. This situation should push us even more to deliberate the bill, including the labor elements, intensively given that after the pandemic there will be a need for massive job creation for the laid-off workers," Apindo's statement reads.
President Joko "Jokowi" Widodo announced on Friday that the government and House of Representatives had agreed to delay deliberation of labor provisions in the omnibus bill, providing time to explore substantial issues and "accommodate inputs from stakeholders".
The decision was a concession to labor unions, which postponed planned mass protests against the bill despite the COVID-19 outbreak. Labor groups fear the omnibus bill will exacerbate existing conditions with up to 5.2 million people at risk of losing their jobs according to government estimates in a worst-case scenario where the economy contracts by 0.4 percent.
While labor groups commended the government for delaying the legislation process, businesses objected to the decision, citing fears of impending waves of layoffs amid the oncoming economic downturn.
"It's true that we should focus on preventing the spread of COVID-19. However, we also have to simultaneously anticipate the skyrocketing number of layoffs by improving our business climate," Apindo's deputy chairman Bob Azam told The Jakarta Post.
More than 1.2 million workers from 74,439 companies in both the formal and informal sectors have either been told to stay home or have been laid off as a result of the pandemic, according to Manpower Ministry data released in early April.
"Right now, the business sector is collapsing. There are a number of companies that have closed their operations and sold their assets, and we cannot continue doing business-as-usual to survive," Bob said.
Indonesian Chamber of Commerce and Industry (Kadin) deputy chairwoman Shinta Kamdani echoed Bob's statement and underlined the importance of revising the country's labor legislation in order to woo investors.
"We respect the bill's deliberation process at the House and support consultation efforts with all stakeholders. However, we would like to point to the importance of continuing the labor provisions' deliberation, which are an integral part of the bill," she told the Post.
Shinta added that Indonesia's labor market and regulations must be reformed to improve the country's global competitiveness, and create an efficient and productive business climate.
The Confederation of Indonesian Trade Unions (KSPI), meanwhile, has argued the COVID-19 pandemic makes the omnibus bill even more dangerous as millions of workers are facing layoffs and furloughs.
"Of course [the pandemic] made the bill worse. The 'easy hire-and-fire' concept could make it easier for companies to lay off their workers," KSPI spokesperson Kahar S. Cahyono told the Post.
"The global economic structure is changing due to the pandemic. Our studies have shown that there is no guarantee that there will be an increase in investment if we lower the bar when investor countries are also focusing on recovering their own economies."
The KSPI expects discussions could be continued objectively with the participation of the public and labor unions in the future when pandemic pressures have eased.
Economists, meanwhile, have expressed mixed views on the delay. Perbanas Institute economist Piter Abdullah said the omnibus bill on job creation contained many problematic issues and not only on labor reforms.
"The government and the House should delay the deliberations of every provision altogether," Piter said. "They must first make sure and convince the public that there are no conflicts of interest in any article of the bill."