Jakarta – President Joko "Jokowi" Widodo did not let a single day of 2022 go to waste. Fresh from the well-praised presidency of the Group of 20, Jokowi did not wait until the new year to issue a government regulation in lieu of law (Perppu) to implement the Job Creation Law, which had been declared conditionally unconstitutional.
In November 2021 the Constitutional Court ruled the jobs law unconstitutional due to a lack of meaningful public consultation and gave lawmakers two years to make changes to the controversial legislation. Back then the country's regulatory system had yet to recognize an omnibus law, a single law that can amend a number of existing laws all at once.
The House of Representatives and the government have amended the regulatory system to recognize omnibus laws since last year and lawmakers have passed another omnibus law on the financial sector that has made key changes to the country's monetary and financial regulations, including expanding the roles of Bank Indonesia.
As the regulatory system is already in place, there are reasons to question the government's decision to issue a Perppu to make the jobs law enforceable. A Perppu is a legal instrument akin to an executive order the government can issue only in a state of emergency.
In 2020, the first year of the COVID-19 pandemic, for instance, the government issued two Perppus to enable extraordinary policy measures to strengthen the response to the pandemic. This included raising the state budget deficit ceiling to beyond 3 percent of GDP to be able to increase the health budget and provide a stimulus for the economy.
The result was that although the world entered a recession, Indonesia's economy survived, if not thrived, with a continuous trade surplus and inflation maintained below 6 percent.
Coordinating Economic Minister Airlangga Hartarto said Perppu No. 2/2022 on Job Creation was issued to anticipate a global economic and geopolitical downturn. The legal certainty the Perppu is offering will give a boost to investment opportunities amid the gloomy global outlook, Airlangga said.
While it is wise to prepare for a crisis, issuing the new Perppu hardly fixes the problems that are inherent with the problematic omnibus jobs law. The law was heavily opposed by labor unions for undermining workers' rights. Among other articles, the law mandates lower severance pay for laid-off workers than the 2003 Labor Law. It also gives more flexibility for employers to lay off workers.
The issuance of the Perppu only demonstrates the government's blatant neglect of the Constitutional Court's demand for meaningful public consultation, the very reason for its declaring the law unconstitutional.
Critics have voiced concerns the Perppu will only justify employers in labor-intensive industries such as textiles, footwear and furniture carrying out mass layoffs this year as a consequence of slowing demand for export goods. It may also hit hard other industries, including tech, which are currently experiencing slowdowns.
Although the government aims to ensure legal and business certainty through the Perppu, it may have the opposite effect. Enabling employers to lay off workers en masse will only backfire since this year is expected to be a rocky political year ahead of the 2024 elections.
The government should engage in thorough discussion before formulating sweeping reforms that could affect how businesses and workers conduct their lives. In the absence of that there could be a political price to pay.