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Jokowi's zeal for reform in Indonesia tested by labor protests

Bloomberg News - January 19, 2020

Karlis Salna and Arys Aditya – Indonesian President Joko Widodo is facing a fresh wave of protests over a plan to overhaul the nation's labor law, testing his ability to push through tough economic reforms.

Jokowi, as the president is known, had pledged to deliver to parliament a new job creation bill in the first 100 days of his second term, promising to ease labor rules that businesses say make it difficult and costly to hire and fire workers.

Yet he's struggled to get the bill in front of lawmakers, as his administration sought to come up with a workable draft that would appease businesses and labor unions, as well as politicians worried about how the controversial reform would play out among voters.

He's now facing a worsening public backlash, with tens of thousands of workers set to rally Monday in nationwide protests against any watering down of worker protections.

"Failure to push through his much-heralded labor reforms would deal a significant blow to Jokowi's authority," said Hugo Brennan, principal political analyst with Verisk Maplecroft in London.

In October, just weeks before his inauguration, Jokowi said changes to the labor market regime would be his "first priority" and insisted at the time that protests would not derail his efforts. He said changes to the rules would be restricted to new jobs and that employment conditions and workers' rights for those in existing jobs would be protected – a way for the government to attract investment while defusing opposition from labor groups.

Missed deadlines

Businesses complain that a complex minimum wage system and restrictions on hiring and firing – including some of the most generous severance pay conditions in the world – make it difficult for them to expand operations. Economists say the labor rules are holding back an economy that's expanded about 5% on average since Jokowi first came to power in 2014, which is when he pledged to boost growth to 7%.

Jokowi has missed several deadlines to get the omnibus bill, which includes relaxing of restrictions on foreign investment, in front of lawmakers. The government had initially said it would submit it to the parliament, along with a second omnibus law on taxation, by the end of last year. Frustrated with the lack of progress, the president then set another deadline for draft legislation to be completed by the end of last week.

Coordinating Economic Affairs Ministry Secretary Susiwijono said Friday officials expected to finalize the draft within days. Indonesia needs millions of new jobs each year to absorb entrants into the labor force, meaning overhauling the current system was "critical," he said.

Labor unions are unhappy at the prospect of any changes to the current system. Said Iqbal, president of Indonesia's confederation of labor unions, said they are demanding that current provisions for minimum wages, social security and severance pay be protected.

"The omnibus law is the best way to eliminate prosperity for workers," he said.

More talks

Arsul Sani, who along with several other fellow lawmakers attended a meeting with Jokowi last week to discuss the labor bill, said that despite the president's demand for a speedy resolution there are a range of issues that must first be considered.

"We also request that the government continue to open communication with various elements of the community directly affected by this law, such as trade unions," said Sani, who is also the secretary-general of the United Development Party, which is part of Jokowi's ruling coalition.

It remains unclear how long it will take before the legislation can be submitted to parliament. It will then have to go to a parliamentary committee before lawmakers eventually vote on it.

"Lawmakers will likely provide their unenthusiastic support for the president's labor reforms but will expect concessions in other policy areas in return," Brennan said. "A watered-down reform would likely be viewed by investors as both a small step in the right direction and a missed opportunity."

Source: https://www.bnnbloomberg.ca/jokowi-s-zeal-for-reform-in-indonesia-tested-by-labor-protests-1.137597