Indonesia set to ratify Bill to boost job creation by end-August, senior minister says

The Bill allows employers to recruit workers on flexible working hours.
The Bill allows employers to recruit workers on flexible working hours.PHOTO: REUTERS

JAKARTA - The Indonesian government is hopeful that a job creation Bill would be ratified by Parliament by the end of this month, a senior minister said, amid worries of a recession this year due to the coronavirus outbreak.

The Job Creation Bill will have stipulations that are friendlier to investors, including allowing employers to hire and fire with lower severance pay and benefits compared to current labour laws.

The Bill also allows employers to recruit workers on flexible working hours, thus giving employers the ability to avoid paying full time wages.

Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan, a close adviser to President Joko Widodo, said that six out of the country's eight major labour unions have agreed to support the Bill.

The Bill was put aside for review in April after concerned labour groups stepped up their street protests.

"The basic problem of the Bill are it does not recognise minimum wage... cuts severance pay, makes retrenchment so easy," Mr Said Iqbal, chairman of labour union KSPI, said in a statement on Aug 3. He regretted that Parliament has revived the deliberation of the Bill discreetly, and threatened to mobilise fresh street protests.

Current labour laws guarantee workers an annual pay increase and at least twice the amount of severance pay compared to most regional countries. These would be adjusted under the Bill.

Indonesia's economic slump due to the coronavirus has helped the government's argument to push through the new regulations, after the pandemic caused 3.7 million people to lose jobs.

This raised the country's estimated total of unemployed Indonesians to 10.6 million, nearly 8 per cent of the 133 million workers in the country.


Asked about the chances of the Bill being ratified in Parliament, Mr Luhut said: "Seven (out of nine) political parties (in the House) support this government. We are confident." He was speaking on Monday (Aug 10) night in a webinar organised by the Jakarta Foreign Correspondent Club.

The Job Creation Bill will become law once voted by the majority in Parliament where President Joko Widodo's coalition has more than 60 per cent of the total 575 seats.

Indonesia, the world's fourth-most populous country, is struggling to avoid a recession.

The economy shrank by 5.32 per cent in the April to June period compared with a year ago, its first negative quarterly performance in 21 years.

The Joko administration has been trying to lure more foreign investment and is currently stepping up its social aid spending such as grants and subsidised loans to support consumer buying power and help manufacturers and retailers curb slowdowns.

Meanwhile, the government has appealed to those in the middle- and upper-income class to increase their spending after data showed that funds placed in banks' savings accounts and time deposits have surged.

"No haj this year, no umrah (pilgrimage), no international conferences, no tourists going to Singapore, Japan. We spend more than US$15 billion (S$20.6 billion) on these activities. The money now is still in their pocket," Mr Luhut said.

"We want them to shift to spending their money domestically. Help the economy," Mr Luhut also said.