Hintergrundbild Blogpost Indonesien

Economic Growth At Any Cost

 

Economic Growth
At Any Cost 

Human rights activist Kartika Manurung reports on the emergence and impact of the „Omnibus Law on Job Creation“ in Indonesia.

Economic Growth
At Any Cost

Human rights lawyer Kartika Manurung reports on the emergence and impact of the „Omnibus Law on Job Creation“ in Indonesia.

31.03.2021

Indonesia

Capital: Jakarta
Languages: The official language in Indonesia is Indonesian (Bahasa Indonesia). In addition, there are several dialects and about 250 other languages spoken by parts of the population
Population: approx. 270,6 million 

Did you know? 1,2,3

The Covid-19 pandemic has hit the global economy hard: In the Southeast Asia region alone, the growth rate in 2020 slumped by around eight percentage points compared to 2019. The pandemic caused the first recession in more than 20 years for Indonesia – a country that had been one of the global emerging markets with annual growth of around five percent.4,5 Experts estimate that 3.5 million people in the country could lose their jobs in the wake of the crisis. Government officials are therefore pushing for invasive measures to cushion the impact of the pandemic and move Indonesia’s GDP back towards growth.6

One of these measures is the so-called “Omnibus Law on Job Creation”, which was passed with a broad government majority on October 5, 2020.7 Under the law, 82 existing laws and 1.194 articles were amended in order to promote, among other things, the simplification of investments and the deregulation of the market. While the Indonesian government under President Joko Widodo presents the changes to the law as a win for the Indonesian economy and labor market, critics fear significant losses in labor and environmental protection.8

Kartika Manurung is one of them. The Indonesian human rights activist, who has been involved in the labor movement in Indonesia, doubts the investment-promoting character of the Omnibus Law and predicts a massive cut in environmental and social protection mechanisms. In an interview, she describes her concerns to us.

Concerns about the Omnibus Law

The Indonesian government has been accused of pushing the Omnibus Law in the shadow of the Corona pandemic. How do you estimate these accusations?

I do agree that the Indonesian government has used the pandemic situation to push through the Omnibus Law without proper public participation. Considering the refrain from this participation process, the drafting of the Omnibus Law regulation does indeed appear to have been carried out secretly and drafted very quickly.

During the inauguration of President Joko “Jokowi” Widodo, he proposed 100 days to the parliament to discuss and issue the Job Creation draft bill as a legal act. On 12 February 2020, the draft was submitted to Indonesia’s People’s Representative Council (DPR). Lacking transparency and public discussion, the draft carried tension from the civil society, especially trade unions, agrarian movement, indigenous peoples, and environmentalist groups who have expressed rejection towards the draft of the Job Creation bill. Due to Corona handling regulations, civil societies had so many restrictions to organize their political act against this law in the public space.

During the process, Influential business players and conglomerates were invited and constituted the dominant party among the 127 task force members involved in drafting the law. In the same vein KADIN (Indonesian Chamber of Commerce) which traditionally often rejects increases of minimum wages was given the authority to review the Omnibus Law concept by providing input into the inventory of investment problems.

Straßenverkehr in Indonesienpexels-alifia-harina-2893670
Traffic in Indonesia © Alifia Harina via Pexels

What do the Indonesian government and its supporters hope to gain from the Omnibus Law?

On 20 October 2020, the adoption of the Omnibus Law was announced by the re-elected Indonesian President Mr. Joko Widodo during his first political speech after the inauguration. It was very clear that he was convinced that to strengthen the economy and to increase employment, the regulation problem must be simplified immediately. Through that, Jokowi pointed out that the focus of the work he will be doing for the current government is accelerating the economy after focusing on infrastructure issues in his first period. The business players support the law as it considered streamlining business licenses, welcoming more foreign investment, and creating a flexible labor market.

The most critical question is whether the Job Creation bill is a solution to boost investment in Indonesia, as the justification from government sides suggest. Various studies have shown that corruption is the main contributor to the investment problem in Indonesia, for example political corruption, law enforcement corruption, licensing corruption, good and service procurement corruption, plus corruption on public service. Data from the Indonesian Corruption Eradication Commission (KPK) indicate that bribery cases are the highest during 2004 to 2017.

Jokowi had been criticized as well by the anti-corruption movement since he contributed to the attenuation of the independence of KPK last year by, for example, approving the revision of the widely-rejected KPK law which is assessed to weaken the KPK.

World Bank confirms that unnecessary and inefficient bureaucracy are the biggest obstacle to foreign investors, and it led to the relative stagnation of direct investment into Indonesia. Indonesia was ranked 109th on the ease of doing business index, resulting from complications in construction permits, registering property, paying taxes, and enforcing contracts.

Obstacles for investment decisions in Indonesia
Regulatory Environment 78%
Bureaucratic Inefficiency 75%
Corruption 70%

Source: Joint European Chambers‘ Business Confidence Index 2019 9

What impact will the amendment have on workers in Indonesia?

The law has limited several normative rights of workers, such as the rights on the collective bargaining on wages, the abolition of minimum wages, and leave regulations. Overall, the law supported the flexibility of the labor market as it allows the contract system for more than five years, which was previously limited to only two years. This means, it supports the employer to award non-permanent contracts without time restriction, while the labor law 2003 restricts the contract-based system for only two years.

Furthermore, due to the amendment, wages will be counted based on working time so that workers will be paid per hour, which means that the minimum wage is potentially eliminated. This draft gives the authority to the governor to determine wages as well as the provincial minimum wage rate. It eliminates the labor power for collective bargaining in the tripartite process to determine minimum wage, as it is mandated by current Labour Law.

Before the Omnibus Law was passed, companies had to pay minimum wages, depending on the sector in which they operated, to cover the basic needs of their employees. The Omnibus Law now exempts small and medium-sized companies from these regulations. In addition, larger companies can lower the minimum wage on their own with reference to a strained economic situation, for example.10,11

The bill supports massive layoffs simply by the reason of efficiency, merger, acquisition, or separation of the company. This is a crucial clause because informal workers are the most vulnerable to be fired as they are mostly contract workers (not permanent). According to Indonesia Central Statistics Agency, the number of the working force in February 2019 was about 130 million people of which 57.27% (74 million) are informal workers while formal workers amounted to the remaining 55 million people.
According to the definition of the International Labor Organization (ILO), informal work is a form of work that is based on casual labor, kinship or personal and social relationships and not on contractual agreements with formal guarantees.12 In Indonesia, according to this definition, about 80% of all workers* are employed in the informal sector.13 The discrepancies arise due to the narrower definition of informal work used by the Indonesian Statistics Authority. 

Omnibus Law on Job Creation liberates the company from labor criminal sanctions. One of the major problems in Indonesia is that many employers do not pay the wages of their workers, especially in the garment and textile sector. Through this article, many will get away without harsh consequences.

The Job Creation Omnibus Law will eliminate the right of menstrual leave, sickness, permission to marry, circumcision, plus other social activities and safeguarding mechanisms. This is contrary to the Labor law, which imposes criminal sanctions on companies that prevent workers from giving birth, engage in child labor, do not pay minimum wage and overtime wages or workers’ health insurance, and block the trade union activities. By the Omnibus Law, all of these will only be counted as administrative sanctions.

Regenwald_pexels-tom-fisk-2599142
Rainforest © Tom Fisk via Pexels

What impact does the amendment have on environmental and social standards, for example in the context of infrastructure projects?

Omnibus Law on Job Creation bill is potentially threatening democracy since it weakens the position of regional authorities by centralizing a large part of decision making-powers to Jakarta. Indeed, the article 170 of the Omnibus Law facilitates the executive to have the authority to change the law by government regulations in order to accelerate “Job Creation strategic policy”. While the 1945 constitution of Indonesia fundamentally mandates the parliament as the only supreme authority power to do the law setting, Article 170 violates this principle and grants power to the president in both the executive and legislative branches. Furthermore, indigenous people feel threatened by this particular article because it allows the president to overturn regional regulations as a reason to inhibit investment.

Meanwhile, in the field of environment, the Omnibus Law on Job Employment will eliminate environmental permits and combine them with the business license. Therefore, it will be easier for the business players to make the Environment Impact Analysis since it is only reduced to the sector that has a potential threat to nature. Which of course contradicts to the fact of the objective of mainstreaming environmental permits which have been made as environmental considerations as the effect of globalization.

How does the Omnibus Law threaten indigenous groups in Indonesia?

The Omnibus Law on Job Creation particularly affects indigenous groups in Indonesia. Firstly, the passage of the law simplifies the use as well as the sale by the state of land that is partly cultivated and inhabited by indigenous people. In addition, the penalties for environmental and forest destruction committed by companies will be significantly weakened. Another factor is that the Omnibus Law minimizes the so-called Amdal process, the obligation for companies to conduct an analysis of the environmental risks of their projects. Whereas previously broad participation by indigenous communities and civil society was guaranteed within the process, now only those directly affected are to be consulted. Critics fear that this consultation process will take place without the affected parties being sufficiently informed about the company’s activities and the consequences for them.14,15

Regardless of mass protests in cities like Jakarta or Bandung as well as the International Monetary Fund’s (IMF) concerns over a lack of environmental protection coming along with the Omnibus Law, the Amendment was passed on 5th October 2020.16 What is needed to – nonetheless – protect both workers and the environment from its potential effects? What can Indonesia’s citizens, NGOs, the international community, and private companies do?

One could file a judicial review against the Omnibus Law in the Constitutional Court. Furthermore, one could organise more protests, to express more political resistance. Counting more people to doing the protest in the street is a good idea to organize the power. But unfortunately, the Corona situation makes it so difficult and problematic due to the risk of further spreading the virus.

Sources

  1. Deutsche Vogue: Vogue-Lexikon: Batik – darum ist Tie Dye so beliebt (17.10.19), retrieved from https://www.vogue.de/mode/artikel/batik. Last accessed on 30.03.2021.
  2. Zoo Rostock: Alfred Russel Wallace, retrieved from https://www.zoo-rostock.de/darwineum/alfred-russel-wallace.html/. Last accessed on 30.03.2021. 
  3. Süddeutsche Zeitung: Trennlinie der Evolution (04.10.15), retrieved from https://www.sueddeutsche.de/wissen/indonesische-inseln-trennlinie-der-evolution-1.2675557. Last accessed on 30.03.2021.
  4. International Monetary Fund (IMF): Real GDP Growth (2021), retrieved from https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/WEOWORLD/SEQ. Last accessed on 30.03.2021.
  5. AlJazeera: Covid slammed Indonesia’s economy hard in 2020, data shows (05.02.21), retrieved from https://www.aljazeera.com/economy/2021/2/5/covid-slammed-indonesias-economy-hard-in-2020-data-show. Last accessed on 30.03.2021.
  6. BBC: Indonesia in recession for first time in 22 years (05.11.20), retrieved from https://www.bbc.com/news/business-54819898. Last accessed on 30.03.2021.
  7. GTAI: Indonesien beschließt Reform des Investitions- und Arbeitsrechts (03.11.20), retrieved from https://www.gtai.de/gtai-de/trade/wirtschaftsumfeld/rechtsmeldung/indonesien/indonesien-beschliesst-reform-des-investitions-und-arbeitsrechts-568330. Last accessed on 30.03.2021.
  8. Heinrich Böll Stiftung: Indonesien verpasst mit umstrittenen Deregulierungsgesetz ökologischen Wiederaufbau (14.10.20), retrieved from https://www.boell.de/de/2020/10/14/indonesia-misses-once-lifetime-opportunity-build-back-better-passing-controversial. Last accessed on 30.03.2021.
  9. The Nielsen Company: Joint European Chambers‘ Business Confidence Index 2019, retrieved from https://ukabc.org.uk/wp-content/uploads/2019/08/BCI-2019-Report.pdf. Last accessed on 31.03.2021. 
  10. PWC: Changes of Employment Regulations and Their Impacts on Financial Reporting (Januar 2021), retrieved from https://www.pwc.com/id/en/publications/omnibus/omnibus-flash-2021-04.pdf. Last accessed on 30.03.2021.
  11. Business and Human Rights Resource Center: Omnibus Law on Job Creation reinforcing patriarchal mentality (14.12.20), retrieved from https://www.business-humanrights.org/en/blog/omnibus-law-on-job-creation-reinforcing-patriarchal-mentality/. Last accessed on 30.03.2021.
  12. OECD: Informal Sector, retrieved from https://stats.oecd.org/glossary/detail.asp?ID=1350. Last accessed on 30.03.2021.
  13. ILO: Statistics on the informal economy (2019), retrieved from https://ilostat.ilo.org/topics/informality/. Last accessed on 30.03.2021.
  14. Mongabay: Indonesia’s omnibus law a ‘major problem’ for environmental protection (04.11.20), retrieved from https://news.mongabay.com/2020/11/indonesia-omnibus-law-global-investor-letter/. Last accessed on 30.03.2021.
  15. Forest Peoples Programme: Joint Press Release: Indigenous peoples and civil society organisations file a UN CERD submission on Indonesia’s highly controversial Omnibus Law (13.11.20), retrieved from https://www.forestpeoples.org/en/press-release-indonesia-CERD-submission-omnibus-law. Last accessed on 30.03.2021.
  16. Mongabay: Indonesia’s omnibus law a ‘major problem’ for environmental protection (04.11.20), retrieved from https://news.mongabay.com/2020/11/indonesia-omnibus-law-global-investor-letter/. Last accessed on 30.03.2021.

Write a comment

We look forward to your contributions on this blog in the form of questions, suggestions and criticism. It is important to us that we deal with each other in an open, friendly and respectful manner. We reserve the right not to publish racist, sexist, or other discriminating content.

Kommentar verfassen / Make a comment