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August 28, 2020

Asia

INDONESIA: Some progress in labor law reform, but still not enough clarity

BY Bob Herrera-Lim

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( 2 mins)

Members of parliament and representatives of labor unions have agreed on the principles that should govern the drafting of reforms to the country’s labor law, which is arguably the most anticipated regulatory change in the administration’s omnibus bill on job creation. That discussions did not break down is an achievement in itself, given how previous attempts were derailed early due to threats from the country’s powerful unions. President Joko Widodo wants the bill finished by September.

Both sides agreed that any draft legislation must comply with the past decisions of the Constitutional Court on labor rules, even though this would seem to limit parliament’s ability to alter the current system. However, there is also a view within Indonesia that the decisions have sufficient leeway for legislators to still make substantial changes. On a more positive note, the unions have apparently agreed to consider exemptions to labor rules when applied to the technology sector. The unions were also able to get parliament to agree to retain the criminal penalties for violations of labor laws (which was missing from the government draft).

The wording of the agreement between the representatives of labor and parliamentarians is sufficiently vague that unions could eventually interpret an unfavorable outcome as failing to respect their agreement, which would cause them to formally oppose the bill. However, the fact that the unions did not walk away from the table may be an indication that they recognize that their bargaining power is weaker than in previous years and that by promising some cooperation, they may be more successful in limiting the actual changes. The administration would, after all, prefer not to have a confrontation in the streets.

A highly anticipated rally on 25 August by one of the country’s largest labor groups, the Trade Union Confederation (KSPI), drew about a thousand participants, which is a far cry from the large labor union rallies during the Yudhoyono years. This may be encouraging the administration and legislators to push forward with the legislation, even if cautiously, recognizing how there may be a real window of opportunity to reach a compromise that is acceptable to labor.

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