Indonesian firms, unions in waiting game after job law ruling

Constitutional Court’s ambiguous court ruling leaves labour activists and businesses wondering what happens next.

Labour activists have criticised Indonesia's job creation law as exploitative [File: Courtesy of Jumisih]

Medan, Indonesia – For the past week, commercial lawyer Christopher Panal Lumban Gaol’s phone has been ringing off the hook.

The legal eagle, who is also a lecturer in business law at Santo Thomas Catholic University in Medan, North Sumatra, has been inundated with inquiries about the specifics and effects of a perplexing ruling handed down by Indonesia’s Constitutional Court on the country’s controversial jobs creation law.

While the government has touted the legislation as a way to entice foreign investment and create jobs, unions and labour activists have criticised its reforms for undermining job security, wages and workers’ rights.

“Naturally, there is much confusion about how a law can have been deemed ‘unconstitutional’ while also still applying for the next two years,” Gaol told Al Jazeera.

In its ruling last month, the Constitutional Court found a number of procedural faults that rendered the legislation “unconstitutional” after the law was challenged by Indonesian labour unions. The government has been given two years to fix the faults, failing which, the legislation will be deemed permanently invalid.

Following the November 25 ruling, unions and business owners have been left wondering what the future may hold given the ambiguous outcome.

“We appreciate the ruling, but we had hoped that the law would be deemed completely unconstitutional and cancelled. The Constitutional Court has now added to our workload,” Jumisih, the deputy head of the Indonesia United Workers’ Confederation, told Al Jazeera.

“The next two years will be very complicated,” Jumisih, who like many Indonesians goes by only one name, said. “People have heard that the law will continue to be used and they have also heard the word ‘unconstitutional,’ which doesn’t make sense. We need to consolidate in the future to stand up for our rights.”

Anis Hidayah, the co-founder of Migrant CARE, a Jakarta-based NGO and one of the plaintiffs in the legal challenge, told Al Jazeera the ruling showed the government “can and will be held accountable”.

“It is an important lesson for the government, that you can’t just force through regulations for your own interests,” Hidayah said. “The law affects practically all sectors of society: women, minorities, fishers, farmers, factory workers, and we were worried that the court would not support the public.”

Hidayah added that the law was not transparent, rushed and had not undergone consultation with a wide range of stakeholders.

Indonesia''s President Joko Widodo reacts to reporters as he departs deliver address ahead of Independence Day at the parliament building in Jakarta
Indonesian President Joko ‘Jokowi’ Widodo has sought to attract foreign investment by cutting red tape
[File: Willy Kurniawan/ Reuters]

The law, which was passed in October 2020, was meant to be a boon for President Joko “Jokowi” Widodo’s administration, promising to entice foreign investors with more flexible labour rules, sleek online systems, easy permit applications and fewer bureaucratic hurdles in a country known for its maddening red tape.

“The jobs creation law was designed as a good middle ground between workers and businesses,” Gaol, the commercial lawyer, said. “There are lots of investors in Southeast Asia and little comparative investment in Indonesia.

“Investors don’t need any one country in particular nowadays,” he added. “We are in competition to see which country can become a business haven in the region, particularly in terms of factories relocating from China, many of which choose to relocate to Vietnam rather than Indonesia.”

In July, the Indonesian Ministry for Investment said investment, both domestic and foreign, from January to June totalled 442.8 trillion Indonesian rupiahs ($30bn).

Total investment increased by 16.2 percent in the second quarter of 2021 compared with the same period last year, to 223 trillion Indonesian rupiahs ($15.4bn), with foreign direct investment rising almost 20 percent.

In a statement on its website, the ministry hailed the legislation for creating “positive sentiments for investors to keep their investments activities in progress”.

Yet despite its supporters, the legislation has been controversial from the start, with thousands of protesters taking to the streets following its passage last year. Unions have long considered the law to be exploitative, contrary to human rights and damaging to the environment.

Jumisih, the union leader, said the legislation exacerbated problems for workers such as wildly flexible contracts that failed to provide job security, inadequate wages and lack of maternity leave.

“The government has insulted workers across Indonesia with this law,” she said.

‘More jobs’

On Monday, the Indonesia United Workers Confederation marched to the presidential palace in Jakarta with other unions in a show of solidarity following the ruling.

“We can’t do this alone, we need to work with other unions,” Jumisih said of plans for the future. “We want everyone to know about the Constitutional Court’s ruling. If the law is unconstitutional, it should no longer be used.”

Gaol said, however, that as the ruling was based on procedural rather than material issues, the law would continue to develop in the future and be implemented by businesses during the two-year revision period.

“In its most basic form, the law is a positive development for Indonesia to expand in the field of business,” he said. “We need investment and we need to create more jobs. People should think about that. We need to see how the law flourishes. Law is dynamic not static. If it were, we would be a dictatorship.”

Gaol said the fact unions were able to mount a legal challenge should be seen as a positive endorsement of the rule of law in Indonesia and a sign the legislation was not deliberately stacked in favour of business interests – an allegation often levelled by workers and unions.

Seeking to assure potential investors, Coordinating Minister For Political, Legal And Security Affairs Mahfud MD has indicated the government will make the necessary revisions as soon as possible.

“It will be faster than two years,” Mahfud said in a statement on Monday. “The Constitutional Court gave two years. We will try to go faster so that it is finished quickly and easily.”

According to Gaol, any delays could be detrimental to Indonesia’s ability to attract investment.

“Naturally investors will be nervous and will most likely take a wait-and-see approach for the next two years,” he said.

“Or they will just take their business elsewhere, which will end up costing Indonesia.”

Source: Al Jazeera