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Protests in Indonesia: Labor reforms are difficult but late




Difficult choices.

Photographer: Dimas Ardian / Bloomberg

Indonesian President Joko Widodo has taken a big gamble. A key part of the 905-page omnibus law passed last week shears the country’s labor protection wall, making it a victory for employers and investors. In response, tens of thousands of protesters took to the streets. Some have become violent. While few politicians would be bold enough to undertake labor reform with an economy plagued by a pandemic, Jokowi would have to stick to his guns. These changes are badly needed and time is running out.

The legislation reduces the high severance pay owed by employers, while some upcoming regulations could make contract workers more attractive compared to full-time staff. Union leaders and provincial political leaders have urged Jokowi, as the president is known, to repeal or relax parts of the law, which contains akitchen sink other provisions. Yet few countries in Asia, if any, have severance costs as high as Indonesia, or such complicated procedures for calculating severance pay.

Thus, even if the initiatives are not perfect, they mark a step forward. (Investors, for one, responded positively). With a young population, a growing middle class and plenty of natural resources, Indonesia is expected to be an economic star. But the growth wasstuck at about 5% before the pandemic. Now, thanks to Covid-19, gross domestic product will likely contract this year for the first time since the Asian financial crisis.

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