JAKARTA (REUTERS) – The Indonesian government plans to hand over a revised labour law Bill to Parliament by early January as it seeks to boost employment in South-east Asia’s biggest economy, Finance Minister Sri Mulyani Indrawati said on Tuesday (Nov 26).
The Bill would try to ease the restrictive rules used under the 2003 Labour Law to recruit or lay off employees, Dr Sri Mulyani said at an economic forum.
Revising the politically sensitive labour law is top of the list that foreign investors hope President Joko Widodo will tackle in his second term in office, alongside improving education.
The existing labour law includes some of the most generous severance pay rules in the world that investors have cited as a hindrance to formally hire staff.
“The existing labour market really (is) not creating easy job creation for new entrants,” Dr Sri Mulyani said.
Every year, a significant number of new people join a labour force that currently has around 110 million people, but rules now give “a huge advantage for those who are already employed”, the minister said.
The Bill would aim to create the “same opportunity” for everyone in the labour market to get a job, while companies would also be incentivised to upgrade labour skills, she said.
Trade unions took to the streets to protest after Mr Joko announced his intention to review labour rules, with revision plans being rejected during a series of student-led rallies since September.
Dr Sri Mulyani admitted that revising the law was among the most sensitive subjects the government was working on, but said it would try to provide an “even-handed approach” to appease both business and labour unions.
The changes to the labour law would be part of the so-called “omnibus laws” on job creation, which covers 11 diverse areas, such as regulatory simplification, rules on economic zones as well as research and development, Dr Sri Mulyani said.
Government officials have used the term “omnibus laws” to refer to legislation that pulls together diverse and unrelated areas to speed up improving the investment climate.
Dr Sri Mulyani said a separate “omnibus laws” on taxation issues, including a planned corporate tax cut, will be proposed to Parliament next month.