Page 196 - e-KLIPING KETENAGAKERJAAN 7 OKTOBER 2020

The omnibus law in a single stroke amends 79 laws and eliminates thousands of regulations
inimical to business and investment. But it will take several months more to prepare all the
technical regulations needed to implement the new law.

It is most imperative that the government now focuses its resources on completing all
implementing regulations and disseminating them publicly, notably to local administrations, the
business community and trade unions.

It is difficult to understand why the trade unions remain obsessed with opposing the labor
provisions in the new omnibus law, because they essentially maintain the labor rights protected
in the 2003 Labor Law. Moreover, only less than 30 percent of the estimated 131 million labor
force work in the formal sector which is governed by the labor regulations. The other 70 percent
are still trapped in the informal sector, thereby ineligible for the labor protection as regulated in
the law.

The labor-intensive industries would remain unattractive to investors if the labor rules were not
amended to boost the competitiveness of Indonesian labor against our Southeast Asian
neighbors.

In a country not known for its worker productivity, the too-rigid labor regulations made it virtually
impossible to terminate a permanent employee. This turned away countless potential investors
and encouraged employers to avoid new hires while resorting to rolling contracts to outsource
much of their extra work.

The old, inflexible labor rules were certainly a great disadvantage to employers, because
companies today face a changing economic landscape that have varying impacts on different
business sectors.

The amended provisions also will offer more flexibility in hiring contract and outsourced workers
so companies can adapt to changes as they occur, which is the only certainty in today’s business
climate — notwithstanding the pandemic.

Even without the inflexible labor regulations, our business sector has been suffering from major,
inherent disadvantages in our economy: high logistics costs due to utterly poor infrastructure,
excessive bureaucratic red tape and high interest rates.
We fully support workers’ demand for the compulsory minimum wages to at least meet the basic
cost of living so they can lead decent lives. But we should also accept the basic premise that
economic growth and job creation are in the public and national interests, and that they can be
achieved only if there is industrial peace and equitable distribution of economic gains.

Understandably, the government should be heavily involved in the labor market because a
freewheeling labor market will never favor the workers’ interests, given the unequal status and
often opposing interests of employers and employees.
Labor policies that overly favor workers will stifle new investment and prompt companies to hire
temporary workers. Employers want profits, the unions want better pay and the government
wants a conducive investment climate.

These elements are not part of a zero-sum game, but are interdependent, as companies can
remain profitable only if they take good care of their workers, and the combination of the two
leads to increased competitiveness that attracts investments. Hence, economic growth and job
creation go hand in hand in the common interest.

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