Indonesia aims to submit revised labor law bill by January: finance minister

JAKARTA (Reuters) - The Indonesian government plans to hand over a revised labor law bill to the parliament by early-January as it seeks to boost employment in Southeast Asia’s biggest economy, Finance Minister Sri Mulyani Indrawati said on Tuesday.

FILE PHOTO: Indonesian Finance Minister Sri Mulyani Indrawati during an interview with Reuters ahead of the G20 summit in Hamburg, Germany, July 6, 2017. REUTERS/Wolfgang Rattay

The bill would try to ease the restrictive rules used under the 2003 Labour Law to recruit or lay off employees, Indrawati said at an economic forum.

Revising the politically sensitive labor 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 labor 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 labor market really (is) not creating easy job creation for new entrants,” Indrawati said.

Every year, a significant number of new people join a labor 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 labor market to get a job, while companies would also be incentivized to upgrade labor skills, she said.

Trade unions took to the streets to protest after Widodo announced his intention to review labor rules, with revision plans being rejected during a series of student-led rallies since September.

Indrawati 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 labor unions.

The changes to the labor 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, Indrawati 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.

Indrawati said a separate “omnibus laws” on taxation issues, including a planned corporate tax cut, will be proposed to the parliament next month.

Reporting by Gayatri Suroyo; Editing by Ed Davies and Sherry Jacob-Phillips