Indonesia unions hold protests over planned labor reform

JAKARTA (Reuters) - Several thousand Indonesian workers held a rally on Monday outside parliament to protest against planned changes to labor laws as part of government reforms aimed at creating jobs and boosting investment in Southeast Asia’s biggest economy.

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The so-called “omnibus” bills the government wants parliament to pass aim to replace dozens of overlapping laws seen as obstacles to investment, and to streamline businesses permits and relax labor laws.

With economic growth having been stuck at about 5% for several years, President Joko Widodo has said the new legislation is vital and wants parliament to pass a job creation bill within 100 days of submission.

“This (the law) will be bad for our kids,” said Suwondo, a 41-year-old pharmaceutical worker who attended the peaceful rally alongside other chanting workers.

Current labor laws, passed in 2003, include some of the most generous severance pay rules in the world. Investors have cited them as a hindrance in hiring staff.

The government has pledged to consult unions, and full details of the draft bill have not yet been released though unions have already slammed it as pro-business.

Ellena Ekarahendy, head of the media and creative workers’ union, said ahead of the protests that the changes could increase the risk of mass firings.

Susiwijono Moegiarso, an official at the Coordinating Ministry of Economic Affairs, said on Friday a new social safety net would be put in place for fired workers so they are paid for six months, alongside existing compensation rules.

According to material on the bill released on Friday, the government will require minimum wages to take into account economic conditions of different regions.

The bill will also simplify permit processes covering 15 sectors including manufacturing, agriculture, energy and mining, as well as environmental permits and construction, the material showed.

The government will remove a “negative investment list” that restricts foreign ownership in some areas, though it will continue to set limits in certain industries, an official said.

David Sumual, chief economist at Indonesia’s Bank Central Asia, said passing the omnibus law was “a litmus test” for President Widodo, who is supported by parties controlling about 75 percent of the seats in parliament.

Helmi Arman, an analyst at Citi, said in a note that to ensure a boost to lagging foreign direct investment “there must also be deregulation to ease non-tariff measures such as import restrictions and local-content requirements.”

Muhammad Rusdi of the Confederation of Indonesian Workers’ Union (KSPI) warned at the weekend that he would not rule out the possibility of workers going on strike over the bill.

But Sufmi Dasco Ahmad, deputy speaker of parliament, pledged full consultation once the bill was submitted.

“The bill belongs to workers, business people, and all of us,” he told reporters.

Additional reporting by Tabita Diela; Writing by Stanley Widianto; Editing by Ed Davies and Gerry Doyle