Indonesia Tries to Calm Investors Amid Confusion Over Court Ruling on Jobs Law

Indonesian President Joko “Jokowi” Widodo reassured entrepreneurs on Monday that their investments were safe after the Constitutional Court last week ordered that a controversial law seen as pro-business be revised within two years or scrapped.

The court said the legislation would stay in force pending amendments. A failure to modify the law by increasing public participation in framing it and revising changes made post its passage would result in it being declared “permanently unconstitutional,” the court warned.

“All the provisions and substance of the Jobs Creation Law remain fully in force and no single article has been annulled or declared null and void,” Jokowi said in a statement.

“I can assure businesspeople and both foreign and domestic investors that investments that have been made, are being made and those being processed are safe and protected.”

On Nov. 25, a nine-judge panel at the Constitutional Court ruled in favor of a petition filed by labor unions and declared that the process of devising the Jobs Creation Law had violated the constitution.

“The formation of the Jobs Creation Law was not based on standard procedure and method,” the court said, citing a lack of public engagement in deliberations about the bill. Additionally, changes were made to the bill after parliament passed it, the court said.

Student groups and labor unions greeted the bill’s passage in October 2020 with street protests that were violent at times.

Mohammad Mahfud MD, the coordinating minister for political, legal and security affairs, said the government would work fast to revise the law.

“The public should not worry, and the government understands that this is only a matter of procedure that needs to be corrected,” he told reporters on Monday.

A day after the ruling, Law and Human Rights Minister Yasonna Laoly said the government was optimistic that it could complete amendments required by the court in under two years.

The so-called omnibus law introduced sweeping changes to 79 pieces of existing legislation, including on labor, taxation and investment.

Labor unions said it cut protections for low-income workers, allowed employers to pay lower wages and fire workers more easily, as well as helped businesses hire short-term contract workers without benefits.

Green activists said the legislation could undermine conservation efforts because of more relaxed environmental impact analysis requirements from businesses.

‘Political considerations’

Mahfud MD, meanwhile, noted that in addition to allowing the legislation to remain in force pending amendments, the court also rejected the petitioners’ request for a review of the law’s content. That is, the court only ruled on the constitutionality of the procedure used to draft and pass the law, not its substance.

But that is what is confusing about the Constitutional Court’s ruling, according to Denny Indrayana, a lecturer in constitutional law at Gadjah Mada University in Yogyakarta.

“To avoid ambiguity, the Constitutional Court should have just struck down the jobs creation law,” Denny said in a statement.

“It cannot allow an unconstitutional law to remain in force under the pretext of demanding improvements.”

Timboel Siregar, secretary general of the All-Indonesian Workers’ Unions, agreed that the court should have scrapped the law. He demanded the government cancel newly announced provincial minimum wages for next year because they were decided using the Jobs Creation Law.

“The most appropriate thing is to postpone the [new] minimum wages until there is a further agreement with the unions,” Timboel told BenarNews.

Labor unions have threatened to mobilize two million workers to go on strike Dec. 6-8 to protest the minimum wages revision, which with an increase of only 1 percent, are lower than those demanded by unions. Minimum wages vary by province.

Said Iqbal, chairman of the newly-established Labor Party and president of the Confederation of Indonesian Trade Unions (KSPI), said the government needed to revert to the old law to decide minimum wages.

“We ask for the new provincial minimum wages to be revoked and declared void by the governors,” Said told reporters on Saturday.

“We are asking for an increase of at least 5 percent.”

An official at the Indonesian Chamber of Commerce and Industry (Kadin), Sarman Simanjorang, said the Constitutional Court’s ruling only affects administrative matters of law-making.

“All regulations derived from the law are in the interests of the business world, and remain in effect, so the business and investment climate remains favorable,” Sarman told BenarNews.

After the law was passed last year, Jokowi said there would be no change to wage structures under the legislation. He also denied claims that the law would allow employers to fire employers arbitrarily, and said that companies would still be required to conduct environmental impact studies for their projects.

Bivitri Susanti, an expert on constitutional law at the Center for Legal and Policy Studies (PSHK), said that the Constitutional Court’s decision was politically motivated and appeared intended to satisfy both sides in the argument.

“We can see how the Constitutional Court’s decisions always carry political considerations, not just legal,” Bivitri told BenarNews.

“These attempts to reach a middle ground have only caused confusion.”

Nevertheless, Bivitri said the ruling had a silver lining.

She said: “Bad practices must not be legitimized.”