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Indonesia’s omnibus law dilemma: Favorable or misfortune?

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Image source: industriall-union.org

The wave of protests from community elements, workers, students, academics and activists against the legalization of the ‘Omnibus Law on Job Creation Bill’, is entering its peak on October 8, 2020. The omnibus law demonstration was not only held in Jakarta, but also in major cities across the country.

The masses across the region expressed disappointment by calling for a ‘motion of no confidence’ against the central government and the Indonesian Parliement (DPR) for betraying the people by issuing regulations that were more beneficial to entrepreneurs and investors, but not for the people and the working class.

Crowds from various regions expressed their disbelief in the parliament and Joko Widodo’s administration for the legalization of the Omnibus Law. Demonstrators rallied since the ratification of the Omnibus Law on Job Creation Bill, Monday (5/10), and stated that they demanded the state to revoke the regulation which was considered to be tormenting to the people.

The question is, who benefits and loses? Why is it that the Job Creation Bill (according to the government) which is projected for the development of the people’s livelihood will result in massive protest?

Pros

The bill aims to loosen up Indonesia’s complex business, labor, and environmental legal network in an effort to attract investment and boost the economy. In an interview, President Joko Widodo told the BBC the law was about opening up the economy to more foreign investment.

“We want to simplify the [process] licensing and bureaucracy, we want speed, so we need legal harmonization to create fast services, fast policy making, so that Indonesia can respond more quickly to any changes in the world,” he said. Indonesia’s economy shrank 5.3% in the second quarter of this year. Meanwhile, Vietnam, which reported economic growth during April-June 2020, amounted to 0.36%.

The bill makes significant changes to Indonesia’s labor regulations. This removes the sectoral minimum wage, supporting the minimum set by regional governors. This will reduce severance pay to a maximum of 19 months of salary, depending on how long the employee has been in service. Previously, the maximum salary was 32 months.

However, the new government fund will provide an additional six months of wages for the new unemployed. The allowed overtime will be added a maximum of four hours in one day and 18 hours a week. Businesses will only be required to give workers one day off a week, not two.

Outsourcing restrictions have also been reduced, as have restrictions on the jobs in which expats can work. The law also relaxed environmental standards, only forcing businesses to submit environmental impact assessments if their project was deemed high risk.

The bill is expected to create nearly three million jobs for young people who have started looking for work and the six million people unemployed due to the Covid-19 pandemic. Although Indonesia’s ranking in the World Bank’s Ease of Doing Business index has improved significantly in the past five years, Indonesia’s ranking has remained stagnant at 73 in 2019, lagging behind Vietnam, which is ranked 70th.

Cons

The Omnibus Law was drafted and discussed in a hurry, the drafts were “kept secret”, and forced to be included in the national legislation priority program (Prolegnas) and the DPR plenary session. The authorities seems unable to stop the stench of capital interest facilitated by the Omnibus Law. The pretext of simplifying, streamlining, and eliminating overlapping regulations and addressing investment constraints is a reflection of the government’s compliance with free market power or neoliberalism.

Since the Keynesian policy was unable to overcome the economic impasse. Neoliberalism was introduced as an alternative, answered the challenges of the recession of the 1980s, and until now it has become the dominant political economy idea and movement. There are several proposals to be put forward, such as securing state intervention on the market, protecting and guaranteeing private property rights, national security and defense, enforcement of contract-based laws in order to allow the market to take advantage of accumulation.

This view clearly exposes a paradox. On the one hand, the promise of prosperity is inversely related to neoliberal policies that facilitate the institutional framework for the sake of accumulation. The reality of the widening gap between “rich” and “poor” is the logical implication of the savage of accumulation which allows the concentration of capital to occur in the hands of a few. Regardless of the market as the most effective and efficient entity, the market has no commitment to socio-ecological problems.

The plan for setting hourly wages and minimum wages leaves at least two problems. First, workers have the potential to receive a reduction in wages if they work not according to the time set by the company. Demands for producing commodities in a certain amount during a certain period of time are squeezed by the disappearance of several leave permits which have the potential to decrease labor productivity. Second, the minimum wage in the global sweep regulation does not reach workers in the informal sector. This issue reflects the way in which the authorities negate the interest of the working class.

This Omnibus Law systematically weakens the working class. There is no room for workers to raise their bargaining position. This is exacerbated by the presence of workers, who have not yet been absorbed by the industry, lining up for work when the industry needs them. This dire condition was ignored by the government at the expense of the interests of the working class through cheap wages and long working hours, solely to satisfy the appetites of investors and oligarchs.

Currently there are still 1% of Indonesians who control 50% of national assets or if it is increased, there are still 10% of Indonesians who control 70% of the national wealth so that the remaining 30% of assets are captured by 90% of the Indonesian people.The history of human society attests to this. Freedom without equality for those who love and equality without freedom is impossible, as well as a justification for slavery.

The promises of welfare echoed by neoliberalism have almost never been realized. The opposite is true: the worsening inequality between “rich” and “poor”. Since the neoliberalism experiment was first carried out by the Soeharto’s administration during the New Order regime and continued in the Reformation Order, welfare has only been a “neoliberal utopia.”

What should be underlined is that the Omnibus Law is also destroying the collective solidarity of the working class. As reflected in the attitude of the working class in responding to this policy, there are parties who firmly reject it and some are still open to compromises. Although the fragmentation of the working class is nothing new, the existence of the Omnibus Law has only made it worse.

The government’s ambition to smooth out investments is at the expense of humans and the environment. The layered oppression experienced by the working class is exacerbated by allowing corporations to exploit nature in such a way only for profit in the hope that national economic growth statistics can improve. The utopia of the free market which is believed by those who benefit materially as well as those whose existence is legitimized by this understanding has forced them to become slaves who always serve the power of the free market that promises profit.

And lastly, the Omnibus Law is an irrationality of capital justice that politicians and state officials try to rationalize in such a way that the abnormal situation (oppression) experienced by workers as a result of the policy is neutralized into something normal.

Raihan Ronodipuro was awarded the Chinese MOFCOM Scholarship and earned a Master of Law in International Relations from the School of International and Public Affairs at Jilin University in China. He serves as an Associate Researcher in the Department of Politics and Security at the Center for Indonesia-China Studies (CICS).

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Southeast Asia

Muslim piety in Southeast Asia mirrors increased religious traditionalism in the Middle East

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In a mirror image of recent polling in the Middle East, a just-published survey of Muslims in Southeast Asia suggests Islam’s central role in people’s daily lives and choices.

The survey was published days after former Indonesian minister of social affairs Habib Salim Segaf Al-Jufri was named secretary general of the Qatar-based International Union of Muslim Scholars (IUMS), founded by controversial Islamic scholar Yusuf al-Qaradawi, one of the world’s foremost Muslim theologians associated with the Muslim Brotherhood. Mr. Al-Qaradawi died on Monday in Doha at the age of 96.

Intriguingly, Mr. Al-Jufri, a senior member of Indonesia’s Brotherhood-affiliated Prosperous Justice Party (PKS), also represents the World Assembly of Muslim Youth (WAMY) in East and Southeast Asia, a Saudi government-funded organization initially established in the 1970s to promote Saudi religious ultra-conservatism globally. Since 2016, the group has been redirected to promote Crown Prince Mohammed Bin Salman as a reformer pushing the kingdom towards a more moderate and tolerant interpretation of Islam.

The publication also came as Nahdlatul Ulama, the world’s largest Muslim civil society organisation in the world’s most populous Muslim-majority country and democracy, forged an unlikely alliance with Saudi Arabia’s Muslim World League.

Like WAMY, the League, once a prime vehicle globally propagating Wahhabism, has become Mr. Bin Salman’s primary vehicle in his effort to garner religious soft power and propagate an autocratic version of Islam that is socially liberal, but that demands absolute obedience to the ruler.

Neither event will have influenced the responses of the 1,000 people covered in the survey of Southeast Asian Muslims. But the events put the poll into a context in which Muslim organisations, whether state-controlled or not, are pushing different concepts of a moderate interpretation of Islam and making political Islam’s perceived legitimacy or illegitimacy one of their key drivers.

Mr. Bin Salman, who pushes social reform against the background of a history of promoting ultra-conservative dominance, may be more concerned about the growing importance of traditional Islam than governments in Southeast Asia, whose history and encounter with Islam are often influenced by local culture, tradition, and mysticism.

Even so, political and business leaders in Southeast Asia, home to 276.5 million Muslims who account for 40 per cent of the region’s population, are likely to take note of the Southeast Asian survey as well as recent polling in the Middle East amid perceptions of greater religious conservatism in their countries that are not only aligned with trends in other parts of the Muslim world but also in major non-Muslim faith groups across the globe.

Malaysia and Indonesia, together with Saudi Arabia and the United Arab Emirates, emerged as the top four halal markets on this year’s Global Islamic Economy Indicator compiled by US-based research and consultancy company DigiStandard.

The Indicator considers various sectors, including halal food, Islamic finance, Muslim-friendly travel, recreation, and media. Malaysia maintained its long-standing top position because of a 20 per cent jump in investment in Shariah-compliant funds and the success of its Islamic cartoons for children.

Ninety-one per cent of the respondents of the Southeast Asian survey conducted by two New York-based consultancies, Wunderman Thompson Intelligence and the Muslim Intel Lab established last year by YMLY&R, described a strong relationship with Allah as very important.

Lagging in importance was wealth, which was of significance to only 34 per cent of those surveyed, followed by 28 percent who cared about their passions and 12 percent to whom fame was a concern.

Eighty-four per cent of the respondents in Malaysia and Indonesia said they prayed five times daily. Thirty-three per cent described themselves as more observant than their parents, 45 per cent said they were just as observant as their parents, and 21 per cent stated that they were less observant.

Religion’s increasing importance stroked with the polling in the Middle East where 41 per cent of 3,400 young Arabs in 17 Arab countries aged 18 to 24 said religion was the most important element of their identity, with nationality, family and/or tribe, Arab heritage, and gender lagging far behind. That is 7 per cent more than those surveyed a year earlier.

The Middle Eastern polls further showed that a majority disagreed with the notion that “we should listen to those among us who are trying to interpret Islam in a more moderate, tolerant, and modern way.”

In many ways, the Southeast Asian survey was more granular because it focused on Muslim consumer behaviour.

The poll put into perspective a decision in March by the Indonesian ministry of religious affairs headed by a prominent Nahdlatul Ulama figure to deprive the once-powerful Indonesian Ulema (Islamic scholars) Council of its de facto monopoly on halal certification by opening the sector to competition.

Halal certificates are big business. The Halal Product Assistance Agency issues the certificates based on a fatwa issued by the Council to companies in food, fashion, education, pharmaceuticals, cosmetics, tourism, media, travel, medical, health, art, culture, and finance.

The overwhelming majority of respondents in the Southeast Asia survey, 91 per cent, said whether a product was halal was very important in their decision to purchase. At the same time, 83 percent identified halal with certification by an Islamic body.

Sixty-one percent factor halal into their banking and investment preferences. Seventy-seven percent said the availability of halal facilities was important in their choice of travel destinations. Eighty-five per cent wanted a metaverse that caters specifically to Muslims, and 53 percent used prayer and Qur’an apps.

All in all, comparing the polls suggests that religion plays an increased role in people’s lives in the Muslim world beyond the Middle East.

In Southeast Asia, the survey underlines the importance of efforts by groups like Nahdlatul Ulama to promote a humanitarian interpretation of Islam that is tolerant, pluralistic, and respectful of human and minority rights.

In the Middle East, the surveys challenge autocratic leaders whose concept of moderate Islam is social reform needed to cater to youth aspirations, enable economic diversification, and provide religious legitimation of their absolute power as part of a strategy for regime survival.

As a result, Southeast Asia, rather than the Middle East, could emerge as the cradle of religious reform in the Muslim world.

Nahdlatul Ulama appears to believe it can achieve that if it convinces the likes of the Muslim World League that reform has to be genuine and holistic rather than self-serving. That’s an if with a capital I in a strategy that is as risky as it is bold.

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The so-called Indonesia-South Korea Special Strategic Partnership

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President Jokowi in a meeting with South Korean President Yoon Suk-yeol, at Yongsan Presidential Office, Seoul, Thursday (07/28) afternoon. (Photo: Bureau of Press, Media, and Information of Presidential Secretariat/Laily Rachev) Read more: https://setkab.go.id/en/president-jokowi-meets-south-korean-president-to-boost-cooperation/

In several attempts, people can find out there are repetition phrases that informally appeared from 5 years ago until now related to South Korea-Indonesia relations, it is the label “special strategic partnership”. Initially it happened during South Korea’s former president, Moon Jae-in, official trip to Indonesia in 2017. Cited from Indonesia’s Foreign Ministry Press Briefing in Jakarta Globe site, the visit means to upgrade the bilateral relations level from strategic partnership into special strategic partnership, especially to accelerate industrialization in Indonesia. 

The labels seem relevant as both governments agreed to continuing the discussion related to Indonesia-South Korea Comprehensive Economic Partnership Agreement (IK-CEPA) in 2018 that had been postponed in 2014 due to the shifting government. The agreement is likely to eliminate 95,54% post tariffs on the Korea side, while Indonesia does 92,06% post tariffs. Indonesia would get bigger market access in several sectors such as fisheries, agriculture, and other national industrial products, while South Korea is more accessible in several service sectors such as online game, construction, and healthcare service. 

The agreement is barely ratified by Indonesia’s parliament at the end of August 2022 and the Parliament is also warning the executive branch to pay attention to keep the national interest & to be aware of the competitiveness in liberal market post-agreement since many countries are facing the post-pandemic recovery complex recently.  

Besides the mentioned agreement, Indonesia and South Korea have several finished and ongoing strategic projects. Start with an ongoing joint-program on Boramae jet fighters in which Indonesia shares 20% and South Korea holds the rest of production cost. The program aims to reach mass production in 2027 and could have a competitive feature to US-made F-15, but likely less than the F-35 model. Besides that, South Korea is also involved in an Indonesia-owned submarine project for the 209/1400 type which is named KRI – Nagapasa 403 and KRI – Ardadedali 404, both respectively arrived in Indonesia in 2017 and 2018.

If the means of upgrading the relationship level to be a special one by holding the IK-CEPA, Boramae project, and other projects related to strategic necessity of the countries, then it seems Indonesia really has been treated as South Korea’s “Special Strategic Partner”. The mentioned projects aren’t covering all the government-to-government or business-to-business projects that can be classified to assert the upgraded relationship level such as Hyundai-LG investment on electric vehicle ecosystem in Karawang, West Java.

Is Indonesia the only one “Special Partner”?

To answer the question’s sub-headline, we may look back at the trade balance between South Korea and its several bilateral partners in southeast Asia, including Singapore, Vietnam, and Indonesia, for around 5 years. South Korea & Singapore had established the free trade agreement then put into force in 2006. The Korea’s import trade value from Singapore in 2006 is around $5,886,680,000 then in 2007 was risen around 16,5%, but 2017-2021 reports Singapore’s deficit trade with South Korea around $3,457,218,000 with Korea’s major deficit from importing parts of nuclear machinery & mechanical appliances. 

Meanwhile, South Korea & Vietnam had signed similar agreements and were activated in 2015. Vietnam’s export values to Korea moderately rose from $9,804,831,000 in 2016 to $12,495,154,000 in 2017. However, as the same interval trade reports as Singapore, Vietnam is also facing deficit trade around $32,762,826,000. Meanwhile, South Korea itself faces big deficits in several of Vietnam’s competitive commodities such as articles of apparels & clothing, furniture, and fisheries commodities.

Now, let’s take a look at South Korea-Indonesia trade activity. As Indonesia just barely ratified the IK-CEPA in August 2022, it’s hard to set the significance of the IK-CEPA effect on both countries’ trade. However, Indonesia-South Korea trade performance benefited Indonesia for the interval 2017-2021 with Korea Custom Service noting the surplus for Indonesia is equivalent to $8,121,555,000. South Korea’s major deficits come from Indonesia’s prominent commodities such as mineral fuels & oils and other metal & mining products that are heavily demanded by Korea’s domestic industry. 

Worth noting that even though the 3 mentioned countries may have their own bilateral economic agreement with South Korea, the countries are members of ASEAN and ASEAN itself has particular economic agreement under ASEAN-South Korea Free Trade Agreement (AK-FTA) which also benefited the 3 countries. In conclusion, the countries have so much leverage during trade with South Korea under several agreements. 

Indonesia is relatively one of key partners for South Korea since both countries share a significant number of demands in particular industry commodities. However, South Korea’s trade volume with Indonesia isn’t as big as with Vietnam which shares 4.4% of Korea’s imports and 9.04% of Korea’s exports in 2020. Indonesia only shares 1.62% of Korea’s imports and 1.23% of Korea’s exports as OEC displayed. In conclusion, Indonesia moderately played a significant role for South Korea and recently both countries really upgraded their ties by holding many mutual projects, but we can’t be blind that Vietnam was way forward in captivating South Korea’s market as it reflected by the bilateral trade volume and one of the earlier Asian countries to established a bilateral trade agreement with South Korea. 

Regardless of the “Special Strategic Partnership” label, Indonesia should seize the moment once the IK-CEPA applied in both countries by pushing diverse products to be exported, not merely relying on mineral & mining commodities. The government and Indonesia’s corporation must swiftly be aware of the Korean domestic market demands and its opportunities to make sure the IK-CEPA wouldn’t become boomerang which will hurt Indonesia’s domestic market since the market becomes more liberal & South Korea has a relative competitive advantage above Indonesia and its product highly demanded by huge number of Indonesians. The government can support the micro, small, and medium enterprises (MSMEs) to grasp the moment to export their product not only by providing them credit assistance but also information & legality aspects to fulfilled the necessity of exporters which somehow people aren’t aware of and facing complexity administration.

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Southeast Asia

U.S. Incentives for Maintaining a Presence in South East Asia, and the Nature of that Presence

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Authors: Aqeel Ahmad Gichki & Adeel Ahmed*

The US is the most prominent extra-regional actor in the Southeast Asian area. Because of its strategic position and developing economy, the region is a center of attraction all over the world. As a result, the US has significant security and economic interests in maintaining its presence in the region. Furthermore, being the sole hegemonic power, the US has several hurdles to overcome in maintaining its hegemonic status. The threat that used to come from the USSR or Russia has now switched to China, and the ASEAN nations, as its neighbors, have inevitably turned into a hot tub between the two great powers’ competition. China has a tremendous motivation to preserve its dominance in the region and keep it free of any other player’s influence.

Due to the geostrategic importance of the location, China desires a strong presence in both the political and economic affairs of the region’s countries, since any instability or influence from an extra-regional actor in the region has a direct impact on China’s security and economy. For example, the Strait of Malacca, which is one of the world’s busiest maritime lanes, is a critical area of interest for both China and the US. Governing the strait or having influence over the internal affairs of Indonesia, Malaysia, and Singapore, which are adjacent to this chokepoint, will allow the specific player to exert possible control over a major portion of the world’s marine traffic.

The most compelling reason for the US to remain in the region is to contain China, as seen by its recent efforts in the region. The US considers China to be an existential danger, and American-based academics such as John Joseph Mearsheimer has already proclaimed “rising China” to be a menace to both the US and the whole region. To retain its influence in the area, the US withdrew all of its soldiers from Afghanistan and moved its emphasis to Southeast Asia. The founding of QUAD and AUKUS to confront China were bold and decisive measures.

Moreover, an assertive and hegemonic China may endanger freedom of passage in the South China Sea to pressure the US, Japan, or ASEAN states into supporting Chinese political demands. When confronted with this threat, the US may seek backing from individual ASEAN governments to carry out a sea-lane defense, or one of the ASEAN states may request U.S. assistance. While US naval troops would be the primary responders in such a scenario.

The US is attempting to preserve its presence in the region by forming regional security alliances and maintaining excellent ties with its allies, most notably Japan, which is an economic superpower with significant influence in the Asia-Pacific region due to its geostrategic location. In any emergency in the Asia-Pacific, most notably in the case of the Taiwan conflict, Japan will be beneficial to the USA by providing her with airbases.

In addition, Southeast Asian countries rely significantly on the US for defense weaponry because of China’s assertive posture in the South China Sea, which includes territorial claims and the construction of artificial islands. The US has developed significant military bases in Japan and maintains a significant military presence in Indonesia. Most significantly, securing the Malacca Strait by establishing military bases in strategic locations such as Indonesia and Singapore will force China to reconsider adopting coercive action in the region.

North Korea’s troubles provide another impetus for the US to retain its presence in the region. North Korea’s most serious concern is its ambition to acquire transportable nuclear weapons, which would endanger US interests throughout East Asia, perhaps pose an existential threat to Japan, and create a massive proliferation problem.

As Southeast Asia’s ten nations move clearly but unevenly into the global economy and in accordance with the information and technology needs of the twenty-first century, the US has a unique opportunity to assist influence the growth of this region and the lives of its people. The 10 nations there is home to about 525 million people and gross national output of more than $700 billion. They are the fifth-largest trading partner of the US. There is also the unchangeable truth of the region’s strategic geography: it stands astride some of the world’s most important sea-lanes, notably the Malacca Strait, through which roughly half of the world’s trade flows. This includes Persian Gulf oil, which powers the economies of Japan and Korea in Northeast Asia. Equally, if the US withdraws from or misreads the area, it risks causing harm to emerging democracies around the region that rely on US assistance. Consequently, the US has strong incentives to sustain its presence in Southeast Asia.

To conclude, Asia Pacific has historically been significant for the US, strategically, politically, and in terms of economic relations with the ASEAN nations. The US considered the broader Asia Pacific region as its area of influence and maintained security alliances, as a hegemon, for regional stability. Bilateral security alliances and multilateral strategic dialogues are prominent in the depiction of active US presence in the region. Moreover, US military/Naval bases in Singapore and Indonesia demonstrate the US as regional police. The US diversified its presence in the region with economic dynamism and public diplomacy as soft power instruments. Protection and promotion of democratic norms in the region and offering economic opportunities to emerging regional economies remained instrumental in US’s regional policy. To contain an emerging China, the subsequent US administrations indicated a commitment to a comprehensive grand strategy for the Asia Pacific with diversified tools to ensure an active US presence in the region. The US has expanded its alliances with other regional actors like India and Vietnam to prevent the expansion of resurgent China in the Indo-Pacific/Asia Pacific.

 * Adeel Ahmed is a student of International Relations from Quaid-I-Azam University Islamabad. 

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