Workers protest in Indonesia: What is the root cause of the problem?


  • Focus
  • Sunday, 18 Oct 2020

University students hold a sign reading 'Refuse Omnibus law' during a protest against the government's labor reforms bill in Jakarta. — Reuters

JAKARTA and several other cities in Indonesia have witnessed massive protests for several days now. Protests that sometimes turned violent, involving thousands of people from various groups, the majority of whom are university students and workers, are expected to continue until next week.

Their anger is over an employment bill (also called Omnibus law) which was introduced by the Indonesian government in the House of Representatives in early 2020 and was passed earlier this month.

The bill seeks to attract investment from within and outside the country by repealing some regulations that are seen as complicating the operations of business organisations.

The most controversial aspect is the abolition of regulations that protect workers' rights as well as those that protect the environment. An example is the abolition of minimum wage rules as well as regulations that protect employees from being fired by employers.

In addition, regulations that require business organisations to perform an Environmental Impact Analysis before commencing with a project are also relaxed.

Of course, these are all done because of the pressure from industry players and investors who are facing an increasingly challenging business environment.

The level of competition in almost all sectors is intensifying and forcing business organisations to increase their productivity and competitiveness. This means that operating costs must be reduced, especially payroll costs.

This is what makes the workers and students angry because they feel that the Indonesian government is more concerned with the interests of business owners over the interest of workers and the common people.

The issue discussed above is not a new issue. In fact, it has happened before in many other countries before, especially in the west.

For example, in 2006, thousands of students and workers protested violently against the French government under Prime Minister Dominique de Villepin who had proposed a law that would make it easier for business organisations to lay off workers in order to reduce operating costs.

This is because French business organisations were facing fierce competition from abroad, especially from Eastern European countries such as Poland and Hungary where operating costs are lower and labour laws are more flexible allowing business organisations to easily lay off workers when the economy slows down and demand for their products declines.

It should be noted here that eventually the demands of the protesters were ignored, and the French government went on to pass and implement the new law.

What needs to be realised is that the business environment around the world is now facing an atmosphere of extreme or hyper competition.

The main factor contributing to this atmosphere is the existence of many organisations operating on a large scale in almost all business sectors.

Workers and students angry because they feel that the Indonesian government is more concerned with the interests of business owners over the interest of workers and the common people.Workers and students angry because they feel that the Indonesian government is more concerned with the interests of business owners over the interest of workers and the common people.

The current business environment is similar to the atmosphere of intense competition in many sports, which is the cause and effect of the use of steroids by the athletes themselves.

Although the performance of athletes is improved, some negative effects will arise. Among other things, many of them will have heart problems and die early deaths.

Unfortunately, now many athletes have resorted to steroids because that has become a common practice among athletes, and a condition to achieve success especially at the international level.

In the business world, the “steroids” are the financial funds borrowed from the banking sector. Of course, these funds will help organisations operate on a larger scale, with higher levels of innovation as well as stronger marketing capabilities.

But when all organisations use the same strategy, which is to grow by borrowing from the banking sector, the level of competition will be fierce.

The situation is getting worse because money is now mainly in electronic form and no longer in physical form (only 3% of the money supply is in physical form).

This situation makes it easier for the banking sector to create new money, which is then loaned out to the business sector. As a result, the amount of loans to the business sector has increased rapidly and the level of indebtedness of companies keeps increasing.

Eventually almost all business organisations are saddled with huge debts. This is what forces them to find ways to reduce costs as much as possible. Otherwise, they will have to relocate their operations to countries where labour and environmental laws are more relaxed.

The Indonesian government is aware of this possibility and therefore had to agree to their wishes and suggestions for the Omnibus law to be passed.

In fact, business organisations are also victims of the financial system that squeezes them with debt burden as well as creating a very challenging business environment.

To ensure that they can survive and be financially healthy, they in turn must squeeze their employees and engage in processes that threaten the environment.

The people and the workers feel that the situation is unfair to them and are understandably angry at the government which is perceived to be conspiring with business organisations that are oppressing them.

The people do not realise that the cause of the situation that oppresses them is in fact not the Indonesian government alone but also the banking sector that is putting pressure on the business organisations.

In fact, Indonesian society itself is also at fault for allowing the banking sector to grow rapidly over the last few decades. As a result, all parties are in a state of stress and misery, especially the working class.

Unfortunately, based on what had happened in France in 2006 as well as in some other countries, it is very likely that their efforts will be in vain and the Indonesian government will continue to implement this law.

This is because the government has no other alternative to ensure that investment inflows will increase and the Indonesian economy will continue to grow in the future, for the `survival 'of the government itself.

According to reports, the Indonesian Ulema Council (MUI), has also decided to support the students and workers in opposing the Indonesian government in this issue.

MUI, being very knowledgeable on Islamic matters should realise that the cause of the problem is the failure of the Indonesian community in general to restrict the development of the debt-for-profit industry which is contrary to Islamic teachings.

Therefore, in addition to voicing opposition to the new law, MUI should focus on efforts to educate the Indonesian community about the dangers of the debt-for-profit (or Riba) industry as a long-term solution.

MUI also needs to increase its educational efforts to change the basic values of Indonesian society so as not to focus solely on material progress and economic development. Such materialistic values are the main factor in the development of the Riba industry in Indonesia, especially in recent decades.

Failure to identify the root cause of the problem will mean that the problem will not be solved.

What can change the situation in the long run is a greater awareness of the threats from the development of the debt-for-profit industry, What can change the situation in the long run is a greater awareness of the threats from the development of the debt-for-profit industry,

Although this law will ensure that investments will increase and Indonesia's economy will grow, especially when the Covid-19 pandemic ends, it will be followed by an increase in stress and misery among ordinary people, as is happening in other countries, including in Malaysia.

Protests and demonstrations against the government will not change this sad situation. In fact, it is very likely that they will end in a few weeks due to fatigue among the protesters themselves.

What can change the situation in the long run is a change in the basic values of the Indonesian society to create a less materialistic society, and also a greater awareness of the threats from the development of the debt-for-profit industry, and making sure it does not continue to oppress the society there.

Prof Mohd Nazari Ismail is from the Faculty of Business and Accounting, Universiti Malaya. The views expressed here are solely the writer’s own.

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