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Migrant workers needed to fill critical skill gaps in Indonesia

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A cleaning worker walks outside Indonesia's constitutional court in Jakarta, Indonesia, 24 May 2019 (Photo: Reuters/Willy Kurniawan)

In Brief

In August 2022, there were 104,230 foreign workers in Indonesia. But foreign participation in Indonesia’s labour market is frequently susceptible to nationalist backlash. Such a reaction could be seen at a May Day rally in 2018 organised by the militant Indonesian Trade Union Confederation, which lent its political support to presidential candidate Prabowo Subianto, who went on to garner almost 45 per cent of the popular vote.


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In his speech, Prabowo said: ‘There are no people in the world that want to open their doors to foreigners [in the way that we do] … The United States wants to make a wall to keep them out. In Australia, people who try to enter are discharged to remote islands. In Malaysia, our own illegal migrant workers are whipped’.

Later that year the winning presidential candidate, incumbent Joko Widodo, was seemingly pressured into responding to false reports that his policy changes had enabled over 10 million foreign workers from China to compete with locals for jobs.

The number of Chinese workers has indeed risen in line with Chinese investment. But this wildly high estimate has more to do with racism and fear of communism. Indonesia has one of the lowest rates of foreign participation in its labour market in Southeast Asia — a rate of 0.7 per cent in 2020 compared to 13 per cent in Malaysia and 35 per cent in Singapore.

There has still been criticism on the grounds that the government should do more to prevent competition for employment in Indonesia, where the underemployment and unemployment rates are high and the average wage is low.

This concern has been expressed repeatedly in relation to the ASEAN Economic Community, which was established on 31 December 2015 and aims to create a regional production base in Southeast Asia. A popular concern in Indonesia was that the ASEAN Economic Community would facilitate free movement of workers from other ASEAN countries to Indonesia.

But the ASEAN Economic Community only encourages ASEAN states to mutually recognise certifications and qualifications for eight groups of professionals, so that workers can practise their trade in another ASEAN country. No ASEAN country provides these workers with a special work permit, residence visa or access to their national industrial relations systems.

While the Indonesian government has designed and implemented its foreign labour hiring scheme in response to popular concerns about foreign participation in the national labour market, it has overlooked the imperative to integrate its migration and employment policies, with the goal of protecting the rights of foreign workers.

Foreign workers’ residence permits grant them access to the national industrial relations system when their employers unlawfully terminate their employment contracts or withhold wages. But foreign workers face additional challenges due to their status as migrants.

Poor regulatory integration of Indonesian migration and employment policies means that foreign workers cannot request permission to remain in the country to attend meetings related to their labour dispute after their employment visas have expired.

Even if foreign workers find a way to circumnavigate this restriction, they encounter institutional barriers, including not being provided with an interpreter to enable them to follow and participate in official meetings and hearings.

The foreign spouses of Indonesian citizens face the same obstacles. Like other foreign workers, they need to hold a work permit to be lawfully employed. Employers must pay US$1200 per year for this permit. The situation for foreign spouses who have acquired ‘permanent’ residence, which must be renewed every five years and sponsored by an Indonesian citizen, is similar. They too must hold a work permit, which, according to industrial relations judges, entitles them to the employment protections stipulated in Indonesian law.

Regulatory integration is a matter of equality — if migration and employment policy regimes were integrated, this would give Indonesian and foreign workers the same level of access to the national industrial relations system. The Indonesian government would also be in a stronger position to demand the same minimum standards in countries where Indonesian migrant workers are known to experience labour abuse, such as in neighbouring Malaysia.

There is also an economic development imperative for Indonesia. Poor regulatory integration is known to cause reputational damage. This could undermine the Indonesian government’s objective of attracting a greater number of foreign workers to fill skill gaps as part of its 2020–2024 development plan.

In 2019, Indonesia joined the ranks of countries in the high human development category. That success was due in part to the fact that the government had boosted investment in its education system. Even so, the country still suffers from a serious shortage of skilled workers, partly due to a lack of capacity to provide skills training, but also because skilled workers migrate to other, more desirable destinations.

Indonesia’s quest to join the ‘global race for talent’ could be hampered by knowledge of the institutional discrimination that foreign workers face in Indonesia. In order to compensate for a loss of access to much-needed skilled foreign labour, the Indonesian government would need to substantially improve the country’s capacity to develop its domestic talent.

Wayne Palmer is Senior Research Fellow at Bielefeld University. He is also Adjunct Research Fellow in Indonesian Studies at Monash University.

Nicola Piper is Professor of International Migration at Queen Mary University of London.

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