24 January 2020 (closed)
USD/IDR (13,632) +6.00 +0.04%
EUR/IDR (15,067) -43.78 -0.29%
Jakarta Composite Index (6,244.11) -5.10 -0.08%
Indonesian President Joko Widodo wants to drop the regulation that states a foreign worker needs to learn Indonesian. Today (21/08), Cabinet Secretary Pramono Anung said President Widodo (often called Jokowi) requested Hanif Dhakiri, Indonesian Minister of Manpower and Transmigration, to revise this regulation (that was issued in 2013). According to Jokowi the language proficiency requirement would make Indonesia’s investment climate less competitive and could therefore hamper much-needed investment.
The language proficiency rule for foreigners working in Indonesia was designed in 2013 with the implementation of the ASEAN Economic Community (AEC) in mind. The AEC, which will start at the end of the year, is to turn the ASEAN region into one single market and production base and this also implies a free flow of skilled labor. Considering that Indonesia is an attractive market for foreign businesses, the AEC is therefore expected to lead to the influx of foreign companies and foreign workers. Indonesian authorities are not too keen on seeing foreign workers entering Indonesia as it tries to curtail the nation’s unemployment rate. Job opportunities generated through foreign direct investment should therefore primarily go to locals. According to the latest data from Statistics Indonesia (BPS), the country’s unemployment rate stood at 5.8 percent (February 2015), which translates to around 7.5 million unemployed people in absolute terms (Indonesia’s total population numbers over 250 million).
As such, the Bahasa Indonesia language proficiency test was designed in a bid to somewhat curb the flow of foreign workers into Indonesia. The Indonesian government recently also issued regulation number 16 of 2015 on the Procedures to Employ Expatriates in order to curb the number of foreign workers after implementation of the AEC. For example, the ratio foreigner-local employee was raised from 1 (foreigner): 3 (local employees) to 1:10, meaning that for each foreign worker a company needs to add ten Indonesian workers.
The free movement of labor is not part of the AEC. Free trade in Services is. There is a difference.