JAKARTA — Indonesian President Joko Widodo has signaled a softening of his government’s increasingly stringent visa requirements for foreigners working in the country in an apparent response to strong concerns raised by overseas businesses.
Widodo told the cabinet on Aug. 20 that the government would drop earlier plans to require foreign workers to learn the Indonesian language and apply for temporary stay permits of up to a year, known by their local acronym, Kitas.
The president’s statement, relayed by Cabinet Secretary Pramono Agung, came six weeks after the Ministry of Manpower and Transmigration introduced new rules requiring all companies to hire 10 Indonesians for every foreign employee. It also set rigid conditions on visa requirements for foreign workers visiting the country, even for one-off business meetings.
Despite his latest directive to overturn the earlier proposals for language and Kitas visa requirements, Widodo did not comment on whether the ministry’s new hiring rules would be abolished or whether another visa or permit system would be introduced to replace Kitas.
How the presidential directive will be implemented also remains unclear after Widodo recently complained about ministries and officials ignoring various government policy changes.
Source of confusion
According to lawyers in Jakarta, the new hiring rules are causing confusion among foreign-owned businesses, which are already encountering growing difficulty arranging work permits and visas for expatriate workers.
Ulf Backlund, chairman of the European Business Chamber of Commerce in Indonesia, known as EuroCham, said while the chamber is “upbeat on the economic prospects of Indonesia,” the hiring restrictions could be “counterproductive in the long run.”
“EuroCham has noted that there have been increased difficulties in obtaining work permits for expatriates recently,” Backlund told the Nikkei Asian Review, adding that the hiring ration rules would result in “barring the most experienced expatriates from providing their expertise for the benefit of Indonesia.”
The government wants to create employment for the 2 million Indonesians entering the job market each year, a likely reason for the strict local hiring ratio. But the number of foreign workers in the country of 250 million people is small, at slightly less than 65,000, according to government statistics for 2014.
Widodo’s move on the foreign-worker issue comes after a recent cabinet reshuffle, including the appointment of new economy and trade ministers, aimed at reviving economic growth, which has slowed to under 5%, well short of the official target of 7%.
Although the Indonesian rupiah is at a 17-year low, which is already making imports more expensive, the government in July decided to impose higher import duties on a range of consumer goods, including clothing, cars, alcohol, tea and coffee. The proposed restrictions on foreign workers have increased concerns that the country is becoming more protectionist as it seeks to boost domestic production.
But the government needs foreign investment to support a mammoth infrastructure expansion program, which could cost nearly $500 billion. The stricter hiring rules may hinder the recruitment of foreign professionals for the projects.
One of the new cabinet appointees, Pramono Agung, said Widodo wants to streamline the thicket of conflicting rules and regulations on the national and regional level that discourage investors.
Facing a “contradiction”
The new economy minister, Darmin Nasution, a former central bank governor, said he will seek to boost investment, while Thomas Lembong, the new trade minister, said Indonesia’s recent drift toward protectionism is not good for the economy.
“History over the last 100 years around the world proves pretty clearly that protectionist policies backfire in the end,” Lembong, a Harvard-educated former private equity specialist, told Bloomberg TV.
But many government ministers, particularly those from the Indonesian Democratic Party of Struggle (PDI-P), the main government party, appear to support increased protectionism.
“Many of the cabinet are strongly nationalistic, as is the PDI-P, so there is a contradiction between needing foreign investment for infrastructure on the one hand, and implementing nationalist economic policy on the other,” said Yohanes Sulaiman, a lecturer at Indonesia National Defense University.Show