It is in the interests of Indonesia’s bulging generation of young jobseekers for President Joko Widodo to break through the political barriers to winding back the nation’s high cost of hiring and firing. As south-east Asia correspondent Emma Connors reported yesterday, the fight to pass his job creation bill is set to define Mr Joko’s second term. Political allies such as entrepreneur Sandiaga Uno warn that south-east Asia’s biggest economy risks becoming stuck in a low-growth middle-income trap unless it becomes more friendly to global capital and stops discouraging firms from investing in higher value-added jobs. That would prevent Indonesia from reaping the promised demographic dividend of its young population. In turn, that would limit improvements in education and health to lift living standards in the world’s fourth most populous nation.
Joko Widodo needs to boost prospects for Indonesia’s growing young workforce. Bloomberg
Yet Mr Joko has to battle opponents in his own party who see foreign investor-unfriendly labour rules as bastions of Sukarno-era nationalism and autarky. And Indonesia’s unions prefer the false security of rigid job protections over the opportunities for new jobseekers. Australia’s new free trade agreement should help Mr Joko’s ambitions, and it’s in Australia’s interest for him to succeed. The world and Australia would lose if wider nationalist and protectionist impulses lead big emerging market economies such as Indonesia and India to give up the opportunity of sharing in the wealth of the global economy.