Labour Reforms in the Middle of the Pandemic: Comparative Analysis of Veto Players in Public Policy Making in Indonesia and India

In the middle of the Covid-19 pandemic, when many faced economic difficulties, the governments of Indonesia and India decided to pass the labour reform laws. However, rather than strengthening the workers’ rights, the rules are aimed to attract investment and business; thus, they simplified the existing labour regulations. This essay will compare the policy-making process in both countries, focusing primarily on the role of veto players in passing the bills. This essay decided to choose labour market policy in Indonesia and India due to their similar characteristics (developing countries with large populations and strong economic potential). This paper argues that the veto players model can analyse the labour reforms by pointing out the situations that make change more likely. This article will start by explaining the labour reform laws briefly. It then analyses veto players’ position and roles in allowing the change. At last, this paper will show that the veto players model can explain decision-making better than cleavage theory.

The House of Representatives of Indonesia (DPR) passed the Job Creation Bill into Law in October 2020. The law, known as Omnibus Law, amended more than 70 existing regulations covering labour, business, environmental sector, etc. The government said that the law is crucial to invite investment and generate jobs, especially during economic contraction due to Covid-19 (Samawati and Sari, 2020). The law gained broad support from the business sectors; however, it faced resistance from labour unions, students, and environmentalists. There are two main critiques of the law. First, the law diminishes labours’ rights. For example, Omnibus Law allows the practice of outsourcing in every type of work compared to a limited variety of work before (Amindoni, 2020). It also makes it possible for labours to get a lower minimum wage (Amindoni, 2020). Second, the law deregulates environmental protection. For example, Omnibus Law weakens the environmental impact assessment (Amdal) necessary to obtain a business permit. The new law only approves public participation for those directly impacted, obstructing the role of environmental NGOs in the assessment process (Jong, 2020).

Meanwhile, Lok Sabha, the lower house of the Indian parliament, passed three codes regarding labour in September 2020, following one code passed earlier in 2019. These four codes — Wage Code, Industrial Relations Code (IRC), Social Security Code, and Occupational Safety, Health and Working Conditions Code — consolidated more than 40 existing legislation (Magazine, 2020). The laws were welcomed by the business community but faced protests from labour unions. The most controversial code was the IRC which contains provisions that were seen as giving too much flexibility to employers (Magazine, 2020). IRC raises the threshold limit for issuing standing orders from 100 to 300 workers. The new limitation also applies to the need for government permission to terminate employees. This provision means that more labours will face uncertainty regarding their rights (Magazine, 2020). The other contentious issue is the right to strike. Workers that plan to protest must give a 60-day notice and be prohibited from striking during a tribunal and 60 days after the conclusion of such tribunal (Magazine, 2020).

In both countries, the new legislations are significant reforms from the previous laws. Indonesian central labour regulation, Employment Law, was passed in 2003. Since 2006, there have been several attempts to revise the law (Toro and Utomo, 2006). Meanwhile, Indian existing labour laws were dated back to the early independence period, and the call for revision started in early 2000 (Solanki et al. 2020). In both cases, the reforms managed to be implemented in 2020. How could this happen? This paper used the veto players theory to compare Indonesia and India labour reforms. This theory was introduced by Tsebelis (1995, 2000, 2002), cited in Knill and Tosun (2020) and essentially believes that institutions related to the decision-making process and the involved actors’ preferences determine the outcome of policy-making. According to Tsebelis (2002), cited in Knill and Tosun (2020, p. 111), veto players are ‘individual or collective actors whose engagement is necessary for a change of the status quo’. Tsebelis explained that there are two types of vote players: institutional (executive and legislative institution) and partisan (political parties in the parliament). Furthermore, three crucial aspects need to be analysed (Knill and Tosun, 2020): the number of veto players, the ideological distance between veto players, and cohesiveness within the veto players.

First, this paper will examine how many vote players were involved in the policymaking process of Indonesian Omnibus Law. Indonesia adopts a presidential system that elects the president as both the head of state and government. Indonesia also has a DPR that serves as legislative power. A bill could be initiated both by the president and the DPR. The initiator prepares the legislation draft, and then both discuss the draft. Indonesia also guarantees public participation in the policymaking mandated under Law Number 12/2011 (Khozen, Saptono, and Ningsih, 2021). If the majority of DPR approves the draft, it becomes law.​​ Then, the new law is sent to the president for their signature. In addition, to put in context, the coalition government secured majority seats in DPR during the Omnibus Law. Therefore, the institutional veto players at that moment are the executive and coalition parties. Second, the ideological differences between the nine parties in DPR are nonexistent. Parties in Indonesia do not base on the right or left-wing ideology but usually are perceived as nationalist or religious. The ideological difference is highly concentrated on cultural or religious issues. On the contrary, there is a similar stance regarding economic policies across the parties (Aspinall et al. 2018). However, the Omnibus Law also faced rejection from opposition parties. While there are three opposition parties, only two rejected the bill and one approved with additional notes. However, it is more likely that the opposition was against the bill not because of ideological differences but because they wanted to tackle any government policies and be seen as pro-people. Third, there was no dissenting opinion from the members of government coalition parties.

The overwhelming support for Omnibus Law from the coalition parties was seen as accommodating the industries’ preferences. The government created a task force to discuss the bill, consisting of members of the Chamber of Commerce and Industry, business associations representatives, business communities, regional government representatives, and academics. There were no representatives from the labour unions, indigenous people, marginalised groups, and other impacted groups (Komnas HAM, 2020). Ambardi (2009), cited in Noor (2014), mentioned how politics in Indonesia has transformed into cartel politics that adopt a pragmatic approach to maintain their survival. Therefore, they will do anything to stay in power. Analysts have noted how the President was doing a favour for the political and business elite that had helped him and government coalition parties to win the election (Mahy, 2021). Many actors involved in the Omnibus Law policymaking, be it from the government or the parliament, have their own companies or are affiliated with companies (Indonesian Corruption Watch, 2020). Considering that the critical institutional veto players are executives who initiated the bill and coalition parties with strong cohesiveness to support business’ preferences, labour reforms managed to take place.

In the meantime, India is led by a president and a prime minister, each acting as head of state and head of government. Because of its bicameral system, India has two separate chambers. The lower house name is Lok Sabha, while the upper house is called Rajya Sabha. According to the Lok Sabha Secretariat (n.d.), a bill could be initiated by the ministry or the member of parliament. A bill will go through three readings in each House. After the majority in one House approves the bill, it will undergo the same process in the other House. Last, after both Houses approve the bill, they will send it to the President for his consent (Lok Sabha Secretariat, n.d.). The government and the parliament must consult the public, especially the standing committee related to the bill. In addition, to put in context, the Bharatiya Janata Party (BJP), the prime minister’s party, secured the majority of seats in Lok Sabha during the policymaking of labour codes. Its coalition parties, National Democratic Alliance (NDA), also account for the majority of the Rajya Sabha (Deka, 2020). Hence, the institutional veto players here are the executive and coalition parties in the lower house. Furthermore, how are the ideological differences in the parliament? BJP is famously known as the right-wing populism party in India with a robust Hindu nationalism view. It combines its populist narratives with neo-liberal economic policies (McDonnell and Cabrera, 2018). However, shared ideology is not a requirement within the government coalition parties (Iwanek, 2020). As Iwanek explained, the focus of each party is mainly on winning the election or in other words, these parties adopt a pragmatic approach. Meanwhile, there are ideological differences compared to opposition parties, for instance, Congress Party, which has a centrist view and the Left parties. Regarding the cohesiveness of the coalition, the NDA is an alliance that is not too solid (Iwanek, 2020); however, it has a united position towards the labour codes. Meanwhile, Rowchowdhury and Sarkar (2021) noted that the opposition coalition is fragmented and lacks essential strategies.

Similar to Indonesia, the labour codes are seen as serving corporations’ demands. During the drafting processes and discussions in the parliament, there were no meaningful consultations with the public, especially labour unions (Sundar, 2021). Bharatiya Mazdoor Sangh, a trade union, claimed that the government and parliament did not integrate the recommendations from trade unions and Standing Committee on Labour into the code (Rajalakshmi, 2020). Lerche (2015) noted that PM Modi has tried to create a business-friendly India since his first term of office. Therefore, considering that the essential institutional veto players are the executive, which initiated the bills and coalition parties in the lower house with a solid stance to support business’ preferences — to limit state intervention in the market, labour reforms successfully enacted.

To assess the effectiveness of veto players theory, this paper will also analyse the labour reforms briefly through one of the structuralism theories — the cleavage approach. According to Knill and Tosun (2020), the cleavage approach focuses on socio-economic problems that generate a binary opinion. Thus, policymaking will be a battleground between conflicting ideas to implement what they think is the best solution. Therefore, the cleavage approach is crucial to explain how political parties address specific issues and strive for their preferences in policymaking. The type of social cleavage in accordance with Omnibus Law is workers-employers (Lipset and Rokkan (1967), cited in Knill and Tosun, 2020). On the one hand, workers want their rights to be fulfilled. On the other hand, employers usually want to maximise profit. However, as this paper has demonstrated, Indonesia has no political parties based on workers-employers cleavage because they fight for similar economic policies. In the case of India, the suitable cleavage regarding four Indian labour codes is the workers-employers cleavage. On the one hand, there is an NDA led by BJP that supports employers and corporations. On the other hand, some parties have centrist positions (Congress Parties) and left parties promoting labour rights. Thus, in line with the cleavage approach, political parties in India tend to encourage policy supporting one side of the cleavage. The BJP government was the initiator of the reforms, and opposition parties rejected the reforms.

In conclusion, the veto players theory could explain the success of policy change in Indonesia and India. First, the number of institutional veto players in both countries was low; thus, the change is more likely. Second, there was no ideological difference in the Indonesian parliament, so they agreed quickly on the matter. In the Indian lower house, there were some ideological distances between right and left parties; however, it became irrelevant because most government coalition parties put forward electoral interests and the small number of centre-left parties. Third, the government coalition parties in both countries were very cohesive to support the business’ preferences at the expense of workers. Meanwhile, the cleavage theory can only explain the intentions of political parties and how they fight based on the issues. Thus, the veto players theory could illustrate more effectively the decision-making in the policy process.

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Sayyid AM

Sayyid AM

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International Relations Student at Universitas Gadjah Mada