ASEAN Regulatory Brief: Changes to Indonesian Labor Law, and Changes in the Philippines’ Hospitality Industry

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In this edition of ASEAN Regulatory Brief, ASEAN Briefing covers amendments to an unpopular labor law in Indonesia, and the fight against competition with the upstart Airbnb by established hoteliers.

Indonesia: Government amends labor laws affecting foreign workers

The government amended labor laws introduced in July in a bid to boost foreign investment in the country. The move was welcomed by several foreign companies and business associations including the American Chamber of Commerce, who stated that the original legislation went against the government’s efforts to attract foreign investment. The labor laws introduced by the Ministry of Manpower (MoM) required company executives to get work permits to travel to Indonesia even if they were attending a meeting just for a day. It also required non-resident board members and directors of companies operating in Indonesia to have work permits even if they were not immediately travelling to the country. Another law that foreign companies opposed is a requirement to hire 10 locals for every foreign worker.

Ministry officials had earlier announced that the laws were needed to protect the local labor market from unskilled workers and ensure that foreign employees pass on skills and training to locals. There are about 68,700 foreign workers out of a total 129 million workforce according to the ministry. While these laws have been scrapped, temporary work permits are still needed for foreign workers on short-term activities and consulting assignments which are more than a month. The amended labor laws come as a relief to foreign companies, but highlight the unpredictable and inconsistent regulatory work environment which has been a complaint for foreign businesses with operations in the country.

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Philippines: Hotel industry calls for regulation of Airbnb

The hotel industry has called for regulatory laws for non-hotel accommodations booked through online booking websites such as Airbnb. Airbnb known as the ‘Uber’ for rental places for budget travelers has over 1,500,000 listings in 34,000 cities and 190 countries. The Airbnb philippines website lists more than 300 vacation rentals all over the country including Metro Manila, Cebu, Balabag, and Taguig. Reports indicate that Airbnb Inc, expects business to grow by 300 percent by the end of 2015.

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The hotel industry raised concerns of unfair competitions from businesses such as Airbnb during the Mindanao Regional Meeting of the Tourist Congress Philippines in October. Officials have stated that the issue has been referred to the Department of Tourism (DoT); however there are currently no policies to regulate Airbnb. The hostel industry has argued that several other countries including Canada require all Airbnb establishments to pay taxes just as regular hotels. While there are no regulations currently in place, just like Uber, the government is likely to regularize and come with regulations for businesses such as Airbnb in the near term.


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