A Two-Pronged Crisis: Unraveling the Tangled Web of Layoffs and Domestic Fiscal Pressures

  

A country’s economic policies are, in essence, a reflection of the government’s commitment to the welfare of its people. However, Indonesia’s current macroeconomic dynamics reveal a troubling contradiction. On one hand, the public faces the threat of income loss due to a wave of layoffs that shows no signs of abating across various industrial sectors. On the other hand, the public’s remaining financial leeway is being increasingly squeezed by aggressive fiscal policies aimed at meeting government revenue targets. This phenomenon has sparked a structural debate regarding the effectiveness and long-term impact of a regulatory framework that is perceived as insensitive to the real purchasing power of economically vulnerable groups.

n   Weakening Manufacturing Sector and Rising Layoff Rates

Based on data compiled by the Ministry of Manpower (Kemnaker) and periodic reports from trusted media outlets such as Tempo.co and Detik.com, the number of workers forced to lose their jobs continues to rise significantly. This wave of layoffs is no longer a seasonal phenomenon but rather a structural lagging indicator of economic slowdown. Labor-intensive industrial sectors, such as textiles, apparel, and footwear, have been the hardest hit. Major industrial hubs—from West Java and Banten to Central Java—continue to account for the largest share of national employment statistics.

External factors such as the global economic slowdown and international geopolitical tensions have indeed contributed to the decline in the volume of Indonesia’s manufactured goods exports. However, domestic issues are no less critical. Soaring domestic operating costs, the flood of illegal imported products into the local market, and the failure of business incentives to function optimally have forced many corporate management teams to take extreme efficiency measures. The reduction in overtime hours and the curtailment of employment contracts that occurred several months earlier have now escalated into a wave of open, mass layoffs.

n   Fiscal Pressure Through VAT and Ambivalence in Government  Incentives

Amid these fragile labor market conditions, the government has instead taken bold steps to safeguard the health of the state budget. The phased implementation of value-added tax (VAT) rate increases—including adjustments that have been in effect since the Tax Regulation Harmonization Act (UU HPP) was enacted—places an additional direct burden on end consumers. VAT is regressive; that is, the amount of this tax relative to income takes up a much larger share for low-income and middle-class people than for the wealthy elite.

The government argues that a number of basic necessities, such as rice, eggs, and meat, as well as essential services like education and healthcare, are exempt from VAT to protect low-income communities. Temporary economic stimulus packages—such as VAT subsidies for the affordable housing sector, limited-scale electricity rate discounts, and government-funded income tax (PPh Article 21) incentives—have also been rolled out.

However, a report by an economic analyst on Kompas.com indicates that the effectiveness of this social safety net is still far from adequate. VAT increases in the logistics sector, on unsubsidized fuel, retail goods, and the secondary industry supply chain continue to trigger a domino effect that raises the prices of basic necessities in general, which ultimately erodes the public’s real purchasing power.

n   Systemic Impacts on Household Purchasing Power and Consumption

Household consumption has long been the main driver of Indonesia’s economic growth, contributing more than 50 percent to gross domestic product (GDP). As the middle class—which does not receive cash social assistance from the government but is not wealthy enough to be immune to inflation—is squeezed by fears of layoffs and price spikes caused by taxes, they respond by tightening their spending. The retail sector and micro, small, and medium-sized enterprises (MSMEs) were the first to feel the slump in market demand. This decline in retail sales volume ultimately triggered a vicious cycle: sales fell, factory profitability plummeted, and the possibility of further layoffs reemerged as companies sought to maintain their operations.

n   Fiscal Governance Reform and Crisis Mitigation Strategies

To break this vicious cycle, the government can no longer rely solely on a rigid, one-dimensional approach focused solely on meeting tax revenue targets. Aggressive fiscal policies must be radically balanced with efficiency in government spending and a more equitable expansion of the tax base—such as optimizing a wealth tax on the ultra-wealthy—rather than continuing to expand levies on commodities consumed by the general public. The government-formed Layoff Task Force (Satgas PHK) needs to be equipped with concrete policy instruments capable of alleviating the structural burdens on the business sector. Incentives in the form of reduced corporate income tax rates for labor-intensive industries that commit to avoiding layoffs should be seriously considered.

On the other hand, accountability and transparency in the use of public funds are absolute prerequisites for restoring public trust. The people will not object to paying taxes if they see those funds returned in the form of quality public services, infrastructure that supports the economic mobility of the lower classes, and a responsive social safety net when employment crises strike. Conversely, if the national budget continues to be spent on vanity projects driven by the political interests of the elite and prone to corruption, then the austerity measures forced upon the people will only create a ticking time bomb of social unrest that threatens national stability. *

The Rule of Law: Restoring the Essence of Justice Through the Death Penalty for Corrupt Officials

The death penalty for corrupt officials is a legitimate, just, and crucial instrument of law enforcement to save Indonesia’s future from the economic and social ruin caused by corruption. As an “extraordinary crime,” corruption in Indonesia no longer merely causes financial losses to the state but has also massively violated the social and economic rights of the people. When these corrupt practices are carried out systematically by the elite — including government officials, businesspeople, members of the House of Representatives (DPR) and Regional Representative Councils (DPRD), military personnel, and even law enforcement officials themselves (such as police, judges, prosecutors, lawyers, and court clerks)— the law must no longer be compromising.

The imposition of the death penalty is not merely a manifestation of public outrage, but rather a means of restoring the most fundamental function of the law: to establish the highest form of justice, social order, and an absolute deterrent effect. The urgency of imposing the death penalty becomes increasingly evident when we consider the scale of financial devastation caused by corrupt perpetrators. Based on periodic data from Indonesia Corruption Watch (ICW) reports, the estimated financial losses to the state due to corruption have skyrocketed to staggering levels. While state losses were recorded at Rp28.4 trillion in the previous period (2023), that figure surged sharply by 885.2% to Rp279.9 trillion.

This massive surge is dominated by cases of mega-corruption—one of which is the manipulation of the tin commodity trade within the mining concession (IUP) area of PT Timah Tbk, which alone accounts for losses of Rp271 trillion, or approximately 96.8% of the total national losses. In fact, cumulative prosecution data from law enforcement agencies indicates that the potential risk of state losses has already reached Rp300.86 trillion. The loss of public funds on a scale of hundreds of trillions of rupiah is equivalent to depriving millions of poor people of their rights to free healthcare, adequate education, social security, and equitable access to basic infrastructure.

Legally speaking, Indonesia’s positive law framework has actually provided for the imposition of the death penalty on corruption offenders. Article 2, Paragraph (2) of Law No. 31 of 1999 on the Eradication of Corruption Crimes (Anti-Corruption Law) explicitly states that under “certain circumstances,” the death penalty may be imposed on corruption offenders. The explanatory notes to this article categorize “certain circumstances” as emergency conditions, such as when the nation is in danger, a national natural disaster occurs, there is a recurrence of corruption offenses, or when the nation is experiencing an economic and monetary crisis.

This regulation reaffirms that, from a formal legal standpoint, this punitive measure is valid. Arguments claiming that the death penalty violates the law are, in fact, contradictory, unrealistic, and counterproductive, as this measure stems from the legal system itself and was created to address extraordinary situations. Rejecting the existence of the death penalty within the hierarchy of criminal sanctions could indirectly undermine the authority of the law; it would be as if the law had lost its teeth in the face of those who seek to destroy the nation and the state.

In the global discourse, the imposition of the death penalty is not a step backward for civilization or a form of modern barbarism. The facts show that developed countries with modern judicial systems, such as the United States and Japan, still retain and apply the death penalty within their legal systems. In Asia, the People’s Republic of China (PRC) serves as the most concrete example of how the strict enforcement of the law can transform the landscape of anti-corruption efforts.

(iStockphoto/PsychoBeard) 

Through an aggressive anti-corruption campaign, courts in China have not hesitated to execute high-ranking officials found guilty of accepting bribes or embezzling public funds on a massive scale. As a concrete example, Chinese courts have handed down death sentences to former high-ranking officials, such as Li Jianping for large-scale embezzlement of public funds, and Yang Youlin, who was sentenced to death for accepting a massive bribe worth 2.2 billion yuan—equivalent to Rp5.8 trillion. This uncompromising approach has been empirically proven to drastically reduce corruption rates in China and instill a genuine fear among officials who intend to embezzle public funds.

Although public pressure is very strong, the application of the death penalty in Indonesia continues to face resistance from a number of civil society organizations and non-governmental organizations (NGOs), such as Amnesty International Indonesia, KontraS, ELSAM, and the Network Against the Death Penalty. These groups generally put forward human rights-based arguments, asserting that the right to life is an absolute (non-derogable) right that cannot be revoked by the state under any circumstances. They also frequently voice concerns about the potential for a miscarriage of justice, noting that errors in death penalty convictions are irreversible.

However, this argument in defense of human rights for corrupt officials needs to be reconsidered in a balanced manner. Corruption committed by public officials is, in essence, a grave human rights violation against the right to life of millions of people. Placing a corrupt official’s right to life above the right to life of the suffering public is an irony of justice. The law serves a philosophical function as an instrument of retributive justice as well as a deterrent for the greater good.

If the most feared punitive measure—namely, the loss of life—is removed from the legal system under the pretext of a spurious humanitarian justification, then the law’s effectiveness in curbing extraordinary levels of crime will be weakened. Empirical evidence in Indonesia shows that prison sentences—even life imprisonment and fines—have by no means produced the maximum deterrent effect. Based on the KPK’s analysis of the social costs of corruption, there is an extreme disparity between the value of the embezzled funds and the ability to recover assets for the state. 

For example, ICW points out that, out of the total potential state losses amounting to hundreds of trillions of rupiah, the actual amount recovered through asset recovery or forfeiture is often minimal. This situation allows corrupt officials to rationally calculate their actions: they are willing to risk spending several years in prison because the financial penalties are far smaller than the accumulated wealth they have successfully hidden to enjoy after their release. The deterrent effect of physical punishment in the form of imprisonment is diminished by the possibility of remission or exclusive privileges within prisons.

Conversely, the death penalty cuts across such rational calculations because human life has no material exchange value. Therefore, implementing the death penalty for corrupt officials in Indonesia is no longer merely a political discourse, but an urgent necessity to save the nation and the state from moral and structural collapse. To prevent abuse and ensure justice, its implementation must, of course, be carried out through a judicial process that is extremely rigorous, transparent, objective, and free from political interference.

Law enforcement officials must possess the collective courage to enforce the death penalty provisions already established in the law. When the law is enforced with absolute firmness and without favoritism, the law’s function in creating justice, order, and ridding the state apparatus of a corrupt mentality can be fully realized, leading Indonesia toward a new era that is (more) clean and dignified. ***