Job Creation Omnibus Law

One of the hottest topics in the Indonesian news these days is the recently signed Jobs Creation Law, commonly referred to as the “Omnibus Law”.

Setting the Stage – How did we get here?

On 20 October 2019, at his inauguration ceremony President Joko Widodo outlined his vision for Indonesia 2045 (the country’s centennial anniversary). He reiterated and highlighted five big initiatives: developing a dynamic and hardworking workforce, industry cooperation and technology, continuing infrastructure development and simplifying regulations by creating two omnibus laws, one on job creation and the other on small business empowerment (these two subsequently were unified into one omnibus law and new features were added, covering a new risk-based assessment business licensing system, various measures for ease of doing business, as well as provisions on investment by Central Government through sovereign wealth fund and the acceleration of certain national strategic projects). 

One of the big complications in the country’s investment environment is excessive regulation, not only at the central government level but also at the regional level. In terms of investment, the ease of doing business must be changed. The President’s vision is for Indonesia to become a more efficient country, a more developed country, towards which he aims to reach below level 55 or even 40 in the ranking. In the government’s view, if the current laws cannot be changed, Indonesia cannot become more efficient for business and investment and there is a danger that Indonesia will get stuck in the middle-income trap in 2030, as it misses out on its demographic-bonus.

In the current state many examples of overlapping regulations can be found, issued by different ministries or other government agencies at the central and regional government level. The Omnibus Law is designed and written to amend 76 existing laws and eliminate 4,451 central government regulations and 15,965 regional government regulations. Most of the content of the Law is intended to stimulate domestic and foreign investment by removing bureaucratic red tape that has long stalled competitiveness. Through the process of conventional law-making it would have taken years and perhaps decades to revise all laws and regulations.

Signing of the Omnibus Law and the Way Forward

The parliament passed the Omnibus bill on Job Creation on 5 October 2020, including the aforementioned last-minute changes to the section relating to worker severance. In the deliberation, the bill received wide support from seven political parties compared to only two that were against it. It has now been signed by the President and has the full force of law from 2 November 2020.

The Omnibus Law consists of 11 clusters, 15 chapters and 186 articles. Clusters covered are:

  1. Relaxation of licensing requirements;
  2. Investment growth;
  3. Employment and Labour;
  4. Ease (in obtaining permits) for empowerment and protection of MSMEs;
  5. Ease of doing business;
  6. Research and innovation;
  7. Government administration;
  8. Imposition of sanctions and penalties;
  9. Land procurement;
  10. Government investment and national strategic projects;
  11. Economic Zones.

How Bizindo Can Help You

Bizindo will be staying current and up to date on all of the various sections of the law and forthcoming regulations and bring it as the value added for our customers, investor and nation wide business climate. Together we can all work to move forward with President Jokowi’s vision of increasing Indonesia’s competitiveness and future growth potential.

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