The Omnibus Law on Job Creation: Economic Growth First! – People, Environment and Democracy Later?

Kartika Manurung & Christine Holike*

In October 2019, the Indonesian government began to propagate the so-called omnibus law, which aims to change a number of regulations in existing laws that affect a wide range of issues, from business, environmental impact assessment, labour law, and education to halal certification and regional government powers. Neatly split into the packages of “job creation”, “state capital”, “tax” (already passed in January) and “pharmaceutical”, the “one bill for everything” highlights Jokowi’s ambition to put Indonesia on the map as a global economic player and regional force. Changing 82 existing laws and around 1,194 regulations through the “job creation” bill alone appears like the genie in the bottle that strengthens the economy by increasing competitiveness and creating jobs with one command. The government spokesman, Fadjroel Rachman, expects the bill to contribute 1% to the acceleration of economic growth, taking Indonesia’s economic growth rate up to more than 6% per year. But who will pay the price for these ambitions?

The process

On 20 October 2019, in his first public speech after his inauguration to his second term, Indonesia’s President Joko Widodo put forward the idea of the omnibus law. He made it very clear that Indonesian economic acceleration and employment are the primary goals for his second period of governance. Following the conviction that there are too many national regulations across different legal areas which present obstacles for investors who wish to start businesses in Indonesia, the President stated that he was committed to “simplifying all forms of regulation” that hamper investment. All relevant regulations must thus be streamlined or “harmonised” immediately to make them simple, flexible and responsive for investor’s needs.

On 12 February 2020, the draft job creation law was received by Puan Maharani, head of the DPR (House of Representatives), where the law is now the object of further discussion and could be passed. The process is expected to be completed 100 days from the date it was handed over. However, the bill is encountering resistance from Indonesian citizens. Its drafting appeared to be carried out secretly and very quickly in order to push it through the DPR. Surprisingly, the public could not access the draft before it was put on the National Legislative Plan. The DPR promised to involve more representatives from labour groups in response to several protests by labour movements and civil society groups who were demanding more involvement in the formulation of the draft.


On 24 April, “Jokowi” officially announced the postponement of the decision on the bill’s labour law regulations until the end of the Covid crisis. The statement came after meeting with the leaders of the three major Indonesian trade unions Said Iqbal (KSPI), Andi Gani (KSPSI) and Elly Silaban (KSBSI). They had announced that they would uphold their plan to stage mass protests on 30 April in order to counter the passing of the law unchanged and to address the worsened situation of workers who, in the face of the pandemic, are affected by mass dismissals, often without receiving outstanding wages, or are being forced to continue working in unsafe conditions.

Meanwhile on 27 April, the House of Representatives nevertheless staged a plenary session focusing on expert consultation. Its speaker argued that the House had not received the required official Presidential letter asking the House to halt the deliberation. As of now it seems that the DPR continues to discuss the draft bill. However, contrary to the promise to use virtual meeting spaces to include relevant stakeholders, such as the Civil Society Coalition, there are reports that some of their members were blocked during consultation after expressing opposing views.

Democracy, human rights and the environment at stake

By any standards concerning legislative procedure, the job creation bill does not actually qualify as law as, rather than creating new legal provisions, it merely amends existing laws. In addition, there has been a lack of public transparency with regard to the legislation. The government failed to open the drafting process to relevant stakeholders to deliver input and suggestions on the draft.

In December 2019, Airlangga Hartarto, the Coordinating Minister for Economic Affairs, established a task force as part of the public consultation on the omnibus law. Influential business players and representatives of conglomerates were invited. They constituted the dominant parties among the 127 task force members involved in drafting the law. In the same vein, KADIN (Indonesian Chamber of Commerce), which traditionally rejects increases in the minimum wage, was given the authority to review the omnibus law concept by providing input into the inventory of investment problems.

Labour movements, democracy and human rights activists, as well as environmentalists have criticised the stealth with which the law was put forward as well as the lack of public participation in the creation of the law. Such an approach is also contrary to Indonesia’s human rights obligations. Article 25 of the International Covenant on Civil and Political Rights, which Indonesia signed in 2006, obliges the Indonesian government to guarantee the right of citizens to participate in decision-making, including policy-making, and to conduct legislative procedures with public participation. For the Executive-Director of Amnesty International Indonesia, Usman Hamid, the process of composing the bill contradicts the basic principles of human rights both in Indonesia and in the international community.

With Article 170 of the draft law giving authority to the government to change any existing law which is considered to be an impediment to the policies of job creation strategies, the threat to democracy is imminent. Moreover, the law could potentially lever out decentralisation as it aims to centralise all licensing matters in Jakarta and weaken the position of regional authorities. In practice, the plan is to transfer the authority of the local government to decide over land allocation to the central government and to re-centralise the management of the electricity supply to state-owned enterprises. This can be considered to be a truncation of the regional autonomy policy which is set out by Law No. 22/1999 concerning the autonomy of regional administrations. Such a recentralisation leads to a reversal of the strengthening of the regions that was laboriously fought for during the early stages of the democratisation process. Not only to environmentalists and indigenous representatives, moves like this appear like a return to the times in which a select group of oligarchs loyal to the government, together with the military and the political elite, bled out virtually all regions outside of Java by channeling natural resources and revenues to Jakarta.

Precarious work and environmental destruction

The controversy over the job creation bill from the labour perspective is due to the fact that it would amend Law No. 13/2003 concerning labour, some of the main clauses of which have been used to protect labour rights in Indonesia. A number of the new regulations are considered to be disadvantageous to workers, affecting occupational safety, social services, and income. Some relevant provisions for instance include changing the wage system to an hourly payment system, which will create changes in rules regarding minimum wages. Others are laid out to increase overtime hours and to increase the maximum working days to 6 days a week. It is also planned to exempt companies from the obligation to pay for maternity leave.

From the environmental perspective, the bill also devalues existing environmental protection and management standards. Since the introduction of Article 23 of Law 32/2009 on environmental protection and management, all business operations causing impacts on the natural landscape, social-cultural life or conservation, as well as cultural heritage, would require an Environmental Impact Analysis (AMDAL). According to the bill, this standard would be restricted to businesses that “have important effects on the environment, society, economy and culture”, and which businesses those will be will be determined by an as yet unspecified government regulation. Furthermore, amendment to Article 26 of this law would ultimately limit the capacity of affected communities to appeal on the basis of AMDAL. Environmental impact assessments by independent experts would also be abolished. These interventions pose a threat not only to natural resources but also to indigenous populations. The international standard and legal framework for environmental impact assessments, which Indonesia also follows, guarantees the principle of free, prior informed consent (FPIC) in the protection and promotion of the rights of indigenous peoples. The amendments lead to its de facto abolition.

The bus rolls in the shadow of the Covid 19 crisis

Since mid-February 2020, Indonesian trade unions and social movements have held several protests in various major Indonesian cities such as Jakarta, Surabaya, Yogyakarta and Medan. The unions called for a nationwide strike to happen on 23 March 2020, which was expected to be joined by an estimated 50,000 workers. However, the strike did not take place because the House of Representatives (DPR) cancelled its meeting to discuss the draft law, which was scheduled for the same day.

Against the background of far-reaching restrictions on assembly meetings due to the Covid-19 crisis, the DPR surprisingly held a plenary session on 14 April 2020 to discuss the draft bill. As Jakarta pursues a policy of large-scale social restrictions (PSBB), which limits the number of people who can gather in a public space, trade unions and other civil society alliances have been unable to express their opposition to the draft law through an organised mass protest.

Although Jokowi has recently announced that the decision on the labour provisions of the draft law will be postponed until the end of the Covid crisis, it remains unclear whether the parliament will vote on the remaining parts in June as planned. As the draft has already entered the consultation process, which according to the law may not exceed 100 days, one wonders what legally authorises the President to postpone deliberation and who will ultimately determine when the crisis is over. The behaviour of the House of Representatives described at the beginning of this article, namely to continue hearings despite the exclusion of critical voices, could indicate if not necessarily a sham manoeuvre, then at least the dominating influence of its proponents.

One of the fundamental questions is also whether the omnibus law would actually advance Indonesian economic development and promote investment. In an expert survey conducted by the World Economic Forum (WEF) 2017-2018, international business managers identified 16 factors they deemed obstacles to the investment climate in Indonesia. Corruption was cited as the main obstacle, followed by bureaucratic inefficiency, access to finance, inadequate infrastructure and political instability and government instability. One may not fully accept the assessment of international business representatives, after all, they often follow an agenda similar to that represented by the omnibus law. However, it is no secret that Indonesia has a serious corruption problem – especially one of political corruption – in which the higher echelons of politics, business and the military, as well as the bureaucracy, participate on a large scale. Recently however, in September 2019, the Jokowi government clipped the wings of the anti-corruption commission – which had been created in the course of democratisation in 2003 and was operating successfully – to such an extent that its loss of importance is foreseeable. The question thus remains as to how the omnibus law, which is supposed to open up the investment climate, could be able to jump the corruption hurdle.

Ultimately, the “Omnibus Law for the Creation of Jobs” was largely shaped by influential economic players. It appears to serve their (short-term?) market and power interests to a large extent. There is no getting rid of the suspicion that Jakarta has reversed the gears of history and has once again invited the oligarchs to a banquet at the green table.

 *with assistance from Novidia

Tags: , , , , , , ,