Investment plan

Jokowi’s employment and investment plan deemed unconstitutional


Now is not the time for the government, which hoped to use its G20 presidency to present investment opportunities in Southeast Asia’s largest economy and the world’s fourth most populous country.

Indonesia will officially assume the presidency of the G20 on Wednesday, December 1. Over the next 12 months, there will be meetings across the country leading up to the G20 summit in Bali next October.

Jokowi said foreign investment would be a key focus when he began his second term in October 2019. Shortly before, the World Bank warned Indonesia was losing out to regional rivals in the bidding war for attract foreign companies.

The job creation law aimed to boost employment and make Indonesia an easier place to do business by removing some of the more onerous demands placed on employers for hiring labor. and termination of employment. He also removed the red tape surrounding business licenses and addressed the huge problem of overlapping regulations that could delay projects for years.

It also laid the legal foundation for a sovereign investment fund, the Indonesian Investment Fund, to attract foreign contributions that can be invested in new infrastructure, alongside government cash or equity.

The bill, also known as the omnibus law, incorporated a massive amount of changes into a single law in an attempt to speed reform. An analysis by PwC Indonesia found that the bill sought to amend 76 laws and eliminate 4,451 central government regulations and 15,965 regional government regulations.

Since the bill was passed by parliament in October last year, it appeared to have the desired effect. This month, Morgan Stanley said Indonesia is “a story of absolute and relative growth for 2022”.

The job creation bill had “significantly liberalized the number of business segments open to foreign investment” and the country was well positioned to take advantage of the trend towards diversification of business and manufacturing risks, the contributors wrote. Morgan Stanley Asia Pacific Insight research.

The court’s decision to grant the government a two-year reprieve suggests the legislation will survive, albeit in amended form, but there could be other negative consequences, according to Bill Sullivan, senior foreign affairs attorney at Christian Teo. & Partners in Jakarta.

“In my 25 years in Indonesia, I have never encountered a situation where a law or regulation is declared unconstitutional, but it can still remain in force for up to two more years while the government finds a way. to rectify the problem, ”said Sullivan said.

Given that the Jokowi government made this law “the centerpiece of its strategy to encourage more foreign investment in Indonesia, it would clearly have been a catastrophic loss of credibility” if it had been overturned immediately, he said. declared.

“Unfortunately, however, by adopting the approach it has taken, the Constitutional Court has seriously undermined its own credibility. In the long run, this could turn out to be an even bigger problem for Indonesia. Mr. Sullivan said.