Recent decision by Indonesia’s Constitutional Court to partially uphold the judicial review of labor regulations within the Job Creation Law is a significant step toward fostering a stable and sustainable business climate.
According to Muhammad Anwar, an economist from the Institute for Demographic and Poverty Studies (IDEAS), this move not only supports micro, small, and medium enterprises (MSMEs) but also provides stronger protections for labor rights, offering legal certainty for workers and ensuring that they are not at the mercy of regulations that favor capital interests.
Streamlining Policies for Better Investment Climate
Indonesia’s Minister of Investment and Head of the Investment Coordinating Board, Rosan Roeslani, highlighted the importance of foreign investment in driving economic growth. Speaking at the Indonesian Chamber of Commerce Reception Dinner, he emphasized the need for substantial foreign direct investment (FDI) to meet President Prabowo Subianto’s ambitious target of 8% economic growth.
To attract such investments, the government has enacted the Job Creation Law, which drastically reduces the number of restricted industries for foreign investment from hundreds to just six sectors. This move, according to Roslan, simplifies regulations and fosters a more favorable environment for future investment.
Job Creation Law and Investment Licensing
The Job Creation Law also simplifies the investment licensing process across 11 clusters, including “Ease of Doing Business” and “Enhancing the Investment Ecosystem.” By consolidating 79 separate laws into one through the Omnibus Law, Indonesia aims to create a more efficient and transparent business environment.
Bahlil Lahadalia, former Chairman of the Indonesian Young Entrepreneurs Association (HIPMI), explained that the law addresses the need for certainty, speed, simplicity, and transparency in the licensing process.
The introduction of the Online Single Submission (OSS) system, managed by the central One-Stop Integrated Service, further streamlines the process, reducing overlap between central and regional authorities and enhancing Indonesia’s economic competitiveness.
Transparent Regulations Build Investor Confidence
The Job Creation Law’s establishment of a sovereign wealth fund and strengthened labor protections are crucial in creating a favorable environment for investments. Clear and transparent labor regulations, as Anwar noted, are vital in boosting investor confidence.
The new legal framework under the Employment Law focuses on the actual needs in the field, supporting both workers and businesses by guaranteeing legal certainty, particularly regarding labor protections. Improved worker protections contribute to a more stable environment for long-term investments, enhancing productivity and supporting economic growth.
This foundation is essential for sustainable investment, ensuring that workers feel secure and their rights are respected, which, in turn, supports long-term prosperity.
Overall, Indonesia’s Job Creation Law bridges the interests of labor, investors, and businesses. It simplifies the investment process, reduces regulatory burdens, ensures protections for workers, and promotes sustainable development. By uniting these interests, the law creates a robust and inclusive economic environment that benefits all stakeholders.
Source: Bisnis.com, Tempo.com, Liputan6.com, oss.go.id, Komdigi.go.id
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