7/3/2020 Draft Bill on Job Creation - Hukumonline.

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Tuesday, January 14, 2020 | Issue Number : 3785

Draft Bill on Job Creation

Employment General Corporate

During his second term of of ce, President Joko Widodo is continuing to focus on the development of the country’s
infrastructure and the simpli cation of Indonesia’s statutory regulations (deregulation) in an effort to encourage
investment and ultimately improve Indonesia’s overall economic condition.[1] Ultimately, this process of deregulation has
culminated in the formulation of a new omnibus law, which is being introduced in order to replace several already
existing laws and consolidate them under a single legal framework.[2] The omnibus law has become one of the most
wide-ranging and closely watched policies of the current administration.

Currently, deliberations of the omnibus law are speci cally focusing on the employment and taxation sector, with other
possible sectors to follow suit in the future. The most recent development in terms of the omnibus law is the issuance of
the Draft Bill on Job Creation (“Draft Bill”) by the government, which currently in the process of being submitted to the
  House of Representatives.[3] Once the Draft Bill comes into force, it will repeal and replace a signi cant number of
provisions which were originally set out under the following statutory regulations:[4]

1. Law No. 13 of 2003 on Employment;

2. Law No. 20 of 2008 on Micro-, Small- and Medium-Scale Enterprises;
3. Law No. 33 of 2014 on Halal Product Guarantees;
4. Law No. 18 of 2012 on Food;
5. Law No. 3 of 2014 on Industry;
6. Law No. 7 of 2014 on Trade;
7. Law No. 20 of 2014 on Standardization and Conformity Assessments;
8. Law No. 16 of 2000 on Second Amendment to Law No. 6 of 1983 on General Taxation Provisions and Procedures;
9. Law No. 10 of 1998 on the Amendment to Law No. 7 of 1992 on Banking;
10. Law No. 40 of 2007 on Limited Liability Companies;
11. Law No. 3 of 1982 on Mandatory Company Registrations;
12. Law No. 10 of 2009 on Tourism;
13. Law No. 1 of 2014 on the Amendment to Regulation No. 27 of 2007 on the Management of Coastal Areas and Small
Islands;
14. Law No. 2 of 2009 on Indonesian Export Financing Institutions;
15. Law No. 1 of 2016 on Guarantees;
16. Law No. 16 of 2oo1 on Foundation jo. Law No. 28 of 2004 on the Amendment to Law No. 16 of 2001 on Foundations ;
17. Law No. 6 of 2011 on Immigration;
18. Law No 13 of 2016 on Patents;
19. Staatsblad No. 226 of 1926 jo. Staatsblad No. 450 of 1940 on the Disruption Law (Hinder Ordonnantie);
20.  The Commercial Code;
21. The Code of Civil Law;
22. Law No. 19 of 2003 on State-Owned Enterprises;
23. Law No. 23  of 2014 on Regional-Government jis. Law No. 2 of 2015 and Law No. 9 of 2015;
24. Law No. 30 of 2014 on Government Administration;
25. Law No. 2 of 2012 on Land Procurement for Public Purposes;
26. Law No. 41 of 2009 on the Protection of Agricultural Land for Sustainable Food;
27. Law No. 22 of 2019 on Sustainable Agricultural Systems; and
28. Law No. 39 of 2009 on Special Economic Zones.

The Draft Bill itself encompasses a total of eight main sectors which are elaborated upon across 553 articles relating to the
creation of job opportunities in Indonesia.[5] However, due to the broad scope of the Draft Bill, this edition of Indonesian
Legal Brief (ILB) will con ne its analysis to the matters elaborated upon in the following table:

Aspect                                         Key Points

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Simpli cation of Business Licensing The simpli cation of business licensing should be undertaken through the
following measures:[6]

1. The implementation of risk-based business licensing is to be conducted

based on the risk level of the relevant business activities, which are to be
assessed by taking the following aspects into consideration:[7]

a. Health;
b. Safety and security;
c. The environment; and
d. The preservation of natural resources;

2. Basic requirements for licensing, which encompass the following factors:

[8]

a. Business location (i.e. in accordance with the Spatial Detailed Plans

[Rencana Detail Tata Ruang - “RDTR”]);[9]
b. Environmental permit-related factors (i.e. Strategic Environmental Studies
[Kajian Lingkungan Hidup Strategis / “KHLS”], Environmental Impact
Analyses [Analisis Mengenai Dampak Lingkungan - “AMDAL”],
Environmental Management Efforts and Environmental Monitoring
Efforts [Upaya Pengelolaaan Lingkungan Hidup dan Upaya
Pemantauan Lingkungan Hidup / “UKL - UPL”], etc.);[10] and
c. Compliance with building standards and worthiness certi cation (i.e. must
be in accordance with RDTR or a Regional Spatial Plan [Rencana Tata
Ruang Wilayah / “RTRW”] of the relevant regency/city).[11]

3. Classi es business licensing into the following categories:[12]

a. Fisheries, maritime, agriculture and forestry;

b. Energy and mineral resources;
c. Industry and trade;
d. Public work, public housing and transportation; and
e. Health, drugs and food. 

Investment Opportunities The Draft Bill opens up all business sectors to investment (unless sectors are
designated as closed to investment or open but with requirements relating to
maximum caps on foreign ownership), for example: [13]

1. Horticulture;
2. Plantation;
3. Cultivation;
4. Industry;
5. Private broadcasting agencies;
6. Foreign post organizers;
7. Commercial airlines;
8. Airport management;
9. Shipping companies;
10. Accredited foreign education institutions;
11. Foreign universities;
12. Foreign construction service companies; and
13.  Commercial conventional and sharia banks. 

However, the following sectors are speci cally closed to investment: [14]

1. Cannabis cultivation;
2. Catching of prohibited species of sh;
3. Coral extraction (pengambilan koral);
4. Gambling or casino businesses;
5. Chemical weapons; and
6. Production of Chlor-Alkali through the mercury process.

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Employment The key features set out under the employment section of the Draft Bill break
down as follows:[15]

1. Any employers that employ foreign workers are required to ful ll the
following prerequisites:

a. Must be in possession of relevant working permits;

b. Must be in possession of foreign worker utilization plans; and
c. Must have knowledge of available positions for foreign workers.[16]

2. Outsourcing is permitted through outsourcing agreements and must

meet the following requirements: [17]

a. Must be undertaken separately from main activities;

b. Must be undertaken through direct or indirect orders;
c. Must be a supporting activity for a company; and
d. Must not inhibit the production process.

3. Suf cient minimum wages, pension funds and severance pay;[18] and
4. Work termination procedures.[19]

Ease of Doing Business (“EoDB”) EoDB, as addressed under the Draft Bill encompasses the following business-
related provisions:

1. Legalization of the legal entity statuses of foundations;[20]

2. Application of mandatory licenses in order to implement granted patents;
[21]
3. Establishment of Limited Liability Partnerships (CV);[22] and
4. Establishment of Civil Partnerships (Persekutuan Perdata).[23]

Development and
Micro and Small-Scale Enterprises
(Usaha Mikro dan Kecil – “UMK”)
protection of In an effort to increase development while simultaneously providing protection
for UMK, the Draft Bill features several UMK-related provisions, as follows:
1. Criteria for Micro-, Small- and Medium-Scale Enterprises (UMKM) must
comprise at least one of the following indicators: [24]

a. Net worth;
b. Annual sales results;
c. Investment value; or
d. Number of employees.

2. Simpli cation of registration procedures and funding for the following

needs: [25]

a. Granting of intellectual property rights;

b. Imports of raw/auxiliary materials;
c. Halal certi cation;
d. The Indonesian National Standard (SNI); and
e. Circulation licenses (izin edar).

3. Granting of incentives and business concessions to businesses if they

cooperate with UMK;[26]
4. Fiscal and funding incentives.[27]

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Economic Zones The following criteria must be satis ed in relation to any locations which are to
be proposed as Special Economic Zones (Kawasan Ekonomi Khusus – “KEK”):
[28]

1. Must be in accordance with the relevant RT/RW and must have zero
potential to disturb any protected areas;
2. Must be supported by the relevant provincial/regency/city governments;
and
3. Must have clearly demarcated borders.

Suggestions relating to the establishment of KEK must enclose the following

documents:[29]

1. Location development map;

2. Economic and nancial feasibility study;
3. AMDAL; and
4. Plans and sources of funding.

Research and Innovation Support The Draft Bill mandates that the government should encourage foreign-trade
activities and should control the country’s import and export sectors in ways
which:[30]

1. Increase the competitiveness of Indonesian export products;

2. Increase and expand market access abroad;
3. Work to improve the skills of importers and exporters; and
4. Increase invention and innovation in relation to national products
intended for export.

Land Procurement In this sector, the Draft Bill is primarily focused upon forest areas and
encompasses the following provisions:[31]

1. Designation of forest areas (pengukuhan kawasan hutan);

2. Changes to the purposes and functions of forest areas; and
3. Utilization of forest areas.

The Draft Bill is currently in the process of being submitted to the House of Representatives and may therefore become
subject to further changes. ss

[1] Indonesia.go.id, “Fokus Utama Periode Kedua”, as accessed through https://indonesia.go.id/narasi/indonesia-dalam-angka/politik/fokus-utama-

periode-kedua on 13 January 2020.

[2] detikNews, Mengenal Omnibus Law, Revolusi Hukum yang Digaungkan Jokowi, as accessed through https://news.detik.com/berita/d-
4756789/mengenal-omnibus-law-revolusi-hukum-yang-digaungkan-jokowi on 13 January 2020.

[3] detikNews, Mahfud MD: Draft Omnibus Law Cipta Lapangan Kerja Sudah Rampung, as accessed through https://news.detik.com/berita/d-
4856924/mahfud-md-draf-omnibus-law-cipta-lapangan-kerja-sudah-rampung on 13 January 2020.

[4] Art. 552, Draft Bill.

[5] Recitals, Draft Bill.

[6] Art. 4, Draft Bill.

[7] Art. 5, Draft Bill.

[8] Art. 10, Draft Bill.

[9] Art. 11 (1), Draft Bill.

[10] Art. 41, Draft Bill.

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[11] Art. 63, Draft Bill.

[12] Art. 93, Draft Bill.

[13] Arts. 422-436, Draft Bill.

[14] Art. 415 (1), Draft Bill.

[15] Arts. 437-439, Draft Bill.

[16] For more information on available positions for foreign workers, see ILB No. 3686 and ILD No. 629.

[17] Arts. 440-441 (1), Draft Bill.

[18] Arts. 443-447, Draft Bill.

[19] Arts. 448-458, Draft Bill.

[20] Art. 460, Draft Bill.

[21] Arts. 463-465, Draft Bill.

[22] Arts. 466-468, Draft Bill.

[23] Arts. 469-474, Draft Bill.

[24] Art. 475, Draft Bill.

[25] Art, 477 (6), Draft Bill.

[26] Art. 478, Draft Bill.

[27] Art. 480, Draft Bill.

[28] Art. 485 and 487, Draft Bill.

[29] Art. 486, Draft Bill.

[30] Art. 511 (1-2), Draft Bill.

[31] Arts. 507-510, Draft Bill.

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