COM654

ASIAN POLITICS

GROUP ASSIGNMENT: INDONESIA

CRITICISMS AND ADVANTAGES OF THE INDONESIA LABOUR LAW
(OMNIBUS LAW)

SUBMITTED BY:
FATIN SHAFINA BINTI RASIDI [2017613786]
NUR WAHIDAH ABU BAKAR [2017843982]

PROGRAMME:
BACHELOR OF MASS COMMUNICATION (HONS)
PUBLIC RELATIONS

LECTURER NAME: ENCIK AHMAD FARAMI BIN ABDUL KARIM

SUBMISSION DATE:
26 JULY 2021
INTRODUCTION - INDONESIA: COUNTRY BACKGROUND

Indonesia is a very unique destination located in South east region. The country is famous
throughout the world for its islands and beautiful landscapes. Indonesia is well located at the
Southeastern Asia, archipelago between the Indian Ocean and the Pacific Ocean. The major
regions of Indonesia include the islands of Java, Bali, and Sumatra, and large portions of
Borneo and New Guinea (a contested region). The archipelago gradually converted to Islam
between the 13th and 16th centuries. The Dutch began to colonize Indonesia in the early 17th
century when Japan occupied the islands from 1942 to 1945. Indonesia has declared
independence shortly before Japan’s surrender, but the Netherlands relinquished sovereignty
in 1949 four years later. In the period of the unruly parliamentary democracy ended in 1957 in
the era of President Soekarno declared martial law and instituted Guided Democracy. After an
abortive coup in 1965 by alleged communist sympathizers, SOEKARNO was gradually eased
from power. From 1967 until 1998, President SUHARTO ruled Indonesia with his "New
Order" government. After street protests toppled SUHARTO in 1998, free and fair legislative
elections took place in 1999. Indonesia is now the world's third most populous democracy, the
world's largest archipelagic state, and the world's largest Muslim-majority nation.

The government in Indonesia is a system of republic in which the chief of state and the head
of government is the president of Indonesia. Indonesia encompasses a mixed national economy
which incorporates a spread of personal freedom, combined with centralized economic
designing and government regulation. Republic of Indonesia could be a member of the Asia-
Pacific Economic Cooperation (APEC) and also the Association of Southeast Asian Nations
(ASEAN). In this very day, Indonesia is a home to over three hundred ethnic groups with over
seven hundred languages and dialects spoken. Being a unitary state, full power is centralized
within the central government under the head of state, the commander-in-chief of the
Indonesian National Armed Forces, the director of domestic government, policy-making, and
foreign affairs which are the President of Indonesia. A council of ministers is named by the
president, who are not expected to be elected representatives of the legislature. Economy of
Indonesia is mainly based on agriculture and oil. Approximately 90% of the population is
engaged in agriculture. In the agricultural sector, Indonesia has become self-sufficient in rice
and does not need to import this staple food as it had for years.
INDONESIA LABOUR LAWS

Every employer and employee in Indonesia must abide by the country's many labour laws.
These laws ensure that all work-related dealings in the country are morally and ethically sound.
They grant much legitimacy to the workforce and corporate environment of Indonesia.
According to Indonesia’s existing labour laws, there are various important laws that govern
employment. Indonesia’s primary labour law is stated under the Law “NUMBER 13 YEAR
2003: CONCERNING MANPOWER”, which applies equally to all employees and does not
draw distinctions between different types of worker. The most important Indonesian labour
laws state into the several aspects. Firstly, national improvement is done to improve the lives
of all who live in Indonesia and encourage all Indonesian citizens to become citizens who are
beneficial to the country, fair, prosperous, just, and well-versed in material as well as spiritual
matters based on the Five Principles (Pancasila) and the constitution of the Republic of
Indonesia (UU Dasar Negara Republik Indonesia Tahun 1945). Furthermore, in accordance
with the role and position of employees, the development of manpower is conducted to improve
the quality of labour and its role in development along with the improvement of the protection
of labour in accordance with the dignity and prestige of humanity. Additionally, protection of
employees is meant to ensure the basic rights of workers or labourers and ensure the equal
opportunity to work without discrimination based on any reasons in order to increase the
welfare of workers and their families while still paying attention to the advancement of the
business world. The laws mentioned are accompanied by government regulations as well as
regulations made by the Minister of Manpower. To supervise the implementation of the labour
laws, the regional offices of the Ministry of Manpower inform supervisors of matters related
to manpower. Their main job is to ensure compliance with the provisions. These labour laws
defend employees’ rights, and Indonesians benefit from the labour laws.

THE OMNIBUS LAW INDONESIA

The Omnibus Law was first introduced throughout President Joko Widodo’s speech when
being appointed as president of the Republic of Indonesia for a second term in October 2019.
It represents the primary time within the country’s legal history that such in depth amendments
are created to varied laws through one legal instrument. Since the establishment of The
Omnibus Law, it has received numbers of positive feedbacks especially from investors as it
purports to open more doors to foreign workers and investors which introduce employment
provisions that are regarded as favourable to business owners.
CRITISM OF THE OMNIBUS LAW

The main goal of the newly re-appointed President of the Republic of Indonesia, President Joko
Widodo is to boost the investment to accelerate economic development in Indonesia. During
his inauguration speech in October 2019, President Joko Widodo has announced the five
primary development goals comprising of human resources in development infrastructure
development, deregulation through a proposed ‘omnibus’ law, bureaucratic reform, and
economic reform. President Joko Widodo established two principal laws as a means of boosting
investment in which a law on job creation and a law on small and middle level business. Further
suggested laws were also announced that are intended to use the omnibus method, covering
subjects such as taxation and pharmaceuticals. The presented omnibus law on job creation has
gained most attention whereby this law would revise over seventy current laws consists of Law
No 32/2009 on Environmental Protection and Management (Environmental Law). Among the
many criticisms of the omnibus law is that the law will restrict the public’s ability to consult
on projects or businesses that may cause environmental and social harm. According to
Greenpeace Indonesia, the non-governmental organization in South Jakarta, Indonesia, the
establishment of Omnibus Law would threaten the country’s environment since investments
will set aside such protections as well as worsen forest fires and the impact of climate change.
Before the proposed Omnibus Law, environmental damages in Indonesia has already occurred
and with the introduction of omnibus law the environmental damages would be even worse.

Further on their concerns is that the rollback of environmental protections might lead to greater
deforestation, which is the main driver of Indonesia’s greenhouse gas emissions, and in turn
jeopardize global efforts to mitigate climate change as called for under the Paris climate
agreement. Reducing emissions from land-use changes is the key to achieving these goals.
Although Indonesia can play a key role in this area, it currently faces the risk of not doing so
and jeopardizing the overall success of the agreement. Among other things, the omnibus law,
with its raft of incentives for the coal industry and heavy deference to similar policies in the
recently amended mining law, is far from being climate-friendly. It exempts coal companies
from paying royalties if they develop downstream facilities, such as coal-fired power plants, to
add value to their commodity. Burning coal accounted for 58% of Indonesia’s electricity
generation in 2017, and dozens of new plants are expected to come online over the next several
years. Another provision in the new law that threatens to exacerbate emissions is the scrapping
of a requirement for all regions to maintain a minimum 30% of their watershed and/or island
area as forest area. Around 40% of land use, land use change and forestry are the largest
contributors of emissions in Indonesia that is concerned that these are not in line with our
commitments to reduce our emissions yet to safeguards the weaken environmental health.

Further in the criticism of the omnibus law is that the law scraps the need for environmental
permits altogether and replaces it with an approval process based on developers’ self-
declarations of compliance, called environmental approval. This effectively eliminates any
opportunity for the public to challenge environmental permits in court, which in the past has
successfully been used to revoke business permits and stop a project. The omnibus law allows
no mechanism for the public to challenge an environmental approval, even if the approved
project can be demonstrated to cause ecological and social harm. Apart from the criticisms on
the environmental aspects, with all the changes in the omnibus law, the public concerned on
the attracting of dirty investments in Indonesia. The omnibus law’s weakening of the three
environmental guarantees of access to information, participation and justice might open up the
country to unbridled exploitation by less scrupulous investors. The omnibus law will attract
many investments possible however the major problem is that the safeguards that originally
may screen investors are being loosen. The omnibus law will surely effectively attract global
investments in Indonesia however they will be dirty investors in which they will not have
higher environmental standards. Investors who have higher environmental standards will not
like investing in Indonesia because they will face pushback not just in Indonesia, but back in
their home countries.

ADVANTAGES OF THE INDONESIA OMNIBUS LAW

Indonesia is the major economy in Southeast Asia and is foreseeable to be the seventh largest
in the world by 2030, surpassing Germany and the United Kingdom. is the fourth most
populated country in the world and home to the world’s prime Muslim population. Its digital
economy, only USD 8 billion in 2015, is expected to grow exponentially to USD 124 billion
by 2025.

Still, Indonesia hits below its weight in economic performance, and is conventionally
characterised by a complex and difficult investment environment. It assembles somewhere in
the middle of the pack in the World Bank’s Ease of Doing Business Rankings for 2020. Other
experts are less charitable – global professional services firm TMF Group say it is the most
difficult country in the world to do business.

Indonesia is a country with great potential and able to grow better forever. A large number of
analysts, meanwhile, say that the same barriers to foreign growth and investment: bureaucracy
and greed, excessive foreign ownership restrictions, tedious labor laws, and one of the most
complex tax systems in the world.

The following points summarise the current regulatory, and the provisions in the Omnibus Law
that seek to address such issues:

• Bureaucracy and red tape

The existing Indonesian system of government has produced one of the most complicated
bureaucracies in the world, there are many applications and permissions that need to be
made by traders and investors in obtaining businesses and licenses to set up a modest
business.

Provision: Simplified business licensing regime

Four risk categories, and reduced licensing requirements for internal businesses all except
the highest risk category. Omnibus laws in Indonesia’s well-known business licensing
regime are becoming more consistent.

• Tighten excessive foreign investment

One of the main barriers identified is foreign investment which lists Negative Investments,
which limits the percentage of foreign ownership in each industry sector.

Provision: Liberalization of foreign investment regimes Through the Omnibus law, it

liberalizes all business sectors except those allocated to the Indonesian government (e.g.
manufacture of weapons) or prohibited altogether (i.e. production of narcotics; gambling
activities); and promising fiscal and non -fiscal inventories (such as licensing, location,
infrastructure supply and energy) for priority business sectors.

• Onerous labour laws

Onerous labour laws Indonesia’s labour laws are intended to protect the workforce from
misuse, and make it very difficult to take disciplinary action, or to sack underperforming
employees.

For example, the employers weeping, that they cannot fire an employee in Indonesia if the
latter were a convicted axe murderer – an employee would have to be a convicted serial
axe murderer to warrant dismissal.

Complicated work permit application processes also discourage foreign workers from
working in Indonesia, leading to a manpower shortage in sectors such as technology and
professional services.

Provision: Labour law reform

Labour law improved The Omnibus Law expands the grounds on which an employee
might be terminated and reduces constitutional compensation packages from a maximum
of thirty months’ salary to no more than nineteen months’ salary.

The Omnibus Law also make simpler work permit application processes, and relaxes work
permit requirements for foreign labors in various sectors including, notably, technological
start-ups and scientific research. Foreign directors and commissioners who own shares in
the employer also enjoy relaxed work permit requirements.

The Omnibus Law has eased regulations relating to the use of fixed-term contracts and
outsourcing arrangements (both of which were highly regulated under the previous
regulatory regime), thereby allowing employers greater flexibility in planning for their
manpower needs.
CONCLUSION

In conclusion, the big issue in Omnibus Law Create Workplace today is in the simplification
of licensing attempts. With the Omnibus Law Create Workplace, it is hoped that licensing will
try to be simpler but clear.

While the new law has been well received by some, it has also sparked protests across the state.
According to some critics, the law, it is feared, will increase the company's profits at the
expense of the human rights of employees.

Omnibus law is the government's response to public pressure on the creation of new jobs in
Indonesia. If someone says that the ratification of this law is in a hurry, this law is not made in
a hurry, the draft law has been in place since last year and has been reviewed until now it has
finally been inaugurated.

Others argue that the law relaxes environmental standards. For example, businesses now only
need to submit an environmental impact analysis if their project is considered “high risk”. This
also includes various incentives for the coal mining industry, including exemptions to pay
royalties if coal companies develop downstream facilities such as power plants. Yet, such
concerns, the law is generally welcomed by the business community.

Indonesia must be able to mediate the interests of the people, to mediate between different
groups, not to side with one group only. In the context of state development, it serves as a
protection, that is, to protect the interests of its people from foreign filtration. Because foreign
filtration is currently shaped politically, economically, and culturally. It is hoped that the
Omnibus Law will be able to protect the interests of the people and not take sides with one
group only.
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