In his speech shortly after taking the oath of office in the House of Representatives compound in Central Jakarta, Jokowi pledged that, among other goals, his administration aimed to simplify regulations by creating two omnibus laws relating to job creation and the empowerment of small and medium enterprises (SMEs).

“Both of these laws will be omnibus laws, namely a single law that revises several, even dozens of other laws. Dozens of laws that hamper job creation will be revised at the same time. Dozens of laws that hamper the development of small and medium enterprises will also be revised,” Jokowi said.

He has many times said that numerous overlapping regulations are bad news for investments and the country’s economy.

Recently sworn-in Law and Human Rights Minister Yasonna Laoly and Coordinating Economic Minister Airlangga Hartarto said the President had briefed them to go full-throttle in preparing the laws.

An omnibus law was first introduced during the last months of Jokowi’s first term by Finance Minister Sri Mulyani Indrawati, who said that the government had a plan to issue one in the tax sector to amend the General Taxation Law, Income Tax Law and Value Added Tax Law, the revisions of which had so far been deliberated sluggishly.

Sri Mulyani said the measure would be taken to attract more foreign direct investments, as well as to tap deeper into the country’s tax collection potential.

What is an omnibus law?

An omnibus law, known as an omnibus bill before it is passed, is legislation that amends and consolidates a number of laws, even up to dozens, into one law. An omnibus bill is formulated with the approach of synchronizing many overlapping regulations.

A senior researcher and the executive director of the Indonesian Center for Law and Policy Studies (PSHK), M. Nur Sholikin, said on Monday that he saw the potential for an omnibus law to help streamline regulations. He said bureaucracy in Indonesia was plagued by too many regulations issued on various levels, from the central government to regional administrations, that often overlap one another.

“An omnibus law’s characteristic is suitable for a country that has many regulations. It will help to simplify the hyper-regulation and help solve the overlapping regulations that have hindered economic growth,” he said.

According to data from the PSHK, Indonesia had as many as 7,621 ministerial regulations, 765 presidential regulations, 452 government regulations and 107 laws as of October. From 2014 to 2018 alone, the government issued 1,324 regulations.

Should Jokowi’s second-term administration succeed in having the omnibus bills passed into law, it would be the first time Indonesia would have such regulations, said Bivitri Susanti, a constitutional law expert with the Jentera School of Law.

The pros

Experts and economists have many times said the intertwined and overlapping regulations create a legal uncertainty that often discourages investments.

A deputy for politics, law, defense and security in the National Development Planning Agency (Bappenas), Slamet Soedarsono, said there was an urgency to passing such bills, especially in the SME and employment sectors.

“Employment is a problem for all. As 90 percent of all businesses in Indonesia are SMEs, these sectors have a huge impact on people’s prosperity. However, currently the employment and SMEs sectors are adversely affected by many asynchronous laws,” he said during a recent discussion.

According to the Bappenas’ findings, the problems in regulations and institutional bureaucracy became the most binding constraints that needed to be resolved to push economic growth, Sholikin said. 

“If these problems remain unsolved, slower economic growth will always cast a shadow on Indonesia,” he added.

The law should also cover the aspects of licensing and organization of employment and SME sector, said Arif Budimanta, an economic observer and the former deputy chairman of the National Economy and Industry Committee. The licensing should include provisions on, among other things, land, environmental management and fiscal policy.

The cons

Bivitri said questions might be raised prior to the deliberations over the omnibus bills. One of them might be on whether a single law containing provisions on many issues would be suitable to be implemented with the country’s legal system.

“I have also been wondering whether the authorities have evaluated the existing regulations, as Indonesian executive and legislative bodies rarely evaluate existing policies,” Bivitri said.

Before moving on to deliberate the omnibus bills, both the government and the House of Representatives should also evaluate the existing regulations as part of the policy cycle, Bivitri said.

The deliberations over such bills, she added, might create potential side effects. Despite covering a broad range of issues, she raised concerns that with the law, authorities might overlook small problems that occurred in reality, but were not present in the prevailing regulations.

Deliberation challenges

The process of creating omnibus bills, however, would become another challenge for the government as Indonesia had never yet drafted any such legislation.

As the main purpose of the law is to harmonize overlapping regulations, the process needs participation, communication and cooperation involving all relevant ministries and stakeholders.

“The cross-sector coordination could also be more work and a challenge for the government and lawmakers,” Sholikin said, adding that the Office of the Coordinating Economic Minister could take a role as the coordinator of the efforts carried out by each institution.

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