The Jakarta Post
The government is upbeat that the sweeping omnibus bill on job creation will bolster investment and open up more jobs for Indonesians, as it braces for tough public scrutiny during the bill’s deliberation at the House of Representatives.
Coordinating Economic Minister Airlangga Hartarto said that the omnibus bill on job creation could help the government inch closer to its 6 percent economic growth target through Rp 1,200 trillion (US$87 billion) in projected investment.
Under a “business as usual” scenario, he added, Indonesia would attract between Rp 800 trillion and Rp 900 trillion in investment per year, therefore the bill could “add more than Rp 300 trillion” in investment into Indonesia. The country booked Rp 810 trillion in investment in 2019 from domestic and foreign investors, Coordinating Investment Board (BKPM) data shows.
“To reach the [economic] growth target of 6 percent, we need faster decision-making, a faster licensing process and to ease the doing of business for small and medium businesses,” Airlangga added during an interview with The Jakarta Post. He referred to gross domestic product (GDP) growth targets in the 2020-2024 National Medium Term Development Plan (RPJMN).
“We are targeting 3 million new jobs in the manufacturing sector, start-up companies and part-time workers.” Indonesia at present adds around 2 million jobs per year. With a young and growing population, this number is not sufficient to keep up with high school and university graduates entering the labor market.
Coordinating Minister for Economic Affairs, Airlangga Hartarto in Jakarta on Monday, February 24. 2020. (JP/Wendra Ajistyatama)
President Joko “Jokowi” Widodo’s administration submitted the omnibus bill on job creation on Feb. 12 to the House, expecting deliberations to be concluded within 100 working days so as to attract more investment to help boost the country’s flagging economic growth rate.
Airlangga added that the government’s planned omnibus bill would open up financial access for small and medium businesses (SMEs). He went on to say that the proposed bill would also relax regulations to allow SMEs to become formal companies. “This will change the informal sector into a formal one.”
Indonesia’s economy grew 5.02 percent last year, the lowest growth rate in four years, as investment and exports cooled. Investment – the second-largest contributor to GDP growth – expanded 4.45 percent last year, a far cry from the 6.67 percent growth rate recorded in 2018.
“The omnibus bill is the government’s plan to boost investment and we really need to kick-start economic growth. The misnomers we are seeing right now are being caused by a lack of communication between the government and related stakeholders, such as investors and labor unions,” Center of Reform on Economics (CORE) Indonesia research director Piter Abdullah told The Post.
“Indonesia needs a breakthrough and the omnibus bill is that breakthrough. But the government should have communicated the proposed plan more clearly. The omnibus legislation should be drafted carefully and not be rushed.”
The 2020-2024 RPJMN planning document shows that Indonesia’s mid-term economic growth target is well short of the ambitious 8 percent target stipulated in the previous 2015-2019 plan. The government now hopes to realize growth of between 5.4 percent and 6 percent.
This year’s economic growth target of 5.3 percent, as documented in the 2020 state budget, has been criticized by economists as unrealistic, especially now that the novel coronavirus (COVID-19) is expected to drag down economic growth in China, Indonesia’s largest trading partner and second-largest foreign investor.
“A drop of just one percentage point in China’s economic growth rate will result in a drop of 0.3 to 0.6 percentage points in Indonesia’s [growth],” Finance Minister Sri Mulyani Indrawati said during a recent media briefing in Jakarta.