The World Bank has expressed strong criticism toward the omnibus bill on job creation, arguing that the proposed reform currently under deliberation at the House of Representatives could adversely affect the environment and labor rights.
World Bank Indonesia and Timor Leste country director Satu Kahkonen said the bill was very much needed so Indonesia could attract foreign investors. However, she expressed concerns about the environmental and labor aspects of the bill.
“It’s going to move Indonesia’s environmental legislation further away from the implementation of best practices,” Kahkonen said during a virtual launch of the Indonesia Economic Prospect report on Thursday.
She said the bill “is basically not helping Indonesia,” as it proposed loosening environmental protection requirements, which could negatively affect the livelihoods of those that depended on the country’s natural assets.
The omnibus bill seeks to revise 79 prevailing laws and more than 1,200 articles, from labor and mining regulations to business license and environmental laws, to cut red tape and attract investment to the country.
However, observers have criticized the stronger role of the central government in the bill while environmentalists have warned that less stringent environmental impact analyses and building permit requirements will result in unsustainable growth. Labor unions also oppose the draft as they fear it will jeopardize labor rights.
The proposed reform was aimed at reducing delays in obtaining environmental permits, yet the World Bank report noted that these delays were caused by “cumbersome processing and arbitrary and corrupt implementation, rather than the protection enshrined in the environmental law”.
“The omnibus bill has the potential to turbocharge economic recovery, but some reforms could be detrimental to the economy and some pitfalls should be avoided,” World Bank lead economist for Indonesia Frederico Gil Sander said during the same event.
“The bill also includes reforms that could be detrimental to the environment, health and safety and incomes of Indonesians – dropping them or modifying them will ensure the bill brings maximum benefits to everyone.”
The World Bank report noted that the bill had the potential to support post-COVID-19 recovery in the near term, while setting the foundations for faster long-term growth.
The government is struggling to attract investment to help spur recovery of the virus-hit economy. Indonesia’s GDP is expected to shrink 0.4 percent this year in the worst-case scenario, or grow only 1 percent in the baseline scenario as the coronavirus outbreak paralyzes business activity.
The World Bank, based in Washington, DC, projects the Indonesian economy to book zero percent growth this year or even contract 2 percent if mobility restrictions are imposed again in the future as COVID-19 cases soar.
Kahkonen said the bank would like to see a clear plan for unemployment, the benefits system and the adjustment of severance pay.
The bill’s proposed revisions to the Manpower Law could reduce protections for workers, a particularly problematic proposition at a time when unemployment is soaring, the report reads.
“Right now the omnibus bill is somewhat vague,” she noted. “This [modification] is something that can be done and we hope it can be done before the omnibus bill is passed by the House,” she said.
Businesspeople, however, are pushing the government and the House to accelerate the deliberation, saying the regulation would help them stay afloat amid the pandemic.
“The COVID-19 pandemic has made the bill even more relevant and essential to support economic recovery,” Indonesian Chamber of Commerce and Industry (Kadin) deputy chairwoman Shinta Kamdani said on Wednesday.
“We need structural reform and a greater amount of investment to offset the job losses caused by the pandemic.”