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Job Creation Law could boost investment, but risks loom
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Activists from the Indonesian Forum for the Environment (Walhi) protest the omnibus bill on job creation in front of the House of Representatives compound in Jakarta on July 9, 2020. (JP/Wendra Ajistyatama)
T
he recently passed Job Creation Law is expected to boost foreign investment into the country but risks of environmental destruction and a lack of skilled labor could deter potential investors, experts and foreign investors have said.
Although the law is a business-friendly way to improve the country’s investment climate, foreign funds might not immediately come flooding in, according to Fitch Solutions Asia country risk research head Anwita Basu.
“Indonesia still falls behind relative to the likes of Vietnam in the region due to the lack of scaled manufacturing capacity across sectors, quality of labor and infrastructure deficits,” she told The Jakarta Post in an email correspondence on Tuesday. “Furthermore, the pandemic made the timing of this move awkward.”
Laborers, activists and citizens had voiced their opposition to deliberations of the law.
The government and the House of Representatives nevertheless passed on Monday the controversial bill into law, which the government said could improve the country’s investment climate, spur economic growth and create jobs.
“With the COVID-19 crisis having devastating effects on Indonesia’s labor market, it is not surprising that the law is being interpreted as a means to make it easier to retrench workers without providing sufficient severance,” Basu said.
“With the number of COVID-19 cases still rising in the thousands and imminent protests, it is likely that investors will remain wary of the conditions over the immediate term,” she stated, expecting the full benefits of the law to be felt after the pandemic crisis subsides.
