However, there are still many pros and cons related to several key points in this law, such as labor-related articles. This is reasonable considering that the technical regulations for implementation are currently still in progress.

As stipulated in the final part of the jobs law, regulations on its implementation must be issued no later than three months since the law was enacted.

The jobs law will have a broad impact on the economic sector, including retail, which will be affected by several articles.

First, Article 15 on approval of suitability for space utilization for business activities by the central government. It is stipulated that in case a local administration has not established and provided a detailed spatial plan (RDTR), businesses can submit an application for approval to the central government — not at the regional level. 

The application is submitted through the electronic business licensing system, in accordance with the provisions of laws and regulations. Furthermore, the central government will issue an approval of suitability for space utilization activities in accordance with the RDTR. 

Second, Article 46 (3) on the authority of the central government to regulate public markets, shopping centers, supermarkets and grocery stores. This article stipulates that the central government shall regulate development, arrangement and fostering that are equal and fair to public markets, shopping centers, supermarkets and grocery stores to create business certainty and a balanced cooperative relationship between suppliers and retailers while still paying attention to supporting cooperatives and micro, small and medium enterprises (MSMEs). 

Such development, arrangement and fostering are carried out through the arrangement of business licensing, spatial planning (RTRW) and zoning which, are regulated in a government regulation (PP) by taking into account the distance and location of the establishment, partnerships and business cooperation.

Third, Article 81 on labor, such as employee remuneration and outsourcing system. This is important considering that the retail sector uses a lot of workers for its operational activities. 

As an illustration, salaries, wages and employee benefits contribute 30 percent to 50 percent of the retailer's total sales costs. A relatively simpler minimum wage setting will certainly relieve retailers.

Fourth, articles related to business facilities for MSMEs. Article 87 (6) stipulates that the implementation of partnerships with the general trading pattern can be done in the form of marketing cooperation, or the provision of business locations for MSMEs by large enterprises, including large retailers. 

In addition, the fulfillment of goods and services required by large enterprises is carried out by prioritizing the procurement of products of small businesses or micro-enterprises, as long as they meet the required quality standards for goods and services. 

In the aspect of licensing, for example, Article 87 (2) simplifies the procedures and types of business licenses and exempt business licensing fees for micro-enterprises and provide fee relief for small businesses. 

Besides partnership, various other facilities are also provided in the form of funding and trade promotion for MSMEs. This is important because many MSMEs have become business partners for large companies in the retail sector.

In general, we see that the omnibus law will have a positive impact on the retail sector. This is reflected in several articles that are directly related to retail businesses, let's say articles 15 and 46

Article 15 allows retailers to expand their business in regions that do not yet have RDTR. All this time, the expansion of retail businesses has been hampered by an existing regulation, namely Presidential Decree No. 112/2007, of which articles 2 and 3 stipulate that the location of the establishment of traditional markets, shopping centers and modern outlets must refer to the regency or city spatial plan and regency or city RDTR, including their zoning regulations. 

Only 30 to 40 regencies and cities have RDTRs, so the business expansion of retailers is limited. The Indonesian Retailers Association (Aprindo) estimates that domestic retail market capitalization can increase by between 30 percent and 40 percent once the jobs law is fully implemented.

In addition, we think that direct arrangement by the central government through a PP will accelerate the business expansion of retailers. Previously, in Law No. 7/2014 on trade, the regulation was carried out by the central government and/or regional administrations in accordance with their authority. However, in practice, there are often overlapping policies between the central government and regional administrations.

Meanwhile, regarding partnerships with MSMEs, we see this as an effort to distribute welfare and help lift the economy of small-scale entrepreneurs. However, we believe it should not be forced and must be based on the principle of mutual benefit.

Last but not least, although the regulatory authority in the retail sector will be largely controlled by the central government, it is better if the central government still maintains communication, coordination and synergy with regional administrations. This is because the regional administrations are seen as having more knowledge about the technical conditions in their regions.

As we all know, retail is one of the main sectors that is expected to recover relatively quickly compared to other sectors amid the COVID-19 pandemic. 

According to a survey by Bank Indonesia, as of September, retail sales have shown an improving trend, although it is still in the contraction phase. Meanwhile, the improvements were still limited and supported by the sales of basic necessities, particularly in the food category.

In sum, we all hope that the implementing regulations of Job Creation Law can be issued soon so as to encourage a beneficial business climate for optimum economic recovery.

Senior industry analyst at Bank  Mandiri

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