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Job Creation Law Encourages Structural Reforms and Attracts Big Investment


Law Number 11 of 2020 concerning Job Creation (Ciptaker) is part of structural reforms in order to cut regulations. This simplification of regulations is believed to be able to provide legal certainty and attract large investments.

Finance Minister Sri Mulyani Indrawati emphasized the importance of structural reforms amid the trend of improving Indonesia’s economy after being affected by the Covid-19 pandemic. He likened that structural reform in the midst of national economic recovery has a role like a blacksmith’s process that must be forged when it is hot.

“Reforms must go hand in hand with the economic recovery process. Because we understand that iron is malleable when it is still hot.” Sri Mulyani said.

For this reason, Sri Mulyani emphasized that the structural reform agenda through the Job Creation Law should not be postponed. This aims to strengthen Indonesia’s economic foundation in the midst of the difficult situation due to the Covid-19 pandemic and the heating up world geopolitical conditions.

Structural reforms must be carried out to address fundamental issues such as strengthening the quality of human resources, ease of doing business, downstreaming and economic transformation. In addition to structural reforms, reforms in the state budget and state finances are also needed to maintain the trend of national economic recovery.

Among other things, through the establishment of Law Number 1 of 2022 concerning Financial Relations between the Central Government and Regional Governments and the Law on the Harmonization of Tax Regulations (UU HPP). These two pieces of legislation will certainly strengthen state revenue policies and the quality of transfer spending to the regions.

Previously, President Joko Widodo (Jokowi) praised the House of Representatives for successfully passing the Job Creation Law in the midst of the Covid-19 pandemic. Jokowi said that apart from health care, the government’s focus is to create as many quality new jobs as possible. Therefore, the implementation of the Job Creation Law must be carried out.

Jokowi said the DPR and the government have also worked hard and synergized to build a legal foundation for handling Covid-19. In addition, with various innovations, the DPR continues to conduct community aspirations and supervise the implementation of government programs.

However, the Constitutional Court (MK) has decided that the unconstitutional job creation law is conditional on judicial review of the content of this controversial law. The government then made improvements to the contents of the articles of this law to maintain the business climate. Moreover, the current business conditions are relatively improving when the Covid-19 pandemic is under control by sloping down confirmed cases of Covid-19.

Coordinating Minister for Economic Affairs Airlangga Hartarto said investors and various countries were waiting for structural reforms that were being carried out by Indonesia. With the existing improvement process, Airlangga believes that the revision of the Job Creation Law can be carried out faster than the grace period given by the Constitutional Court.

One of the improvement steps in the revision of Law Number 12 of 2011 (say what?) is to regulate the omnibus method as a standard legal basis. The government also continues to strive to increase public participation to fulfill the right to be heard, the right to be considered and the right to be explained.

The government is also committed to continuing the agenda of structural reforms, deregulation, and debureaucratization as a continuation of the national economic recovery. In addition, the Constitutional Court’s decision regarding the revision of the Job Creation Law will be implemented and followed up by the Government as soon as possible.

It is known that the Job Creation Law also removes the investment requirements contained in the Sector Law and transfers them to the Presidential Regulation on the Investment Priority List. So far, the convoluted and complicated business licensing issues and various bureaucracy in Indonesia have often prevented investors from investing or expanding to set up businesses in Indonesia.

With the ease of obtaining business permits due to the implementation of the Copyright Act, it is hoped that the investment climate in Indonesia will improve. Both for local investors and foreign investors who are interested in investing in the country. So this will have an impact on opening up job opportunities and decreasing unemployment.

Structural reforms are indeed needed, through the Job Creation Law, it is hoped that this will strengthen the nation’s economic foundation and increase the number of industries that are able to absorb workers in Indonesia.

Savira Ayu, Author is a contributor to Pertiwi Institute

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