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The Job Creation Law Strengthens Investors’ Confidence to Invest

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By: Wahyu Pratama )*

Data from the Investment Coordinating Board (BKPM), shows that the Indonesian economy is showing a positive performance in the midst of the Covid-19 pandemic. This is reflected in the realization of Foreign Direct Investment (PMA) and Domestic Investment (PMDM) in the first quarter of 2022 reaching IDR 282.4 trillion, an increase of 28.5% compared to the first quarter of 2021 which was recorded at IDR 219.7 trillion.

In addition, the Indonesian economy in the first quarter of 2022 also grew 5.01% (yoy), improving compared to the first quarter of 2021 which recorded a contraction of -0.74% (yoy). This condition shows that investors still believe in Indonesia’s economic prospects, because investment in Indonesia still provides favorable returns and the Indonesian economy is still moving in a positive direction amidst the Covid-19 pandemic.

Separately, on April 27, 2022, the Debt Rating Agency Standard and Poor’s (S&P) upgraded Indonesia’s outlook from negative to stable and maintained Indonesia’s rating at the BBB (Investment Grade) level. S&P assesses that the Indonesian economy is able to face external risks such as global economic recovery, increasing global inflation rate and increasing geopolitical escalation between Russia and Ukraine, so that Indonesia’s economic recovery will continue for the next two years, supported by solid fiscal conditions and the implementation of the Copyright Act. Work that will improve investment performance. Seeing this condition, S&P projects that the Indonesian economy in 2022 will grow 5.1%.

To increase the confidence of business actors in Indonesia’s economic prospects to accelerate the progress of economic recovery, President Joko Widodo initiated the Job Creation Law which aims to simplify business licensing. With the existence of business licensing, it is hoped that it will encourage investment performance that can increase the creation of business fields and accelerate economic growth.

Bank Indonesia projects that the Indonesian economy throughout 2022 will grow in the range of 4.5% to 5.3% (yoy). Meanwhile, the Ministry of Finance projects that the Indonesian economy throughout 2022 will grow in the range of 5.2% to 5.8% (yoy).

The Head of the Investment Coordinating Board (BKPM), Bahlil Lahadalia said, the Job Creation Law can encourage investment, accelerate economic transformation, harmonize central-regional policies, provide ease of doing business and can overcome overlapping regulatory problems.

Meanwhile, Chairman of the Standing Committee on Employment at the Indonesian Chamber of Commerce and Industry Bob Azam said, the Job Creation Act provides fresh air to investors and can be a solution to increase investment realization in Indonesia, because it is able to solve three fundamental problems that hinder investment entry, namely employment, licensing, and taxation.

The Coordinating Minister for Economic Affairs, Airlangga Hartarto, said that improving Indonesia’s business and investment climate is a must to encourage national economic recovery. For this reason, strong coordination and synergy are needed between the Government and all stakeholders. For this reason, the Government created the Job Creation Act to improve the conduciveness of the business climate, thereby increasing investment.

In line with this, the Indonesian Christian University (UKI) Economic Development Law Expert, Dhaniswara K Harjono appreciated the Government, in the midst of the Covid-19 Pandemic, Indonesia was able to present a new legal product that gives hope for increasing economic growth, namely the Job Creation Act. This regulation will encourage business growth and investment in Indonesia through regulatory reforms and ease of doing business.

In the midst of global economic risks and the Covid-19 pandemic, the Indonesian economy is still able to show positive prospects. This condition needs to be improved so that it can accelerate the progress of economic recovery. For this reason, the Government needs to implement the Job Creation Law to increase the conduciveness of the investment climate that can increase investor positive sentiment towards Indonesia’s economic prospects, so as to create jobs and accelerate economic growth.

)* The author is a Public Policy Observer

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