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Job Creation Law Creates Jobs and Encourages Investment


By : Ridwan Putra Khalan )*

Employment is something that should be a focus for the government so that more of the workforce is absorbed in the world of work. The absorption of the workforce will certainly have an impact on the amount of money circulating. On the other hand, the Job Creation Law also encourages investment because regulations make it easier for those who want to open a business.

Deputy Minister of Finance (Wamenkeu) Suahasil Nazara said that the Job Creation Law aims to create a new economic landscape in the future. The Job Creation Law covers various dimensions of economic activity that seeks to create employment opportunities for all Indonesian people.

​Employment opportunities will certainly have an impact on increasing welfare due to increasing income, which in turn will be able to create social justice for all Indonesian people.

​On the other hand, the Job Creation Law is also used as an instrument in an effort to achieve the investment realization target in 2023 of IDR. 1,400 trillion. Of course, investors also need legal certainty before investing capital in a country.

Secretary of the Directorate General of Industrial Relations Development and Social Security (PHI and Jamsos) of the Indonesian Ministry of Manpower, Surya Lukita, said that the structural reform of the Job Creation Law is believed to have a positive impact on increasing investment and reducing trade and investment barriers in Indonesia. In fact, this regulation is considered to be able to reduce trade and investment barriers by up to 10%.

​Previously, the DPR officially approved Government Regulation in Lieu of Law (Perppu) Number 2 of 2022 concerning Job Creation to become law. Approval was taken at the 2022-2023 Plenary Session at the parliament complex. This regulation was approved less than two months after the President’s letter (Surpres) was sent to the DPR on February 7. A week later, the DPR Legislative Body (Baleg) held a marathon meeting to discuss the Perppu.

​Coordinating Minister for Economic Affairs Airlangga Hartarto said that the implementation of the Job Creation Law during the Covid-19 Pandemic had succeeded in encouraging an increase in the flow of foreign direct investment (FDI) into the country. The level of foreign investment (PMA) in Indonesia increased by an average of 29.4 percent in the 5 quarters after the Job Creation Law was issued compared to the FDI level in the 5 quarters before the Job Creation Law was issued.

The main aim of the Job Creation Law is of course to harmonize existing policies at the central and regional levels, as well as overcome overlapping problems, especially as this law will cut articles that are considered ineffective. It is hoped that the ratification of the Job Creation Law will have an impact on good economic development.

The ratification of the Job Creation Law is expected to encourage investment with a simple licensing system. The business activity licensing process has now been changed from permit-based to risk-based. A system called Risk Based licensing can be obtained online via the Online Single Submission Risk Based Approach (OSS-RBA).

With the ease of processing business permits, it is of course hoped that the investment climate in Indonesia will improve. As well as attracting local and foreign investors to invest their capital in Indonesia. If investment figures increase, of course more jobs will open up in various sectors, so that the number of unemployed will decrease.

Of course, when investment increases, employment opportunities also increase. This is the actual aim of the Job Creation Law, namely to make it easier for the workforce to get decent work.

Referring to BKPM records, Indonesia has a vision to become the top five countries with the strongest economy in the world, and have a GDP of IDR 27 million per capita per month by 2045. It is natural that Indonesia hopes that the Ciptaker Law will make the business climate conducive, able to absorb more workforce thereby reducing unemployment, increasing economic growth and increasing worker productivity.

It should be noted that the workforce in Indonesia increases by approximately 2.4 million people every year. So normatively there should be additional decent jobs for the workforce. Otherwise, it means that there will be people who are unemployed or forced to work but with inadequate income. With the Job Creation Law, many entrepreneurs will easily expand, so that jobs will be created which will be able to accommodate the new workforce or those who are still unemployed.

In terms of capital investment or investments, the Government has changed the concept from being based on Negative Investment List (DNI) Business Sectors to Priority Business Sectors. Various priority business fields will be given incentives and facilities including fiscal and non-fiscal incentives.

The Job Creation Law is an instrument that is capable of providing beneficial effects for many sectors, from the employment sector to the investment sector. The existence of the Job Creation Law needs to be supported and monitored, because in its implementation, the Job Creation Law seeks to simplify various regulations.

)* The author is a Contributor to the Nusantara Reading Room

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