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Job Creation Law Strengthens National Economy


By Dygta Andalusia )*

The government and academics agree that the Job Creation Law (UU) has great benefits for the Indonesian economy. The Job Creation Law has the potential to increase Indonesia’s competitiveness in the global market. By simplifying regulations and licensing processes, this law allows companies to more easily operate and invest in Indonesia. This creates a more friendly and attractive business environment for foreign and domestic investors. Thus, investment growth can spur the economy as a whole.

Secretary of the Job Creation Law Task Force, Arif Budimanta, said that the Job Creation Law is not only beneficial for one group, but also involves various parties. Starting from implementers such as financial institutions and MSMEs to access these services. He emphasized that the Quo Vadis Job Creation Law is in line with its main objective, namely building broad employment opportunities by expanding the business economy, empowering MSMEs, as well as aspects of environmental sustainability that are in accordance with Pancasila.

Apart from that, simplifying the licensing and regulatory process also has the potential to increase company productivity. By reducing bureaucracy and eliminating unnecessary administrative obstacles, the Job Creation Law allows companies to focus on their core activities. This can help improve operational efficiency and innovation, which in turn can lead to long-term economic growth.

The Job Creation Law also has the potential to create new jobs through infrastructure development and other investment-driven development projects. By expanding job opportunities, this law can help reduce unemployment and poverty levels, which in turn will support inclusive economic growth.

Job creation is the key in efforts to reduce poverty and strengthen national economic resilience. For this reason, the Government is focusing on creating jobs through a number of policy mixes that have been prepared, starting from downstream industry, implementing digitalization, increasing entrepreneurship, to reforming the licensing system through the Job Creation Law.

The existence of the Job Creation Law simplifies regulations and permits aimed at improving the business climate and competitiveness. This is important because a good business climate can attract quality investment and provide a multiplier effect, including increasing employment opportunities. Coordinating Minister for Economic Affairs Airlangga Hartarto said the government was carrying out  structural reform  by issuing Law Number 11 of 2020 concerning Job Creation to encourage more and more inclusive employment opportunities.

In addition, the Job Creation Law has the potential to strengthen the informal sector of the economy through increasing access to social protection and skills training. By providing broader access to these programs, this law can help increase the economic resilience of households and increase their ability to survive difficult economic situations.

Various derivative regulations have been completed since the first issuance of the Job Creation Law Number 11 of 2020. Their implementation has become part of the structural reform efforts carried out by the Government. After the decision of the Constitutional Court Number 91/PUU-XVIII/2020, the issuance of Law Number 6 of 2023 which stipulates Government Regulations in Lieu of Law Number 2 of 2022 concerning Job Creation has been the right step to respond to a very difficult situation at the global level in 2022 for Indonesia’s economic recovery phase.

The Job Creation Law itself has had a positive impact on the Indonesian economy and has been validated by reports from various international institutions. Based on the World Bank’s analysis report in the publication of Indonesia Economic Prospects (IEP) December 2022, structural reforms through the Job Creation Law have had a positive impact on increasing Foreign Direct Investment (PMA) in Indonesia, even being able to be higher than FDI before the reforms were implemented. Total FDI realization increased by an average of 29.4% in the five quarters after the Job Creation Law was issued (post-policy) compared to pre-policy in the previous five quarters.

To increase productivity even higher, the government continues to make efforts to transform the digital economy considering that Indonesia has significant potential in the form of a large population, wide market share, high technology adoption, and increasing economic and financial digitalization.

Effective implementation of the Job Creation Law is very important. Close monitoring and consultation involving various stakeholders is needed to ensure that the positive impacts of this Law are truly realized and the interests of all parties are properly accommodated. The Job Creation Law has been declared constitutionally valid by the Constitutional Court. On this basis, the government will continue to socialize this law to the wider community. Because, the ultimate goal is to create a condition that exists in the spirit of Pancasila, through consensus deliberation and  meaningful participation .

In conclusion, the Job Creation Law has the potential to have a positive impact on resilience and national economic growth through increasing competitiveness, operational efficiency, job creation and strengthening the informal sector of the economy. However, effective implementation and close monitoring are required to ensure that this positive potential is fully realized and that possible negative impacts are also identified and appropriately addressed.

)* The author is an economic observer

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