{"id":72073,"date":"2021-06-14T10:39:49","date_gmt":"2021-06-14T10:39:49","guid":{"rendered":"https:\/\/chinadialogue.net\/?p=72073"},"modified":"2021-06-28T13:00:24","modified_gmt":"2021-06-28T13:00:24","slug":"indonesia-omnibus-law-red-flag-investors","status":"publish","type":"post","link":"https:\/\/dialogue.earth\/en\/business\/indonesia-omnibus-law-red-flag-investors\/","title":{"rendered":"Indonesia\u2019s omnibus law: a red flag for investors?"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The protesters who took to the streets of Jakarta, Bandung and other Indonesian cities in October 2020 were diverse to say the least. Islamic leaders, dressed in white <em>jalabbiyah<\/em>, stood with scantily clad Instagram influencers. Trade unionists, indigenous leaders and environmentalists rubbed shoulders with the National Anti-Communist Alliance.<\/p>\n\n\n\n<p>\u201cThere\u2019s 275 million people in this country, and nearly every one of them has a reason to be pissed off,\u201d said Kirtika Sembiring, a 22-year-old student who organised a sit-in in Surabaya, Indonesia\u2019s second largest city. \u201cJokowi\u2019s government has never cared about farmers and fishermen. This time, even the rich landlords and businessmen are set to lose out.\u201d<\/p>\n\n\n\n<p>She \u2013 and hundreds of thousands of Indonesians like her \u2013 were protesting President Joko \u201cJokowi\u201d Widodo\u2019s latest raft of neoliberal reforms, the Omnibus Law on Job Creation. The massive 1,028-page bill amends, annuls and adds to 79 existing laws. Critics of the bill, including Human Rights Watch and Amnesty International, argue the sweeping changes come at the expense of workers\u2019 rights and environmental protections.<\/p>\n\n\n\n<p>\u201cFrom the beginning, there was no consultation,\u201d says Tommy Pratama, executive director of Traction Energy Asia, a Jakarta-based NGO. \u201cIt was written behind closed doors, and environmental organisations were not allowed to join the discussion. Most of the spirit for the omnibus law is to provide a red carpet for the oligarchs, especially those coming from dirty energy like coal mining.\u201d<\/p>\n\n\n\n<div class=\"wp-block-cd-pull-quote block--pull-quote\"><div class=\"block--pull-quote__wrapper\"><blockquote class=\"block--pull-quote__quote\">The spirit for the omnibus law is to provide a red carpet for the oligarchs<\/blockquote><cite class=\"block--pull-quote__cite\">Tommy Pratama, Traction Energy Asia<\/cite><\/div><\/div>\n\n\n\n<p>In an age when sustainability is <a href=\"https:\/\/hbr.org\/2019\/05\/the-investor-revolution\">growing<\/a> as a determining factor in investment decisions, it\u2019s not just Sembiring and her fellow students who are turned off by the omnibus. A group of 36 investors, representing US$4.1 trillion in assets, <a href=\"https:\/\/www.ipe.com\/news\/investors-seek-audience-with-indonesian-government-over-draft-law\/10048241.article\">criticised<\/a> the bill for \u201csevere environmental, human rights and labour-related repercussions that introduce significant uncertainty and could impact the attractiveness of Indonesian markets.\u201d<\/p>\n\n\n\n<p>The legislation is partly the result of a promise Jokowi made when he was re-elected in 2019 to tackle poverty head-on and deal with the country\u2019s infrastructure gap. In his post-election address he warned that, to create jobs, Indonesia \u201cmust invite as much investment as possible\u201d.<\/p>\n\n\n\n<p>\u201cAnything that obstructs investment must be trimmed, such as slow or complicated processes. I guarantee that I will chase, I will control, I will check and I will beat them if necessary!\u201d<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-a-misdirected-solution\">A misdirected solution<\/h2>\n\n\n\n<p>Indonesia is in need of growth. As the country has <a href=\"https:\/\/www.oecd.org\/economy\/growth\/Indonesia-country-note-going-for-growth-2021.pdf\">struggled<\/a> to deal with the coronavirus pandemic, it has hit dire economic straits, with GDP <a href=\"https:\/\/www.aljazeera.com\/economy\/2021\/2\/5\/covid-slammed-indonesias-economy-hard-in-2020-data-show\">shrinking<\/a> by 2.1% to a three-year low. Yet Bhima Yudhistira, from Indonesian think-tank the Institute for Development of Economics and Finance (INDEF), believes that foreign direct investment never dipped during this period.<\/p>\n\n\n\n<p>\u201cInvestment is always going to increase, with or without the omnibus,\u201d he says. \u201cThe problem, which the bill actually adds to, is the quality of that investment.\u201d The bill is against the grain because Indonesia is aiming for middle-income classification by 2045, with the economy transitioning away from labour-intensive work like manufacturing towards white-collar services.<\/p>\n\n\n\n<a class=\"wp-block-cd-related-news alignright block--related-news loading\" data-post-id=\"71087\"><div class=\"block--related-news__image\"><\/div><div class=\"block--related-news__content\"><span class=\"block--related-news__heading\">Recommended<\/span><span class=\"block--related-news__title\"><\/span><\/div><\/a>\n\n\n\n<p>Even when outside investment does create jobs, it\u2019s not clear whether it benefits those at the coalface. Take, for instance, one of Indonesia\u2019s biggest employers, ride-hailing service Gojek. Despite billions in backing from Facebook, Microsoft, Paypal, Alibaba and Tencent, it hasn\u2019t created stable employment for any of its one million drivers. Instead, it\u2019s exposed them to the vagaries of the gig economy: uncertain income, little opportunity to upskill or advance, and an opaque employer\u2013contractor relationship. Not that there\u2019s much to miss out on anymore. Thanks to the omnibus, employees are no longer guaranteed:<\/p>\n\n\n\n<p>\u2022 A five-day cap on the working week<br>\u2022 An eight-hour cap on the work day<br>\u2022 Regional minimum wages<br>\u2022 A permanent contract after three years of casual service<\/p>\n\n\n\n<p>While foreign cash might not serve as a panacea for Indonesia\u2019s woes, many businesses aren\u2019t exactly <em>against<\/em> it either. In the opinion of Ahmad Syarif, senior analyst with BowerGroupAsia, Chinese firms stand to gain the most from this deregulatory approach.<\/p>\n\n\n\n<p>\u201cTake mining, for example, one sector with significant investment from Beijing. Until now, operations have been hampered by all sorts of policy risks. Local content rules for operations, domestic market obligations for the resources themselves, and the mixed role of local and central government.\u201d<\/p>\n\n\n\n<p>Foreign direct investment from China, including Hong Kong, jumped 11% last year to US$8.4 billion. While Jokowi has, so far, <a href=\"https:\/\/www.scmp.com\/week-asia\/economics\/article\/3120687\/why-china-being-left-out-indonesias-us20-billion-wealth-fund\">been conspicuously reluctant<\/a> to share state-owned infrastructure with Beijing, <a href=\"https:\/\/sais-isep.org\/wp-content\/uploads\/2020\/04\/ISEP-BSG-BRI-Report-.pdf\">cooperation on the Bandung-to-Jakarta bullet train<\/a> and the <a href=\"https:\/\/dialogue.earth\/en\/nature\/how-can-belt-and-road-protect-biodiversity\/\">Batang Toru hydropower plant<\/a> shows the door remains open to Belt and Road Initiative participation.<\/p>\n\n\n\n<div class=\"wp-block-cd-story-image block--story-image\" itemscope itemtype=\"http:\/\/schema.org\/ImageObject\"><div class=\"block--story-image__column\"><div class=\"block--story-image__image\"><img class=\"lazy\" data-src=\"https:\/\/dialogue.earth\/content\/uploads\/2021\/06\/indonesia-omnibus-law-coal-fired-power-plan.jpg\" data-srcset=\"https:\/\/dialogue.earth\/content\/uploads\/2021\/06\/indonesia-omnibus-law-coal-fired-power-plan-768x432.jpg 768w, https:\/\/dialogue.earth\/content\/uploads\/2021\/06\/indonesia-omnibus-law-coal-fired-power-plan-1024x576.jpg 1024w, https:\/\/dialogue.earth\/content\/uploads\/2021\/06\/indonesia-omnibus-law-coal-fired-power-plan-1400x788.jpg 1400w, https:\/\/dialogue.earth\/content\/uploads\/2021\/06\/indonesia-omnibus-law-coal-fired-power-plan-1800x1013.jpg 2000w, https:\/\/dialogue.earth\/content\/uploads\/2021\/06\/indonesia-omnibus-law-coal-fired-power-plan.jpg\" data-sizes=\"(max-width: 600px) 768px, (max-width: 999px) 1024px, (max-width: 1400px) 1400px, (max-width: 2000px) 2000px, 2560px\" alt=\"China-funded Suralaya coal-fired power plant\"\/><\/div><div class=\"block--story-image__content\"><div itemprop=\"caption\" class=\"block--story-image__caption\">The 4-gigawatt Suralaya coal plant on the island of Java, Indonesia. The most recent expansion to the plant was completed in 2011, built by a consortium of three Chinese corporations and an Indonesian construction company. (Image: <a href=\"https:\/\/www.adirenaldi.com\/\">Adi Renaldi<\/a>\u00a0\/ China Dialogue)<\/div><\/div><\/div><meta itemprop=\"contentUrl\" content=\"https:\/\/dialogue.earth\/content\/uploads\/2021\/06\/indonesia-omnibus-law-coal-fired-power-plan.jpg\"\/><meta itemprop=\"contentSize\" content=\"1 MB\"\/><meta itemprop=\"height\" content=\"1440\"\/><meta itemprop=\"width\" content=\"2560\"\/><meta itemprop=\"author\"\/><meta itemprop=\"representativeOfPage\" content=\"true\"\/><\/div>\n\n\n\n<p>Asep Komarudin, a senior forests campaigner with Greenpeace, is concerned about the impacts of lower environmental and social safeguards. \u201cChinese investors in the extractive and energy industries are frequently involved in corruption,\u201d he says, citing the Riau-1 coal-fired power plant and the Celukan Bawang port lawsuits. \u201cThere\u2019s a strong suspicion that this bill is only there to accommodate these sorts of investors. To let them pay local workers less, make them work longer hours, and skirt around environmental protections.\u201d<\/p>\n\n\n\n<a class=\"wp-block-cd-related-news alignright block--related-news loading\" data-post-id=\"67943\"><div class=\"block--related-news__image\"><\/div><div class=\"block--related-news__content\"><span class=\"block--related-news__heading\">Recommended<\/span><span class=\"block--related-news__title\"><\/span><\/div><\/a>\n\n\n\n<p>A loosening of labour laws \u2013 not to mention the advantages given to state-owned enterprises \u2013 could turn off Western investors, many of whom have to comply with strict ethical guidelines. Another concern is that the omnibus \u201cweakens the spirit of eradicating corruption,\u201d according to Komarudin, after Jokowi moved in 2019 to <a href=\"https:\/\/webcache.googleusercontent.com\/search?q=cache:iwci5KSBunIJ:https:\/\/www.bloomberg.com\/news\/articles\/2019-12-03\/indonesian-anti-graft-agency-warns-of-risk-of-chinese-investment+&amp;cd=1&amp;hl=en&amp;ct=clnk&amp;gl=au%5C%5C\">curb<\/a> the powers of the Corruption Eradication Commission.<\/p>\n\n\n\n<p>In fact, the new <em>sui generis<\/em> sovereign wealth fund established under the omnibus, the Indonesia Investment Authority (LPI), won\u2019t be overseen by the appropriate anti-corruption body. The over US$20 billion already in assets should be monitored by the country\u2019s peak audit watchdog, the Supreme Audit Agency (BPK). But a recent <a href=\"https:\/\/dinsights.katadata.co.id\/read\/2020\/11\/16\/vague-audit-of-sovereign-wealth-fund?__cf_chl_captcha_tk__=63aa2da36e49cd4397ede3e5e1427c9cb50d37b1-1620082079-0-AdIwZcPDunLlbFumjYv6AHME4uPCuB6qA4Ejf3s36Km9Pol9_vZUp6xtFISWqRV-AyoF3oBLpuqJpyW9JvxGBRDRIc5krqZf3Rp8ZesJdmKo18be3JYMzNY9kEG5_FZ2Coer_uO8SzY2IXhavyRxd-cgRPVEI0kIBnQnT2FVg3yBpXGxbvoPf7qLUzcy7mTNxf6IqOFhWPkDKlEBJAdBPICDJocdfI5lx8RWgZyGiqF-s8RpIVT0y95L7aoUnaBPvwHRKTWlw7OYiw4HvKH1HMA-chy0Clryo752np5MLwkobpscK5ZSFv0mOtnTJDwHHll42N43GRVUynFmqDko8aWf7aMsjzI_FYzintEzwAIW_vbeYj6DEMj4f9PxA6Oksd6OyMSdhtAVq0Bk2Vqp-0L3Uxh0OPb3N4YBKNP1xb7e5lUYRZkpiye5rsb52HPScEe3A3prtRhU8aYQPYsuKiQ49WFGwI5mTwZ2uMKFxZdG5T6P_qPSZ3SGoCKnNqoiaspM92L0oEx4u1aiJAh09-FXPjXLlgFFb4h3aMuAICoZDzlKphhWwQIb-Z5Uh_fcYg_h5QbcgsB5Wp2t0ElOz5v9avoa84WVcMxJRq1SYBCKBYmFg86spARYLlyEhdHqhkAzRg3TsZYIqxUhhMCJVZAKqrdStwaMsDGlvuOo7RpRpBeLfn1CD5RnsbbwAUs09g\">analysis<\/a> from Katadata raises concerns about whether this oversight is sufficient.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-cutting-the-green-tape\">Cutting the green tape<\/h2>\n\n\n\n<p>It\u2019s not investment policy, though, that got Sembiring and her classmates to take to the streets. It\u2019s more a president who, after pushing for palm oil firms to be prosecuted after peatland fires broke out in 2015, has now lifted the assumption of legal liability for fires occurring on their concession areas.<\/p>\n\n\n\n<p>The group of coal-mining giants, another key environmental offender, is contributing to the country\u2019s rapid deforestation. In 2020 alone, the country lost <a href=\"https:\/\/news.mongabay.com\/2021\/04\/indonesia-net-zero-emission-deforestation-target\/\">115,459 hectares<\/a> of forest cover, an area the size of Los Angeles. While most agree that this trend will accelerate under the omnibus changes, Jakarta-based think-tank Madani goes further, <a href=\"https:\/\/madaniberkelanjutan.id\/2021\/02\/04\/pandangan-kritis-terhadap-undang-undang-no-11-tahun-2020-tentang-cipta-kerja-masa-depan-ekonomi-dan-lingkungan-hidup\">predicting<\/a> that it paves the way for the total destruction of natural forest cover in Riau, Jambi, South Sumatra, Bangka Belitung and Central Java provinces.<\/p>\n\n\n\n<p>The key provision they base this on is the repeal of a current regulation that requires at least 30% of forest area to be conserved for each watershed area or island. There\u2019s also the permit acquisition process, which in the past has acted as a brake on environmental exploitation carried out by both industries. Academics and the public played a role in approving or denying project permits, but the omnibus has edged them out of environmental impact analyses&nbsp;\u2013 and, in some cases, the analysis has been scrapped in its entirety.<\/p>\n\n\n\n<div class=\"wp-block-cd-pull-quote block--pull-quote\"><div class=\"block--pull-quote__wrapper\"><blockquote class=\"block--pull-quote__quote\">Investment is always going to increase, with or without the omnibus. The problem is the quality of that investment.<\/blockquote><cite class=\"block--pull-quote__cite\">Bhima Yudhistira, Institute for Development of Economics and Finance<\/cite><\/div><\/div>\n\n\n\n<p>These requirements were hardly ever a burden on big business: in South Kalimantan province, over a third of the land is earmarked for <a href=\"http:\/\/iesr.or.id\/wp-content\/uploads\/2019\/03\/Coal-Transition-in-Indonesia-Jakarta-April-2019-2.pdf\">coal permits<\/a>. For indigenous peoples living in those areas, though, fighting the granting of such permits will now border on the impossible. Cut out from the process <em>prima facie<\/em>, they will have to plead their case with Jakarta, rather than the provincial government.<\/p>\n\n\n\n<a class=\"wp-block-cd-related-news alignright block--related-news loading\" data-post-id=\"67953\"><div class=\"block--related-news__image\"><\/div><div class=\"block--related-news__content\"><span class=\"block--related-news__heading\">Recommended<\/span><span class=\"block--related-news__title\"><\/span><\/div><\/a>\n\n\n\n<p>\u201cThe exaggerated worship of large-scale investment all this time has proven to be very harmful to indigenous peoples,\u201d said Rukka Sombolinggi, the Secretary General of NGO the Indigenous Peoples Alliance of the Archipelago (AMAN). \u201cThe result is that indigenous territories are grabbed and permission is granted for investment by the forestry, plantation\/farming, mining and other sectors.\u201d<\/p>\n\n\n\n<p>The group of 36 investors was just as dismissive: \u201cEfforts to stimulate foreign investment by weakening regulations, such as easing restrictions on clearing land in palm oil concessions, are counterintuitive in light of investors\u2019 growing desire for environmental protections and rising international demand for responsible commodity production and regulation on imported deforestation.\u201d<br><br><em>Correction note: The original version of this article referred to Trend Energy Asia. This has now been corrected to Traction Energy Asia.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Aimed at attracting investment, the country\u2019s latest policy package has human rights groups up in arms. Sandy Milne investigates.<\/p>\n","protected":false},"author":3513,"featured_media":72092,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[758],"tags":[544,580,14061],"hashtags":[],"country":[50040717],"class_list":["post-72073","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-finance","tag-policy","tag-transport","country-indonesia"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.0 (Yoast SEO v26.0) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Indonesia\u2019s omnibus law: a red flag for investors?<\/title>\n<meta name=\"description\" content=\"Aimed at attracting investment, the country\u2019s latest policy package has human rights groups up in arms. Sandy Milne investigates.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/dialogue.earth\/en\/business\/indonesia-omnibus-law-red-flag-investors\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Indonesia\u2019s omnibus law: a red flag for investors?\" \/>\n<meta property=\"og:description\" content=\"Aimed at attracting investment, the country\u2019s latest policy package has human rights groups up in arms. 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