{"id":81138,"date":"2022-06-01T14:28:13","date_gmt":"2022-06-01T14:28:13","guid":{"rendered":"https:\/\/chinadialogue.net\/?p=81138"},"modified":"2022-06-16T08:09:26","modified_gmt":"2022-06-16T08:09:26","slug":"omnibus-law-could-slow-rather-than-drive-chinese-investment-in-indonesian-energy","status":"publish","type":"post","link":"https:\/\/dialogue.earth\/en\/business\/omnibus-law-could-slow-rather-than-drive-chinese-investment-in-indonesian-energy\/","title":{"rendered":"Omnibus Law could slow rather than drive Chinese investment in Indonesian energy"},"content":{"rendered":"\n<p class=\"has-drop-cap\">As Indonesia\u2019s government races against time to <a href=\"https:\/\/jakartaglobe.id\/business\/govt-businesses-find-reprieve-after-court-declares-2020-job-creation-law-unconstitutional\">revise<\/a> the controversial Job Creation Law \u2013 popularly known as the Omnibus Law \u2013 questions remain about the impact these revisions, and the nature of the law itself, may have on the realisation of energy and mining investments from China, one of the country\u2019s largest foreign investors and trading partners.<\/p>\n\n\n\n<p>President Joko \u201cJokowi\u201d Widodo <a href=\"https:\/\/asia.nikkei.com\/Politics\/Jokowi-signs-controversial-omnibus-bill-into-law\">enacted<\/a> the Omnibus Law in November 2020 despite <a href=\"https:\/\/www.france24.com\/en\/20201006-new-indonesia-investment-bill-angers-labour-green-groups\">weeks of protests<\/a> across many parts of the country, which is Southeast Asia\u2019s largest economy and most populous democracy. The Indonesian parliament had approved the bill a month earlier. While officials <a href=\"https:\/\/www.thejakartapost.com\/news\/2020\/02\/21\/guide-to-omnibus-bill-on-job-creation-1028-pages-in-8-minutes.html\">say<\/a> the law would improve the nation\u2019s investment climate and provide more job opportunities, its critics have remained unconvinced. They believe it would further <a href=\"https:\/\/news.mongabay.com\/2020\/11\/indonesia-omnibus-law-global-investor-letter\/\">damage the environment<\/a> and provide more room for employers to <a href=\"https:\/\/www.thejakartapost.com\/news\/2020\/10\/06\/amnesty-dubs-new-omnibus-law-catastrophic-petition-urges-no-confidence-motion.html\">exploit the country\u2019s labour force<\/a>.<\/p>\n\n\n\n<p>Indonesia\u2019s Constitutional Court declared the law <a href=\"https:\/\/www.mkri.id\/index.php?page=web.Berita&amp;id=17816\">\u201cconditionally unconstitutional\u201d<\/a> in November 2021, finding it to contradict the country\u2019s 1945 State Constitution and have \u201cno conditional binding legal force.\u201d As a result, authorities were told to present revisions within two years \u2013 by late 2023 \u2013 or risk the law being permanently nullified.<\/p>\n\n\n\n<p>The passing of the law\u2019s revision will depend on the political configuration in 2024, the year of Indonesia\u2019s next general election, and whether the government \u201cstill has strong enough political capital in parliament\u201d to push it through, says Giri Ahmad Taufik, a legal researcher at the Indonesian Center for Law and Policy Studies (PSHK) and lecturer at the Indonesia Jentera School of Law.<\/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\">Chinese investors are not scared off by social or environmental protections<\/blockquote><cite class=\"block--pull-quote__cite\">Rebecca Ray, senior academic researcher at Boston University\u2019s Global Development Policy Center<\/cite><\/div><\/div>\n\n\n\n<p>\u201cThe political situation is dynamic, especially when it comes to crucial matters concerning the environment and employment, so the parliament might be careful [in weighing those] considering that 2024 is approaching,\u201d Giri says.<\/p>\n\n\n\n<p>Yet, experts say the country should not see the Job Creation Law as legislation that could sustain and secure future mining and energy investments from China. According to Indonesia\u2019s investment ministry (BKPM), so far in 2022 mainland China has been the <a href=\"https:\/\/www.bkpm.go.id\/id\/publikasi\/siaran-pers\/readmore\/2455101\/80701\">third-largest foreign investor<\/a> in the country after Singapore and Hong Kong, accounting for US$1.4 billion or 13.2% of total foreign investments in the first quarter of the year, figures consistent with pre-pandemic (and pre-Omnibus) levels, when China accounted for $1.2 billion or 16.1% of foreign investment in the first quarter of 2019.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-attracting-chinese-investment\">Attracting Chinese investment<\/h2>\n\n\n\n<p>Rebecca Ray, senior academic researcher at Boston University\u2019s Global Development Policy Center, says her research on Chinese overseas investment shows that \u201crolling back environmental and social protections does not bring more Chinese investment\u201d \u2013 conditions and an outcome the Job Creation Law has looked to stimulate. One of the critical elements of the law would be the implementation of <a href=\"https:\/\/indonesiaatmelbourne.unimelb.edu.au\/indonesian-oligarchs-are-defending-their-wealth-at-the-cost-of-democracy\/\">deregulation policies<\/a>, which could benefit oligarchs in the country.<\/p>\n\n\n\n<p>\u201cChinese investors are not scared off by social or environmental protections,\u201d says Ray, who has studied cases in Indonesia and Amazon Basin countries that face similar governance challenges. She believes that \u201cthese short-term costs are not as big of a part of their decision-making process\u201d as longer-term considerations.<\/p>\n\n\n\n<a class=\"wp-block-cd-related-news alignright block--related-news loading\" data-post-id=\"72073\"><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>In December 2021, Ray published a <a href=\"https:\/\/link.springer.com\/article\/10.1007\/s43621-021-00069-0\">paper<\/a> on social-ecological risk mitigation in Indonesia amid an increase in China\u2019s foreign investments, alongside 13 other authors. She says that reducing such protections would likely do a \u201cdisservice in the long term\u201d on the part of Chinese investors.<\/p>\n\n\n\n<p>\u201cThe investors are there for other reasons,\u201d Ray says. \u201cAnd if they\u2019re just not as well regulated, they\u2019re more likely to run into social conflict, suspensions, even cancellations, because of environmental and social risks that were not properly taken into account in the planning stages.\u201d<\/p>\n\n\n\n<p>\u201cOur work shows that a more constructive policy response is to work deeply with Chinese counterparts, find out what their motivations are, and find a way to jointly regulate these investments, which are often in very environmentally and socially sensitive sectors.\u201d<\/p>\n\n\n\n<p>Southeast Asia\u2019s largest population has seen some public opposition regarding Chinese-funded projects in the country. For instance, in March 2019, activists from WALHI, a domestic environmental NGO, <a href=\"https:\/\/tirto.id\/walhi-desak-bank-of-china-cabut-pendanaan-proyek-plta-batang-toru-dico\">protested<\/a> in Jakarta to demand that the Bank of China not fund a hydropower dam in North Sumatra province. In an <a href=\"https:\/\/www.walhi.or.id\/index.php\/open-letter-to-bank-of-china\">open letter<\/a>, they said the project would \u201clikely doom the newly discovered Tapanuli orangutan species to extinction.\u201d Meanwhile, in June 2020, hundreds of Indonesians in Southeast Sulawesi <a href=\"https:\/\/regional.kompas.com\/read\/2020\/06\/23\/16195351\/tolak-kedatangan-500-tka-china-ratusan-orang-demo-di-perempatan-bandara\">opposed<\/a> the arrival of hundreds of Chinese workers in the province over concerns they deprived local people of jobs.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">A low-carbon pivot?<\/h2>\n\n\n\n<p>How might Chinese investments in Indonesia change given both the legal environment and the necessity to control greenhouse gas emissions?<\/p>\n\n\n\n<p>Bill Sullivan, senior foreign counsel at the Jakarta-based law firm Christian Teo &amp; Partners, says \u201cthere\u2019s always a high level of uncertainty\u201d in Indonesia, particularly around its policies and regulations. But he says that, compared to Western investors, Chinese firms are \u201crather less concerned\u201d about such uncertainties. \u201cI suspect that\u2018s because they\u2019re forced into dealing with the somewhat opaque regulatory environment in China,\u201d he says.<\/p>\n\n\n\n<p>There are other factors, beyond the legal environment, influencing China\u2019s energy and mining investments in Indonesia.<\/p>\n\n\n\n<p>Last year, both <a href=\"https:\/\/dialogue.earth\/en\/energy\/china-to-stop-building-new-coal-power-projects-overseas\/\">China<\/a> and <a href=\"https:\/\/asia.nikkei.com\/Spotlight\/Environment\/Climate-Change\/Tokyo-vows-at-G-7-to-cut-off-overseas-coal-financing-this-year\">Japan<\/a>, two of the biggest investors in Indonesian coal power, announced an end to their financing of new coal-fired power plants overseas. Indonesia also published its low-carbon <a href=\"https:\/\/unfccc.int\/sites\/default\/files\/resource\/Indonesia_LTS-LCCR_2021.pdf\">strategy<\/a> up to 2050. \u201cCombined, these developments reflect a turning point for the country\u2019s clean energy transition,\u201d the GEM report states.<\/p>\n\n\n\n<a class=\"wp-block-cd-related-news alignright block--related-news loading\" data-post-id=\"79534\"><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>Beijing\u2019s new <a href=\"https:\/\/dialogue.earth\/en\/business\/what-chinas-new-guidelines-on-green-development-mean-for-the-belt-and-road\/\">guidance<\/a> on Belt and Road projects, which asks that they align with the Paris Agreement, is also set to influence investment decisions overseas. The Task Force on Climate, Development and the International Monetary Fund recently <a href=\"https:\/\/www.bu.edu\/gdp\/files\/2022\/03\/TF_WP_02_FIN.pdf\">analysed<\/a> some of the negative impacts that China\u2019s falling demand for coal could have on Indonesia, such as loss of employment in the mining sector. However, low-carbon projects such as renewable power generation are a promising alternative investment destination, given China\u2019s keenness to support environmentally sustainable projects.<\/p>\n\n\n\n<p>With over a year left until the deadline for amendments to the Job Creation law, Giri does not foresee a straightforward path, particularly with 2024 election campaigns looming. \u201cThe discussion on the revision of the law is likely to cause political upheaval and the potential for political parties to recalculate,\u201d he says. It doesn\u2019t look like the controversy surrounding the law will be going away any time soon.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Controversy around \u2018unconstitutional\u2019 law adds to an uncertain legal environment, while global shifts in fossil fuel finance may force an investment rethink<\/p>\n","protected":false},"author":3513,"featured_media":81456,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[758],"tags":[520,544,547,556],"hashtags":[],"country":[50040717],"class_list":["post-81138","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-coal","tag-finance","tag-fossil-fuels","tag-infrastructure","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>Omnibus Law 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