Setting back ambitious reforms . . .
Last Thursday, Indonesia’s Constitutional Court ordered the revision of the controversial Job Creation Law (also known as the Omnibus Law) after ruling it unconstitutional. The court determined that the government did not follow proper law-making and public consultation procedures stipulated in both the constitution and 2011 legislation. For President Joko “Jokowi” Widodo, the court ruling is a significant setback for his ambitious reform agenda. A cornerstone policy for his second term in office, Widodo envisioned the Job Creation Law as critical for attracting increased investment into Indonesia, reducing red tape, and aiding mid-Pandemic economic recovery. While the law remains in force during a two-year grace period for revisions, the government has ceased implementing regulations. The Constitutional Court is sending the strong message that bypassing public consultation will only mean any rushed legislation will end up on its docket, leading to delayed reforms and legal uncertainty.
Long-simmering controversy reignited . . .
Indonesia’s parliament passed the Job Creation Law a year ago to great controversy, inciting massive protests lasting weeks, mainly in Jakarta but spreading throughout the archipelago. Protestors demanding the government repeal the law remain active in Jakarta to this day. Labour unions have led the opposition to the omnibus law stating they have been shut out of the drafting process. They also argue the bill erodes worker rights through multiple provisions, such as lowering severance package requirements and making it easier for companies to dismiss workers. Critics also point to the lack of transparency and public consultation before the bill’s passing. Much of the crucial debates on the bill occurred behind closed doors, with the public and detractors unaware of final revisions made until parliament endorsed the bill and Jokowi signed it into law. International investors also raised concerns over the law lowering environmental protections in Indonesia.
Damage control . . .
Jokowi accepted the court’s decision (which cannot be appealed) and stated his government will immediately start the revision process. Jokowi was also quick to reassure domestic and foreign investors that his government will ensure legal certainty, process continuity, and investment safety despite the ruling. However, economists already predict the court ruling and ongoing revision process will dim Indonesia’s investment prospects and delay investing decisions through 2022, despite promising recovery and growth rates forecasted in the new year. This is not the only legal challenge to the omnibus law, with other pending cases brought by labour unions on the constitutionality of the law’s substance (rather than its drafting process). The recent court ruling will likely further fuel the opposition, thus reinvigorating protests as revisions to the law are heatedly debated again.