For the past couple of months we have frequently heard President Joko Widodo and other top government officials refer to the upcoming omnibus laws as key tools or solutions to improve the quality and attractiveness of Indonesia’s investment environment.
Currently, one of the largest hurdles in the country’s investment environment is excessive regulation (or red tape); not only at the central government level but also at the regional levels.
Many examples of overlapping regulations can be found. These regulations have been imposed by separate ministries or other government agencies at the central or regional government level. It is a situation that causes uncertainty for investors and quite often leads to a delay – or the cancellation altogether – of an investment project. Recently, a local newspaper even mentioned that more than USD $120 billion worth of capital (that had accumulated in the investment pipeline in Indonesia over the past three years) failed to materialize due to excessive regulations. Weak coordination and cooperation between government institutions make it very difficult for an investor to know (1) which business permits and licenses to arrange, (2) where to arrange them, and (3) in what order.
Indonesian President Widodo mentioned two omnibus bills that are scheduled to be sent to Indonesia’s House of Representatives (DPR) – for further deliberation – in mid-January 2020:
- Omnibus Bill on Job Creation
- Omnibus Bill on Taxation
An omnibus law is a law that revises several, even dozens of other (prevailing) laws. The World Bank labels an omnibus law a technique to concurrently amend many related laws in order to ensure consistency of the provisions of these laws on the same issue or domain and speed up the process of perfecting the legal system of a state.
Read the full article in the December 2019 report
This article discusses:
• Excessive regulation (red tape) that undermines the attractiveness of Indonesia's investment environment
• Difficulty of governance in the decentralization era (weak cooperation/coordination between the center and regions as well as the presence of 'local kings' in the regions)
• The two omnibus laws; what are they and what do they aim for?
• Do we think these omnibus laws can be a game-changer?