"Omnibus Law" on job creation has been enacted

02 Nov 2020

On 2 November 2020, Indonesia’s President officially enacted the job creation law - commonly known as the "Omnibus Law". It aims to attract investment, create new jobs, and stimulate the economy by, among other things, simplifying the licensing process and harmonizing various laws and regulations, and making policy decisions faster for the central government to respond to global or other changes or challenges. The Omnibus Law has amended more than 75 current laws and will require the central government to issue more than 30 government regulations and other implementing regulations within 3 months. The key points include among others: - It focuses on increasing the ease of doing business in Indonesia (e.g., simplifying licensing processes, simplifying land acquisition processes, formalizing economic zones, providing more incentives to free-trade zones, creating a land bank supervisory authority). - It introduces a new concept of risk-based business. The business activities are divided into three categories, i.e. low, medium and high risks. All categories require the business actors to obtain a business identity number. A standard certification is required for a medium-risk business and a business license for high-risk business. - It provides that capital investment (including foreign investment) is permitted except for investment in business lines that are closed or those that can only be carried out by the central government. The central government, through a presidential decree, plans to issue a positive list that replaces the existing negative list. - It removes, in general, the relevant requirements and restrictions for foreign investment that are currently stipulated in various laws governing several business sectors that are amended by the Omnibus Law. This should give the central government more freedom to direct and implement the foreign investment policy in those sectors. - It introduces key amendments in several sectors, notably mining, power, forestry, public housing, healthcare (particularly requirements on medical facilities) and postal services. - It simplifies environmental assessment requirements and licensing procedures, dispenses with statement of environmental management and monitoring capability, integrates environmental permits and business licenses, removes the concept of strict liability and limitations on minimum forest cover for river basins and islands, and creates scope for greater government discretion in permitting forests. - It amends several tax provisions to increase the ease of doing business and to provide more legal certainty. - It also introduced several changes to the Immigration Law including Visit Visa and Limited Stay Visa and the guarantor requirement for expatriates.

Nature of measure:

• Facilitation

Type:

• Entry and establishment (Ownership and control)
• Treatment and operation (Operational conditions)
• Promotion and facilitation (Investment facilitation , Investment incentives)

Industry:

• Primary (Agriculture, forestry and fishing, Mining and quarrying)
• Services (Electricity, gas, steam and air conditioning supply, Transportation and storage, Real estate activities, Human health activities, Other service activities)

Sources:

• Lexology, Indonesia Omnibus Law - Changes to the Immigration Law, https://www.lexology.com/library/detail.aspx?g=e3167dcf-4929-4241-8677-b3737797e6e5, 11 Nov 2020
• Nikkei Asia, Jokowi signs controversial omnibus bill into law, https://asia.nikkei.com/Politics/Jokowi-signs-controversial-omnibus-bill-into-law, 03 Nov 2020
• Baker McKenzie, Indonesia: The House of Representatives Approves Omnibus Law, https://www.lexology.com/library/detail.aspx?g=325667ec-4f80-4cba-af93-a540842edaa1, 09 Oct 2020