It is with little doubt that anyone who follows any reputable business news publication on Indonesia will have heard of the Job Creation Law, or commonly known as the “Omnibus Law”.  There have been a lot of hype generated towards the close of 2019 of the impending ‘law-of-all-laws’ that will reshape the legal and regulatory framework of this beautiful archipelago that abounds in business opportunities.

For the uninitiated, the Law No. 11 of 2020 revises more than 70 existing laws and regulations and promises to simplify business permits and land acquisition processes as well as ease foreign ownership requirements, and would regulate many provisions in various industry sectors. It seeks to strengthen the economy of Indonesia by creating jobs, increasing competitiveness and making it easier to do business in Indonesia. Below is aa summary of some key aspects of Law No. 11 of 2020, structured to the relevancy for foreign investors

Foreign Investments

The Omnibus Law comprises of provisions for the relaxation of foreign investment regulations in Indonesia, as the President’s administration had promised.

The impending revision of infamous “Negative List” within the next 3 months expects to see more business sectors open to foreign investment. There shall also be the introduction of prioritised business sectors, where fiscal incentives and non-fiscal incentives may be provided.

Manpower

The revisions to Indonesian’s Labour Law may be said to be the Omnibus Law’s most controversial component, and have exposed the polarity within the existing sphere of industrial relations. The spirit of the revisions was founded on job creation, and as a corollary, make Indonesia’s workforce more competitive against regional or global standards.

Various changes have been made, inter alia, the certainty of fixed-term employment, streamlining of compensation payments for termination of employment complemented with a less cumbersome process, and the extension of overtime hours allowed.

In the employment of foreign workers, tt would seem that the Indonesian government have heard the strong sentiments of the foreign business community in the application of work visas. Under the provisions of the Omnibus Law, foreign shareholders of a company, members of the board of directors or board of commissioners of the company may be exempted from requiring an approval from the Ministry of Manpower for the utilisation of foreign workers.

Ease of Doing Business

Foreign businesses investing in Indonesia shall also be categorised according to risk levels, and be issued permits accordingly. Moreover, more permits will be designated under the ambit of the Online Single Submission system (“OSS”) and issued electronically. This provides a higher degree of certainty with minimal human interaction. Meanwhile, various permits that were required prior to the Omnibus Law have also been made obsolete due to their antiquated purpose, with the Omnibus Law revoking the relevant regulations requiring such permits.

Law No. 11 of 2020 was enacted in November 2020 with a veritable blend of reactions. Various interest groups question its thoroughness and true beneficial qualities; the business community are dumbfounded as to the absence of consultations; and the labour unions felt threatened that the changes will result in a drastic disadvantage for them and their members. Regardless of one’s view on Law No. 11 of 2020, it is here to stay and ergo imperative for the business community, be they foreign or domestic, to understand how it affects their business. For further information about this topic, please to access the link https://kfmap.asia/research/indonesia-industrial-property-investment-guide/773.

Writer : Tuah & Suparto Advocates and Solicitors

Source : 

https://kfmap.asia/research/indonesia-industrial-property-investment-guide/773