February 13, 2020 / 11:58 AM / 15 days ago

FACTBOX-Indonesia bill relaxes rules from mining to labour laws to spur investment

JAKARTA, Feb 13 (Reuters) - Indonesia’s government has submitted to parliament a bill that proposes changes in 80 laws ranging from politically sensitive labour regulations to rules on mining, as President Joko Widodo seeks to attract more investment and create jobs.

Widodo has said passing the “Job Creation” bill and several other so-called “omnibus” laws will address investor concerns about the difficulties of opening a business in the country.

WHY IS THE GOVERNMENT PROPOSING THE CHANGES?

Some 2 million people enter the job market every year in the world’s fourth most populous country, while 7 million are currently unemployed.

Indonesia’s net inward foreign direct investment to GDP ratio is among the lowest in Southeast Asia, despite it being the biggest economy in the region and among the world’s top 20 economies.

WHAT IS IN THE BILL?

There are over 1,000 articles, covering, among other things, simplification of the cumbersome business permit system, changes to environmental rules, relaxation of labour rules, removal of foreign ownership limits and rules on land acquisition.

The bill proposes opening up to foreign investment in all business sectors except for six, such as chemical weapons, though this would be covered in detail under another regulation. References to foreign restrictions in some laws have already been removed, such as in airport operations and plantations.

Many licences and levies currently overseen by regional governments and ministries will come under the control of the president’s office.

Some specific changes include relaxing coal mining rules, a shift in the oil and gas regulatory structure and allowing foreigners to own apartments.

The bill is also taking on politically sensitive labour rules. The maximum severance pay employees must provide will be cut to 17 times monthly salary, from 32 times under current rules, though employers will be asked to give cash benefits upfront to all staff.

A state-owned social security agency will take over some responsibility by providing skills training, six month-cash benefits and access to new jobs for unemployed workers.

The central government will also let local governments set minimum wages according to regional economic conditions.

HOW HAVE PEOPLE RESPONDED?

Some business groups have welcomed it.

Labour unions have rejected the bill, calling it “modern-day exploitation” and pro capitalist, due to what they perceive as cuts in workers’ benefits. They have threatened to go on strike to block the bill.

The bill was also criticised by environmental activists who said the government is putting profit ahead of protecting the archipelago’s rich natural surroundings.

HOW LIKELY IS THE BILL TO PASS?

Parties backing the president control 74% of parliamentary seats, though this does not guarantee a smooth passage. At least one senior member of Widodo’s own party has publicly criticised the bill as being too pro-business.

Widodo had told lawmakers he wanted them to pass the bill quickly, but in a recent interview with BBC Indonesia he predicted the process would take six months. (Reporting by Tabita Diela, Fransiska Nangoy, Gayatri Suroyo, Maikel Jefriando and Bernadette Christina Munthe; Editing by Ed Davies and Susan Fenton)

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