Page 47 - e-KLIPING KETENAGAKERJAAN 8 OKTOBER 2020

In the air-conditioned conference room, Airlangga argued that to prevent Indonesia falling into
the middle-income trap a lot of new jobs had to be created in the country, which is experiencing
a “demographic bonus” whereby the productive population outnumbers that of nonproductive
people.

“Every year, there are around 3 million people who need jobs, and especially during the COVID-
19 pandemic the need to create new job opportunities has become more urgent,” said the Golkar
Party politician.

Experts and foreign investors have said that although the law is expected to boost investment,
the risks of environmental destruction and a lack of skilled labor could deter potential investors.
Foreign funds might not immediately come flooding in, according to Fitch Solutions Asia country
risk research head Anwita Basu.

“Indonesia still falls behind relative to the likes of Vietnam in the region because of the lack of
scaled manufacturing capacity across sectors, quality of labor and an infrastructure deficit,” she
told The Jakarta Post in an email correspondence on Tuesday.

“Furthermore, the pandemic has made the timing of this move awkward.”

Indonesia had recorded more than 307,100 COVID-19 infections as of Tuesday, from around
200,000 in early September when relaxed movement restrictions implemented in various parts
of the country failed to boost business and spending.

The country’s economy shrank 5.32 percent in the second quarter as consumer spending faltered
and investment cooled. With another contraction projected for the third quarter, the government
has forecast Indonesia will face its first annual recession since the 1998 Asian financial crisis.

Foreign investors prefer other destinations because of the uncertainty caused by layers of
overlapping regulations and high labor costs with low productivity in Indonesia, said executive
director for the British Chamber of Commerce in Indonesia (Britcham) Chris Wren on Tuesday.

“But with international investors now embarked on strategic global supply-chain risk
management, Indonesia is right to have pushed [the law],” he told the Post. “Indonesia is now
better placed to pitch [itself as] a genuine and realistic alternative to China and more investors
should be willing to look at the Indonesian proposition in similar terms with Vietnam.”

The Indonesian Chamber of Commerce and Industry (Kadin) also welcomed the law, saying it
would be a solution to issues hampering investment.

“The coronavirus pandemic has had a harmful impact on the economy and businesses and thus
the Job Creation Law is needed to support economic growth through recovery and
transformation,” Kadin chairman Rosan Roeslani said in a statement on Monday.
If properly implemented, the law could help increase foreign direct investment into Indonesia
over the medium term, said JP Morgan economist Sin Beng Ong.

“The best measure of success would be in an increase in more stable capital flows, primarily
direct investment inflows, which reduce the reliance on portfolio capital inflows,” he wrote in a
note.

However, 35 foreign investors managing US$4.1 trillion in assets have warned that the Job
Creation Law could bring about environmental risks for the country.

“While we recognize the necessity for reform of business law in Indonesia, we have concerns
about the negative impact of certain environmental protection measures affected by the omnibus

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