The Week That Was in ASEAN@Smartkarma - The Omnibus Law, Bank Risk, and Mobile World

Open Omnibus Path, but for Bills / DPR Dissuaded from Jiwasraya Probe / US Journalist Detained

Indonesia Political Risk Analyst

Kevin O’Rourke

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

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President Widodo's Omnibus Bill on Job Creation proposes the most extensive re-write of laws in Indonesia's history.  It would, as advertized, improve the investment climate.  Stipulations on labor-market regulation would bring down severance costs by half, Ref Wkly estimates, while providing sorely needed flexibility for layoffs and wages.   For 78 other laws across the economy, the bill mandates a host of generally investor-friendly changes, including rules on foreign ownership of apartments, the lifting of certain foreign-ownership ceilings, streamlined permitting and a provision whereby the president can cancel unfavorable regional regulations.  But the bill's sheer scope may prevent it from passing anytime soon -- it could require years. Omnibus Bill: President Joko Widodo provided parliament with an Omnibus Bill on Job Creation that constitutes the most ambitious re‑write of the legal code in Indonesia’s history.  It would change aspects of 79 laws in dozens of diverse areas.  Overall, initial indications provide reason for optimism that the bill, if passed as is, would prove constructive in fostering investment, growth and employment.  But its mammoth scale renders it unlikely to pass this year or, perhaps, even next (Page 2).  Specifically with regard to labor‑market regulation, Ref Wkly estimates that the Omnibus Bill would cut severance pay costs by approximately half, although this remains unconfirmed by other sources.  The bill also mandates changes to minimum wage structures while rendering dismissals of workers easier to implement (p. 3). Politics: Zulkifli Hasan won re‑election as National Mandate Party (Pan) chair – the first to ever do so.  His triumph marks the end of the two‑decade era of dominance of party founder Amien Rais.  The outcome is also a rare instance of genuine change via democratic voting within a political party – although the congress involved scuffling and chair‑throwing with four serious injuries and a cardiac arrest.  Hasan seems likely to incline Pan towards support for Widodo (p. 8).Policy News: The ministers of education and finance introduced changes to the Operational School Assistance (Bos) program.  The reform aims to improve transparency and effectiveness, although the ministers are also using Bos to cover the thorny problem of salaries for teachers’ assistants (p. 11).  The state enterprise minister chided PT Telekom for generating meager returns and failing to enter high‑tech sectors (p. 12).  The vice trade minister expressed optimism about securing renewal of Indonesia’s eligibility for the US Generalized System of Preferences (GSP); he signaled increased foreign ownership ceilings (from 80 percent currently) are likely for the insurance and re‑insurance sectors (p. 12).  The president called on ministers to elevate Indonesia’s rank in the Ease of Doing Business (EoDB) index (p. 12). <table class="table table-striped"><tbody><tr><td style="width: 203.4pt;">Produced since 2003, the Reformasi Weekly Review provides timely, relevant and independent analysis on Indonesian political and policy news.  The writer is Kevin O’Rourke, author of the book Reformasi.  For subscription info please contact: &lt;kevin.orourke@reformasi.info&gt;.</td></tr></tbody></table>Health: There are still no confirmed Covid‑19 cases in Indonesia, but the health minister’s defiance on the issue may prove imprudent and unconstructive.  The minister, Terawan Putranto, attributed the absence of cases to a blessing from God, while a Harvard specialist suggested that inadequate testing may be the key factor (p. 13).  In Natuna, the 285 returnees from Wuhan remain in good health, say officials, and will return to their homes on 15 February (p. 16).

President Widodo's Omnibus Bill on Job Creation proposes the most extensive re-write of laws in Indonesia's history.  It would, as advertized, improve the investment climate.  Stipulations on labor-market regulation would bring down severance costs by half, Ref Wkly estimates, while providing sorely needed flexibility for layoffs and wages.   For 78 other laws across the economy, the bill mandates a host of generally investor-friendly changes, including rules on foreign ownership of apartments, the lifting of certain foreign-ownership ceilings, streamlined permitting and a provision whereby the president can cancel unfavorable regional regulations.  But the bill's sheer scope may prevent it from passing anytime soon -- it could require years. Omnibus Bill: President Joko Widodo provided parliament with an Omnibus Bill on Job Creation that constitutes the most ambitious re‑write of the legal code in Indonesia’s history.  It would change aspects of 79 laws in dozens of diverse areas.  Overall, initial indications provide reason for optimism that the bill, if passed as is, would prove constructive in fostering investment, growth and employment.  But its mammoth scale renders it unlikely to pass this year or, perhaps, even next (Page 2).  Specifically with regard to labor‑market regulation, Ref Wkly estimates that the Omnibus Bill would cut severance pay costs by approximately half, although this remains unconfirmed by other sources.  The bill also mandates changes to minimum wage structures while rendering dismissals of workers easier to implement (p. 3). Politics: Zulkifli Hasan won re‑election as National Mandate Party (Pan) chair – the first to ever do so.  His triumph marks the end of the two‑decade era of dominance of party founder Amien Rais.  The outcome is also a rare instance of genuine change via democratic voting within a political party – although the congress involved scuffling and chair‑throwing with four serious injuries and a cardiac arrest.  Hasan seems likely to incline Pan towards support for Widodo (p. 8).Policy News: The ministers of education and finance introduced changes to the Operational School Assistance (Bos) program.  The reform aims to improve transparency and effectiveness, although the ministers are also using Bos to cover the thorny problem of salaries for teachers’ assistants (p. 11).  The state enterprise minister chided PT Telekom for generating meager returns and failing to enter high‑tech sectors (p. 12).  The vice trade minister expressed optimism about securing renewal of Indonesia’s eligibility for the US Generalized System of Preferences (GSP); he signaled increased foreign ownership ceilings (from 80 percent currently) are likely for the insurance and re‑insurance sectors (p. 12).  The president called on ministers to elevate Indonesia’s rank in the Ease of Doing Business (EoDB) index (p. 12). Produced since 2003, the Reformasi Weekly Review provides timely, relevant and independent analysis on Indonesian political and policy news.  The writer is Kevin O’Rourke, author of the book Reformasi.  For subscription info please contact: &lt;kevin.orourke@reformasi.info&gt;.Health: There are still no confirmed Covid‑19 cases in Indonesia, but the health minister’s defiance on the issue may prove imprudent and unconstructive.  The minister, Terawan Putranto, attributed the absence of cases to a blessing from God, while a Harvard specialist suggested that inadequate testing may be the key factor (p. 13).  In Natuna, the 285 returnees from Wuhan remain in good health, say officials, and will return to their homes on 15 February (p. 16). 

Vast Omnibus Holds Promise but May Languish / Would Halve Severance / Health Minister Vs Harvard