President Joko “Jokowi” Widodo introduced the concept of the omnibus bill to Indonesia at the start of his second term, as a way to speed up changes to laws seen to be hampering economic growth.
Given the slow pace of regulatory reform – just over a dozen of the 54 laws slated for deliberation by the House of Representatives (DPR) are expected to be passed this year – the omnibus approach offers a convenient way to bundle multiple cross-sectoral legal changes into a single bill.
But the public, trade unions, environmentalists, local governments and other stakeholders are unhappy, and say the approach lacks transparency and opportunities for public participation. The Covid-19 pandemic has further prompted demands for Jokowi to put the brakes on his omnibus drafts, but neither lawmakers nor the president have shown any sign of slowing down.
Why the omnibus approach?
Regulatory problems are still one of the major obstacles to national economic growth. A growth diagnostic study conducted in 2018 by the National Development Planning Agency (Bappenas) noted that the most binding constraints were overlapping regulations and “sectoral egos” (the tendency for government agencies to prioritise their own interests rather than collaborating with other ministries or institutions).
Another study, conducted by the Indonesian Center for Law and Policy Studies (PSHK) in collaboration with Bappenas in 2019, identified further problems in regulatory management in Indonesia. The absence of strict procedures for harmonising, monitoring and evaluating legislation has led to an explosion in regulations, many of them conflicting or overlapping. From 2014 to October 2018, 7,621 ministerial regulations, 765 presidential regulations, 452 government regulations and 107 new laws were introduced at various levels of government.
In his first term from 2014 to 2019, Jokowi issued a number of policies to overcome these regulatory obstacles and encourage ease of doing business. A deregulation policy package introduced in 2016 aimed to simplify and restructure the legislation system. In his second term, Jokowi introduced the omnibus approach – with the controversial omnibus bill on job creation (RUU Cipta Kerja) at the top of his list.
In the DPR’s list of priority bills (National Legislative Program, Prolegnas) for 2020-2024, there are three draft omnibus bills – the job creation omnibus bill, first mentioned by Jokowi in his speech as re-elected president, has copped considerable criticism from the public.
Why has it become so controversial?
Drafted in the first three months of the president’s second term, the omnibus bill on job creation was prepared by the Coordinating Ministry for Economic Affairs, in a process widely criticised for its lack of transparency and public participation.
No draft was made accessible to the public, and the government taskforce set up to guide the process was mostly made up of entrepreneurs and representatives of employers’ associations, with no voice given to trade unions or workers.
Only when it had already been submitted to the DPR was the draft finally made public. Criticism of the substance of the bill quickly followed, in particular, aspects relating to employment, the environment, decentralisation, governance, and legislation.
Trade unions say the bill unfairly favours employers, endangering workers’ rights. Environmentalists say relaxation of business permit processes under the bill will severely weaken environmental protections. Local governments say it constitutes a backwards step for decentralisation, pulling authority back into the hands of the central government and the president.
In contradiction of a Constitutional Court decision (No. 137/PUU-XIII/2015), the bill would return to the central government the power to revoke regulations made by local governments.
The draft bill also raises concerns for democratic governance. For example, it proposes granting the government the authority to change the law simply by passing a government regulation. In the Indonesian legal system, laws rank higher than government regulations, and can only be formulated or revised in the DPR (with approval of the president). Providing the government with the ability to change the law by passing a regulation would conflict with the hierarchy of laws and blur the separation of powers.
End of the road?
Despite public pressure to pause discussions to prioritise handling the Covid-19 pandemic, the DPR has continued to work on the bill. Two factions have flat-out refused to continue discussion during the pandemic: the Prosperous Justice Party (PKS) and the Democratic Party.
As opposition mounted in the leadup to International Labour Day on 1 May, the DPR and the government agreed to postpone discussion of the controversial labour arrangements in the bill until the very end, reportedly to allow more dialogue with stakeholders. But the remainder of the process is expected to run smoothly, with the bill enjoying majority support in the DPR from the 427 seats held by Jokowi’s coalition partners – the Indonesian Democratic Party of Struggle (PDI-P), Golkar, the Greater Indonesia Party (Gerindra), the Nasdem Party, the National Awakening Party (PKB), and the United Development Party (PPP). Only the 148 DPR members from PKS, the Democratic Party and the National Mandate Party (PAN) oppose the bill.
In many ways, it is unfortunate that Indonesia’s first attempt to use the omnibus approach has been so negative.
Overlapping regulations at the central and regional levels of government pose real problems for regulatory reform, requiring comprehensive government efforts. “Sectoral egos” continue to hamper a coordinated response, slowing economic growth. The omnibus approach does pose potential solutions to these problems. However, its poor implementation via a closed, non-participatory process, and its flawed substance, contrary to democratic principles, have proven to be self-defeating.
The DPR should stop its discussion of the bill, and return the draft to the president to revise its problematic elements. Continued conflict over the bill’s substance and formulation process only serves to underscore the urgent need for bureaucratic reform to promote economic growth in Indonesia.