Hope for Perppu on Job Creation

The government has turned regulation in lieu of law (Perppu) No. 2/2022 into a "weapon" to deal with the global uncertainty expected to continue in 2023.

KOMPAS/AGUS SUSANTO

Cadres and sympathizers of the Labor Party demonstrate against the Government Regulation in Lieu of the Job Creation Law around the Arjuna Wiwaha Horse Statue, Central Jakarta, Saturday (14/1/2022).

JAKARTA, KOMPAS — An unfavorable world economic condition is predicted to occur again in 2023. Global demand will weaken and have a significant impact on the national economy’s performance.

Therefore, the government sees that regulation in lieu of law (Perppu) No. 2/2022 on job creation is necessary to anticipate this condition. The Perppu, among other instruments, is expected to encourage domestic demand in times when there is a decline in global demand.

"Indonesia has entered a period when global uncertainty still occurs. One of the threats of the situation is stagflation, namely several countries, including the United States, are is continuing to raise interest rates," Coordinating Economic Minister Airlangga Hartarto said on Thursday (26/1/2023) in Jakarta.

According to him, the government issued the Perppu on job creation to anticipate the threat of the global condition. The presence of the Perppu can act as a buffer that encourages domestic demand in the middle of a decline in global demand.

"The Perppu on job creation is expected to encourage household consumption and domestic investment, especially in the MSME [micro, small and medium enterprise] sector and create jobs," Airlangga said.

Also read:

> Job Creation Law and Legal Certainty of Investment Climate

> Job Creation Law Endures a Steep Road of Revision

The same hope was conveyed by Shinta W. Kamdani, the deputy chair of the Indonesian Employers Association (Apindo).

According to Shinta, business and industrial actors expect Perppu No. 2/2022 to provide legal certainty and optimism toward increasing investment, which will in turn have an impact on employment.

Airlangga explained that the Perppu on job creation would also act as a buffer because after it was issued, various government regulations (PPs) could be prepared to provide certainty to investors. "We see that some investments are hampered because no PPs have been made again, or they need to be improved after two years of work of the Job Creation Law," he said.

The justices of the Constitutional Court (MK) in November 2021 ruled that Law No. 11/2020 on Job Creation was formally flawed. For this reason, the court declared the Law on Job Creation was conditionally unconstitutional.

The Perppu on job creation is expected to encourage household consumption and domestic investment.

According to the Constitutional Court justices, the Job Creation Law was contrary to the 1945 Constitution and was conditionally not legally binding, as long as it was not "improved within two years after the issuance of this verdict ". Thus, the Job Creation Law was still valid until the improvements were made according to the predetermined period as stated in in the verdict.

Then, the government towards the end of 2022 issued the Perppu on job creation. At the Presidential Office in Jakarta at the end of December 2022, Airlangga revealed a number of urgent reasons underlying the issuance of the Perppu on job creation, such as anticipating the global economic condition.

According to Airlangga, the Constitutional Court's ruling on the Job Creation Law had greatly affected the behavior of the business world, both at home and abroad. "They are almost all waiting for the Job Creation Law to be sustained," he said.

At the end of last year, Coordinating Political, Legal and Security Affairs Minister Mahfud M.D. said that legal aspects and legislation pointed to an urgent need to issue Perppu No. 2/2022.

In accordance with Constitutional Court Decision No. 138/2009, the reason for the issuance of the Perppu was urgent need (or) coercive urgency to be able to resolve legal issues quickly with a law, but the law that was needed did not exist, which presented a legal vacuum.

Several elements of civil society questioned the Perppu on job creation with the Constitutional Court through applying for both formal tests and material tests. The move was taken because the Constitutional Court was deemed to possess the authority to test the Perppu, both in terms of the validity of its legislation and the regulation’s substance.

KOMPAS/NINA SUSILO

Coordinating Minister for the Economy Airlangga Hartarto, Coordinating Minister for Political, Legal and Security Affairs Mahfud MD, and Deputy Minister of Law and Human Rights Edward OS Hiarief announced a Government Regulation in lieu of the Job Creation Law after meeting the President around 10.15 to 10.45 at the Merdeka Palace, Jakarta, Friday (30/12/2022)

Implementation challenges

Sarman Simanjorang, the deputy chair of the Indonesian Chamber of Commerce and Industry (Kadin), said the Perppu on job creation contained several items that needed to be clarified as to their substance in either a derivative regulation or a government regulation (PP), so their implementation did not lead to uncertainty, such as new provisions regarding the calculation of minimum wage.

Therefore, the government was asked to involve all affected parties in the process of preparing the derivative regulations.

"Involve entrepreneurs and workers who intersect with the issue. All must be asked to speak during the preparation of a PP so we can find the right solution and format. Do not let the wage issue continue to [cause] a commotion every year," said Sarman.

To fully realize the expectations for the Perppu on job creation, issues related to coordination across ministries and institutions, as well as between the central and regional governments, also needed to be overcome. If not, one possible impact was the less-than-optimal business licensing process through the online single submission risk based approach (OSS-RBA) platform.

Also read:

> Employers and Workers Question Perppu

> Perppu and Urgency

Apindo chairman Hariyadi Sukamdani said that the data was not synchronous between ministries and institutions, local governments, and the OSS-RBA system. As a result, the licensing process still took time and energy.

According to the Investment Climate Development Deputy Yuliot at the Investment Ministry, the ministry continued to coordinate with other ministries and institutions to improve and integrate the various existing systems in line with the OSS-RBA. The ministry expected this online platform to continue to function as expected.

Discussion process

House of Representatives Legislation Body (Baleg) chairman Supratman Andi Agtas explained that after the Perppu was submitted by the government, the document was currently still on the desk of the House leadership. The process to approve the Perppu must be preceded by discussions at a House Leadership Meeting.

We still have time to discuss [the Perppu on job creation] until 17 February.

After that, the Perppu would be handed to a meeting of the House deliberation agency to decide on the House format for discussing it with the government. "We still have time to discuss [the Perppu on job creation] until 17 February”, when the current House session would end, he said.

Andi explained, the because the material for discussion was a Perppu, the forthcoming discussion would not be about its substance, but rather on whether to approve it or not.

"So [the process] is easier," said the Gerindra Party politician. (AGE/JUD/CAS/BOW/NIA/WKM/INA/ANA/APA/Z15)

This article was translated by Hyginus Hardoyo.