The government is pinning its hopes on foreign investment and state spending to improve economic growth next year, following the expected deliberation of the omnibus bill on job creation this week, the country’s top officials have stated. The Finance Ministry’s Fiscal Policy Agency head, Febrio Kacaribu, said on Oct. 2 that economic reforms through the bill, the creation of a sovereign wealth fund and the government’s investment, were expected to help support the economy in 2021. “We are pushing for these economic reforms so that investment is positive going forward, otherwise it would be hard to improve economic growth,” he told reporters. “We must start to chase investment-driven economic growth to have a large multiplier effect.” The House of Representatives Legislation Body (Baleg) and the government have agreed to pass into law the controversial omnibus bill on job creation in the next plenary session on Oct. 8, despite mounting opposition from members of the public – particularly labor groups – in recent months amid concerns over its impact on labor rights and the environment, among others. The government is trying to revise 79 laws and more than 1,200 articles with the omnibus bill. The bill, which is more than 1,000 pages long and contains 174 articles in 15 chapters, is expected to improve bureaucratic efficiency and cut unnecessary red tape, particularly in regard to business permits and investment. The bill is seen as necessary, as the country’s economy shrank by 5.32 percent in the second quarter this year, and is widely expected to record the first economic contraction since the 1998 Asian financial crisis this year. The government is targeting 5 percent economic growth next year. Meanwhile, Investment Coordinating Board (BKPM) data shows foreign direct investment (FDI) realization fell 6.9 percent year-on-year to Rp 97.6 trillion (US$6.5 billion) in the second quarter as the global economy cooled due to the COVID-19 outbreak.
The omnibus bill on job creation is expected to help the economy grow 5.7 to 6 percent, according to the Office of the Coordinating Economic Minister’s secretary, Susiwijono Moegiarso, claiming that it will be able to create up to 3 million jobs per year. The government estimates that up to 5.23 million Indonesians may lose their jobs during the pandemic. “Without the structural reform brought by the omnibus bill on job creation, risks loom for Indonesia’s economy in the future,” he said in a statement on Oct. 2. “We are hoping that the omnibus bill could be a breakthrough regulation that could solve the complex labor issues and facilitate investment so that we can create jobs,” he added. The government also plans to continue its social protection programs, tax incentives and stimulus for small and medium businesses, as well as large corporations, among other planned stimulus programs to revive the economy, Febrio went on to say. “We will continue to build infrastructure and strengthen the information and communications technology infrastructure to support the economy going forward,” he added. The government is preparing Rp 2.75 quadrillion in state expenditure to fuel the virus-battered economy next year, including key sectors such as infrastructure, education and health care, among others. The country expects a budget deficit of 5.7 percent of GDP next year, lower than this year’s 6.34 percent. “The prospect of investment growth will heavily rely on the trajectory of the coronavirus pandemic,” Center of Reform on Economics (CORE) Indonesia research director Piter Abdullah told The Jakarta Post. “Investment will not come without getting the pandemic under control.” Although the omnibus bill would improve the country’s investment climate, the government’s inconsistency in policy-making could hinder foreign investment, he went on to say. “They need to be consistent with their policies to ensure investment will come at full potential.”