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Economist argues Job Creation Perppu creates policy uncertainty

Tempo - January 3, 2023

Amelia Rahima Sari, Jakarta – The Center of Economic and Law Studies (CELIOS) economist Bhima Yudhistira believes that the issuance of the government regulation in lieu of law on Job Creation (Perppu Cipta Kerja) will only pave the way to policy uncertainty.

He argues that the main issue of competitiveness is the high level of policy uncertainty that would create doubt among investors regarding ever-changing rules. Yudhistira argues that there are no guarantees that investments will increase after the Perppu is issued.

"In fact, investors need long-term regulatory certainty. Ideally, when making regulatory products, let alone laws, they must be prepared carefully. It will only become a problem if you rush it," said Bhima in a written statement to Tempo on Tuesday, January 3.

"There is no guarantee that after the Job Creation Perppu investment will increase because so far many Job Creation derivatives have been in effect, but the number of stalled investments remains high."

Bhima also highlighted investors' doubts about increasing investment ahead of Indonesia's political year. He said the presence of the regulation in lieu of law actually confirms the perception that ahead of the election, policy uncertainty remains quite high.

"That, for investors, is a big regulatory risk," said Bhima.

He questioned one of the Articles in the Perppu which can have the most impact on the environment and investors alike, Article 128 A where the government provides a 0 percent royalty for coal utilization.

Bhima believes this will have a negative impact on the renewable energy sector because the use of coal remains massive and will threaten to shrink the portion of EBT or New and Renewable Energy.

"The government contradicts the energy transition acceleration [discussed] at the G20 forum in Bali, causing confusion from potential investors who want to enter," he explained.

As reported on Monday, President Joko "Jokowi" Widodo casually responded to the polemic that stemmed from the issuance of Government Regulation in Lieu of Law (Perppu) on Job Creation. The issuance has drawn criticism.

"Yes, it's common. Pros and cons in every policy, and every time a regulation is issued, are common. But we can explain everything," Jokowi said during a visit to Tanah Abang Market on Monday, January 2, 2022.

On November 25, 2021, the Constitutional Court ruled that Law No. 11/2020 concerning Job Creation was conditionally unconstitutional. The government through Constitutional Court's verdict No. 91/PUU-XVIII/2020 was ordered to amend it within 2 years.

Instead of amending the law, president Jokowi issued the Perppu on December 30, 2022, based on urgency to anticipate the threat of an economic crisis.

Source: https://en.tempo.co/read/1675235/economist-argues-job-creation-perppu-creates-policy-uncertaint