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The World Bank Has Reminded Indonesia Of The Bad Impact Of The Omnibus Law

World Bank
World Bank

JAKARTA – The World Bank has not only described the positive impact of the Omnibus Law in Indonesia. This report entitled in ‘Long Road to Economic Recovery’ which was released last July.

In this report, this world institution apparently gave a view regarding the negative impact of the Omnibus Law on Cipta Kerja.

“This bill also proposes reforms that could have devastating consequences. Especially in the current economic environment,” wrote the World Bank in its report.

For example, the proposals in this bill concerning relaxation of requirements for environmental protection. And this law would destroy a wealth of natural resources. Which are essential for the livelihoods of many people and could have a negative impact on investment.

“However, the cause of the delay and uncertainty in obtaining environmental permits is the complicated process and arbitrary and corrupt implementation, rather than the safeguards enshrined in the Environmental Law [2009],” states the World Bank.

At that time, the World Bank highlighted that this bill removes safety principles from several laws. That regulate is the licensing of high-risk activities and products, such as medicines, hospitals and building construction, and no longer considers them a high risk.

Furthermore, some of the revisions in this bill proposed for the Manpower Law could reduce protections for workers.

Proposed exemptions from compliance with minimum wages and reforms to eliminate severance pay in the absence of fully refined proposals for effective unemployment benefits and insurance schemes could undermine protections for workers and increase income inequality.

“This is especially problematic at a time when unemployment has increased due to the Covid-19 crisis,” wrote the World Bank.

On the other hand, the World Bank considers this bill has the potential to support post-COVID-19 recovery in the near future. While setting the foundation for faster long-term growth.

World Bank Notes on Omnibus Law

Omnibus Law Protests
Omnibus Law Protests

According to the World Bank, there are at least 3 positive things from the Omnibus Law Bill which was still being discussed in the DPR.

First, this bill will signal to the international community that Indonesia is open to business by removing investment restrictions. Including discriminatory practices against foreign investors in sectoral laws. Removing restrictions on foreign capital could trigger an additional investment of US $ 6.8 billion.

Second, this bill will improve the trading environment and increase the participation of local companies in global value chains that depend on imports and exports.

Adopting a risk-based approach to import and export licensing can reduce costs and trade uncertainty.

“World Bank analysis shows that letters of recommendation to obtain each import. This license cost 6 cents for every dollar of import value,” the report said.

The World Bank also views that moving the authority for trade-related licensing. From sectoral ministries to the central government will reduce ministerial discretion and opportunities for corruption.

Third, efforts to eliminate the appointment process from the Minister to accredited institutions to carry out conformity assessments. With the Indonesian National Standard (SNI) can accelerate and reduce the uncertainty of the SNI certification process. The SNI certification process is estimated to increase input costs for businesses by 21 percent.

At the same time, the World Bank believes that reform of labor laws is less important than trade and investment reforms to stimulate new investment.

Laws and regulations and other recent policies, from mining to agriculture. Also run the risk of having a negative impact on the spillover of economic activity on the community.

Also read other articles about omnibus law becomes a scenario to save indonesia’s economy from a crisis.

 

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