Omnibus Law on Job Creation Overview Series: A Perspective from Foreign Investment and Trade Laws and Regulations

Indonesia’s omnibus law has been promulgated through Law No. 11 of 2020 on the Job Creation on 2 November 2020 (“Law 11/2020”). Law 11/20 introduces significant adjustments to Indonesia’s laws by establishing new provisions on the investment ecosystems and amends 78 (seventy-eight) existing laws. To see the complete list of the amended laws, please click here.

The objective of Law 11/2020 is to improve the ease of doing business in Indonesia to attract more investments, generate more jobs, and thus will support Indonesia’s economic recovery and long-term goal of becoming a wealthy country. The main concern of this reformation focused on increasing bureaucratic efficiency for direct investment in Indonesia.

Note: Click here and here to access our previous publications regarding this matter.

Legal Framework: In preparing the below executive summary, we refer to the following laws and regulations:

  1. Law 11/2020;
  2. Law No. 7 of 2014 on Trade (“Law 7/2014” or “Trade Law”);
  3. Government Regulation No. 74 of 2020 on Investment Management Authority (“GR 74/2020”); and
  4. Presidential Regulation No. 44 of 2016 on List of Business Fields Which Are Closed To Investment and Business Fields Which Are Conditionally Open to Investment (“PR 44/2016”).

Main Keys of Notable Amendments Introduced by Law 11/2020: Please find below our notes with regard to some notable amendments introduced by Law 11/2020, especially in the foreign investment and trade sector.

Update on Indonesian Negative Investment List (“NIL”): The government has released the draft of new Presidential Regulation (“Draft”) that will revoke the existing regulations, namely: (i) PR No. 76 of 2007 on Criteria and Requirements for Preparation of Closed Business Sectors and Open Business Sectors with Requirements in the Investment Sector and (ii) PR 44/2016.

We note that the Draft classifies and stipulates business activities to: (i) priority list; (ii) specifically allocated for partnership with cooperatives and micro-small enterprises; (iii) business with certain requirements; and (iv) other business activities. The PR sets out various conditions that must be fulfilled by the enterprises of each classification.

Indonesian Sovereign Wealth Fund (“SWF”): Law 11/0202 stipulates the establishment of SWF namely Investment Management Authority/Lembaga Pengelola Investasi (“LPI”) which objective is to optimize the managed asset value in long-term in order to support Indonesia’s sustainable development (Art. 5 of GR 74/2020).

We note that the initial capital of LPI set out to be amounting of IDR 75 Trillion whereas the IDR15 Trillion (USD 1 Billion) derived from the state budget and the remaining amount derived from other sources (Art 3 (3) letter a jo. Art. (4) of GR 74/2020).

Notable Amendments of Trade Laws: We note that Law 11/2020 provides several notable amendments to Law 7/2014 as follows:

  1. The trade licensing will now undertake through the Online Single Submission (“OSS”) System (Art. 24 (1) of Law 7/2014 as amended by Art. 46 Point 6 of Law 11/2020);
  2. The amendment of the Trade Law provides the types of administrative sanctions that can be imposed for violations of certain provisions of the Trade Law, namely warning letters, recall of products from distribution, temporary suspension of business activities, closure of warehouse, fines and/or revocation of the business license. However, a government regulation will further provide the criteria, type, and amount of fines and procedures for the administrative sanctions (Art. 77A of Law 7/2014 as added by Art. 46 Point 27 of Law 11/2020); and
  3. The authority with regard to licensing in trade affairs will be further governed by the Central Government, instead of Trade Minister Regulation. We were in the view that this approach is indeed in line with the aim of Law 11/2020 to restructure the licensing for ease of doing business in Indonesia.

The article above was prepared by Marshall S. Situmorang (Partner) and Aniendita Rahmawati (Associate)

Disclaimer: The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances. For more information, please contact us at mail@nusantaralegal.com.