Jokowi and the oligarchs: Indonesia’s elite set to win from Omnibus Bill

Protests and riots erupted across Indonesia last week as the Jokowi administration pushed through its controversial Omnibus Bill, a move that many believe exposes the close ties between government and big business in Indonesia

Stania Puspa
October 13, 2020
Jokowi and the oligarchs: Indonesia’s elite set to win from Omnibus Bill
A student holds a sign reading 'the motherland is on stand up comedy' during the second day of a three-day-strike by labourers against the omnibus bill on October 7. Photo: Fajrin Raharjo/AFP
In Short
  • Controversial Omnibus Bill passed eight days ago, causing protests
  • Bill set to ease restrictions on coal operations and hit workers rights
  • Close ties between government and extractive industry plainly obvious

The enactment of Omnibus Bill on Job Creation by Indonesian parliament eight days ago has caused an uprising from tens of thousand protesters, as people first hit the streets across the archipelago last week in ongoing protests that have resulted in rioting and arrests. 

Government claims the law will create jobs, woo investors and boost economic growth. But critics argue the law is part of a larger plan to extract Indonesia’s natural resources on a mass scale, benefiting a handful of political elites with their fingers in the country’s growing coal industry

The question remains – is this bill the mega stimulus package that the ailing recession-bound country needs amid the global economic downturn, or an oligarchal push towards furthering vested interests in Indonesia’s dirty power and weakening worker’s rights.

Evidence, along with much of the Indonesian public, suggest the latter. 

The furore arose last week when parliament abruptly passed the supposed-to-be revolutionary Omnibus Bill. The Bill consists of 11 clusters covering the agrarian sector, investment, manpower, small and medium enterprises, business, research and innovation, bureaucracy, sanction, land control, government tender and Special Economic Zones. 

It amends 76 laws written in a super-thick near-1,000-page document and will result in over 400 new government regulations being passed. The law was first initiated when Joko “Jokowi” Widodo was inaugurated for his second and final five-year presidential term in October 2019. It underwent blistering deliberation by government and parliament under the cloud of the pandemic before being passed in just under a year earlier this month

The majority of parliamentary factions approved the bill, facing opposition only from the Islamist Prosperous Justice Party, as well as the Democratic Party who walked out from the plenary meeting in protest.

The enactment, however, has received harsh rejection from workers, students and civil society, resulting in tens of thousands taking to the streets across the country in ongoing protests despite the country’s rising Covid-19 cases and government restrictions on public gatherings. The protesters declared a no confidence vote in the government, demanding they immediately repeal the law, while critics have pointed to the fact that there is no final copy of Omnibus Bill publicly available more than a week after its endorsement by parliament.     

But while final finer details remain hard to come by, publicly available information shows the most obvious beneficiaries of the Bill seem to be those in the extractive industries. 

While the State is greasing the wheels of the mining sector, easing their operations, the Indonesian people are also being thrown in as collateral in this faustian bargain

In the latest version of the Bill, Article 128A eliminates any royalty payments from companies to the government for their mining operations, severely impacting state revenue, as well as encouraging exploration of forests and traditional lands in the face of economic recession.    

The Bill has also slashed ecological safeguards by eliminating public involvement in Environmental Impact Assessments on Article 29, 30 and 31. 

Article 29A permits individuals to utilise conservation areas under social forest licensing, which will open indigenous people to land grabs and exploitation of pristine forests in Papua, Kalimantan, Java and Sumatra.

But while the State is greasing the wheels of the mining sector, easing their operations, the Indonesian people are also being thrown in as collateral in this faustian bargain of economic development. 

Amnesty International dubbed the Bill a bust for human rights, adding that it violates two international covenants that Indonesia ratified in 2005 – the International Covenant on Economic, Social and Cultural Rights, and the International Covenant on Civil and Political Rights.   

This exploitation of natural resources will be operating through cutting labour costs, namely eliminating basic living standard components on Article 88C. This includes trimming weekends from two days to one and erasing two-month sabbatical leave for workers who have worked for six consecutive years (Article 79), all while providing no job security through the indefinite extension of temporary work contracts (Article 59).  

Workers have also protested the reduced severance payment stipulated in the Omnibus Bill, from 32 times their latest salary as formerly mandated in the Labour Law to 25 times. The Omnibus Bill also removes the rights of workers for layoffs if the company abuses, insults or threatens them, previously regulated under Labour Law Article 169. 

Women’s rights to take paid pregnancy, labour, miscarriage and menstruation leave are also not stipulated clearly in the Omnibus Bill, despite regulations being written in the previous Labour Law. The Omnibus Bill also abolishes criminal charges for companies who don’t include their workers in pension programmes, previously written in Article 184 of Labour Law.  

State capture

But Indonesia’s Omnibus Bill was merely the latest legal ambush that the government and parliament have conspired to launch since Jokowi’s second presidential inauguration last year. 

The first ensnare was the revision of Corruption Eradication Commission Law in late 2019, which curtailed much of the Commissions’ authority, resulting in a significant drop in graft cases investigated afterwards. The revision caused the first wave of mass student demonstrations last year, claiming the lives of two students.  

Youths throw stones at riot police during the second day of an ongoing strike of labourers against the Omnibus Bill in Lampung on October 7. Photo: Perdiansyah/AFP

Second was the passing of the Mining Bill that removed the size limit placed upon mining operations and allowed automatic permit extensions up to twenty years. The endorsement was made in May, when public scrutiny and attention was limited due to Covid-19. 

Article 47 and 83 of the Mining Law allow mining companies to extend mining permits every ten years until closure without reclamation, meaning they can legally leave open vast pits that will devastate communities and the environment. Article 169A of the same law allows mining companies to receive permit extensions without oversight and scrutiny, as stipulated in previous regulations, opening the door for even greater monopolies to grow. 

Third was the revision of Constitutional Court Law last month, which many interpret to eliminate the Constitutional Court’s legally binding power over the government and parliament. The revision also grants longer judicial terms to the current judges that have potential for interference and power abuse. Activists accused the revised law of being a “trade-off”, so politicians could potentially influence the court’s futures decision on public challenges to the numerous controversial Bills.     

But with its bountiful legal amendments, the Omnibus Bill is set to trump these. 

Executive Director of the Indonesian Forum for Environment, Yaya Nur Hidayati, called the Omnibus Bill a blatant sign of state capture, a condition when elite politicians or businesspeople manipulate policy formation to their own advantage. 

“The State was held hostage by the economic and political interests of the oligarchs,” said Yaya during discussion of the Omnibus Bill held by Gajah Mada University’s Center for Anti-Corruption Study in July. “The Omnibus Bill was misleadingly narrated as an effort to overcome barriers in the investment climate by fixing institutional problems in regulations.” 

Evidence suggests merit to this argument, with the connections between the government and firms set to benefit from the bill running deep. The Coalition of Cleaning Indonesia pointed out the immense conflict of interest stemming from the colliding functions of business and political actors in Indonesia, both in government and beyond, with spokesperson Johansyah saying some 50% of parliament members are connected to the coal mining industry. 

The Jokowi administration’s energy policies have also benefited extraction companies, with the country’s coal production increasing by 50% since 2010

As reported by Greenpeace last week, Speaker for the House of Representative, Puan Maharani is among 12 members of government and parliament affiliated to several oil and gas companies, including Odira Energy Karang Agung and PT Rukun Raharja. While Azis Syamsudin, Leader of the Plenary Meeting and a crucial figure in passing the Omnibus Bill, is the Commissioner coal mining company PT Sinar Kumala Naga in East Kalimantan. 

The Coordinating Minister for Economic Affairs Airlangga Hartarto – who founded the controversial Omnibus Law Task Force, trusted with reviewing the implementation of the Bill – is linked to coal mining company PT Multi Harapan Utama, which left 56 open pits in East Kalimantan. The 127 members of Omnibus Law Task Force are also members of the government and parliament, as well as businessmen with various vested interests.      

Vested interests also stretch directly to the Jokowi dynasty. The president’s son, Kaesang Pangarep, is in charge of PT Rakabu Sejahtera, a firm that processes timber and palm oil. Some of the company’s stocks are owned by PT Toba Bara Sejahtera, which operates several coal-fired power plants in Java and owned by Luhut Binsar Pandjaitan, Coordinating Minister for Maritime and Investment. 

The Jokowi administration’s energy policies have also benefited extraction companies, with the country’s coal production increasing by 50% since 2010 as it attempts to meet its ballooning energy needs through dirty power.

In December 2019, the government launched the operation of its largest coal-fired power unit to date, Banten-based Java 7, which offset all renewable energy power progress in the Southeast Asian giant. The plant’s majority owner, Beijing-based coal miner China Energy Investment Corporation, described it as “the largest individual installed capacity of any overseas thermal generation unit invested and built by Chinese enterprise”. 

For many, the Omnibus Bill and these obvious conflicts of interest are too much to ignore. 

Economist Bhima Yudhistira sees that Omnibus Bill has lost its legitimacy in the eyes of the public. Speaking at a virtual discussion hosted by Greenpeace on October 10, he explained that the strategy right now is to push Jokowi to sign the Government Regulation in lieu of Law (Perppu), which would cancel the Omnibus Bill before it’s automatically authorised in a month. 

Beyond that, civil society and the Indonesian public may need to look beyond its own borders. 

“The second path is to rally international solidarity,” Bhima suggested. 

Updates were made to this article on 18 October regarding the revision of the Constitutional Court.

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