It's a legislative reform consolidating multiple laws to improve ease of doing business.
The Omnibus Law—officially known as Law No. 6 of 2023 on the Stipulation of Government Regulation in Lieu of Law No. 2 of 2022 concerning Job Creation Law—represents a transformative shift in the country’s legal and regulatory landscape. This sweeping reform was designed to streamline more than 70 existing laws and eliminate overlapping regulations that have long hindered ease of doing business in Indonesia. As part of the government’s strategic effort to attract both foreign direct investment (FDI) and domestic enterprise, the Omnibus Law introduces key amendments across labor law, investment, taxation, land use, licensing, environmental governance, and etc., In this article, we’ll explore the most significant legal changes, analyze their practical implications for businesses, and provide expert legal insights to help you navigate this evolving regulatory environment.
Indonesia has long struggled with over-regulation, legal uncertainty, and bureaucratic inefficiencies that hinder business activities. The Omnibus Law was introduced as a response to:
By harmonizing and simplifying multiple legal provisions, the Omnibus Law seeks to create a more conducive legal environment for both domestic and foreign enterprises.
Amendments to Law No. 13 of 2003 on Manpower include:
The Omnibus Law replaces the Negative Investment List (DNI) with the Positive Investment List under Presidential Regulation No. 49 of 2021, allowing up to 100% foreign ownership in many previously restricted sectors, including:
Exceptions apply in certain sectors based on strategic importance, public interest, or reserved sectors for cooperatives and MSMEs.
The licensing regime has been restructured through:
Amendments to Law No. 5 of 1960 on Basic Agrarian Principles and Law No. 2 of 2012 on Land Procurement for Public Interest provide:
The Omnibus Law enhances contractual flexibility. Employers are no longer restricted to a limited list of activities for using PKWT, enabling them to hire based on project duration. However, non-compliance with new wage formulas or termination benefits may still trigger legal disputes.
Termination provisions are now more structured but also more employer-friendly. Employers must provide compensation as per the new severance formula, but the process is streamlined through clearer dispute mechanisms via the Industrial Relations Court.
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By opening up numerous sectors and simplifying the licensing framework, Indonesia is positioning itself as an attractive alternative to regional investment hubs like Vietnam and Malaysia. Key reforms include:
The Omnibus Law revises Law No. 32 of 2009 on Environmental Protection and Management, whereby:
These provisions are detailed in Government Regulation No. 22 of 2021.
The Job Creation Law introduces a new categorization of risk levels which determines licensing requirements:
The law empowers the central government to revoke local regulations that contradict national interests. It also reduces overlapping authorities and shortens administrative timelines, ensuring:
Manufacturing
Industrial companies benefit from streamlined licensing, flexible labor laws, and tax incentives under Government Regulation No. 40 of 2021.
Digital Economy and Startups
Tech firms enjoy:
Despite its pro-business intent, the Omnibus Law has faced constitutional challenges. In 2021, the Constitutional Court declared it “conditionally unconstitutional” for procedural flaws, requiring the government to revise it by 2023. The subsequent Law 6/2023 was enacted to cure these defects.
Labor unions, environmental groups, and civil society have criticized:
Nonetheless, the law remains in force and continues to be implemented.
At Kusuma & Partners Law Firm, we have closely monitored the evolution and implementation of the Omnibus Law and have advised clients ranging from SMEs to multinational corporations. We emphasize the importance of sector-specific legal compliance due to the following:
Legal audits, corporate restructuring, and HR policy revision should be prioritized to ensure compliance with the new regime.
The Omnibus Law represents a pivotal moment for Indonesia’s regulatory landscape. With enhanced legal certainty, streamlined procedures, and increased investor protection, it paves the way for stronger economic growth. However, businesses must remain vigilant, as the law is dynamic and subject to evolving interpretations and legal challenges.
If your business seeks to fully leverage the opportunities created by the Omnibus Law, or if you require a legal audit to ensure compliance under the new regulatory framework, consult with our team at Kusuma & Partners Law Firm. Our experienced legal professionals provide tailored legal strategies that align with Indonesia’s rapidly changing business landscape. Contact us today for a consultation.
“DISCLAIMER: This content is intended for general informational purposes only and should not be treated as legal advice. For professional advice, please consult with us.”
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