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Understanding ‘Omnibus Law’

Understanding 'Omnibus Law'

The Indonesian Government appears to have doubled down on implementing the concept of ‘omnibus law’ as a powerful instrument to cut through red tape and make effective new regulations deemed necessary to improve the investment climate in Indonesia. This new focus was announced by President Joko Widodo during his inauguration speech last October, where he stated that the concept would be used to simplify current regulatory challenges, specifically citing two new so-called ‘omnibus laws’, one focused on employment (UU Cipta Lapangan Kerja or the Job Creation Law), and the other on small to medium enterprises empowerment (UU Pemberdayaan UMKM). It may not stop here, as concerned stakeholders have also started discussing omnibus laws for tax and other financial regulations to improve state financing and the business and investment climate.

The term ‘omnibus’ is derived from the Latin language with the meaning ‘for everything’. So in general, an omnibus law bill is a single bill that may include separate and diverse legal matters but will be processed by legislature as a single document. The main argument for omnibus bills would be that, where lawmaking is concerned, the process is therefore ostensibly simplified and made more efficient. The concept of the omnibus law itself appears to have particularly developed in the common law realms, with notable instances of when the concept is used. This notability is because omnibus law potentially runs counter another important legal concept that is used in many jurisdictions, namely the single-subject rule, which stipulates that legislative processes may only focus on one matter at a time. This rule is used to avoid two main problems, firstly the complexity that may arise when one single matter is legislated in different legislative products, and secondly to avoid the ‘rider’ problem, which is a situation when legislators insert an unpopular provision amongst other popular provisions, a kind of Trojan Horse tactic that may be used by regimes in times of heavy political infighting.

In addition to Presiden Joko Widodo’s push for omnibus law as an instrument for efficiency and simplification in lawmaking, BAPPENAS (the National Development Planning Agency) and the Directorate General of Taxes of the Ministry of Finance have also opened discussions on the need to take the omnibus law approach due to the complexity of their respective mandates, where omnibus laws could arguably be considered ‘surgical strikes’ that can address different challenges in one document. The President’s frustration with the complicated legislative process in Indonesia, which is perceived to be a barrier to investment especially and growth and prosperity generally, is understandable. At this point, it becomes important to look deeper into the potential difficulties that may arise from using, or abusing, the omnibus law concept, as hinted above. The fact that President Jokowi just won his second presidency in the recent presidential election does not mean that he controls the DPR in the law-making process. Regardless the real intention of President Jokowi for letting the DPR push for the new and problematic KPK Law, which proved that he may not be in control of his own supporting political parties, the concept of issuing omnibus laws in one go may be deemed as a more effective process than dealing with the DPR for each bill on one particular issue in the legislation process.

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