Jakarta. A prominent economist said on Wednesday that the full implementation of the job creation law could potentially elevate investments and drive economic growth to reach 7 percent.

The law, enacted during the Covid-19 pandemic, aims to enhance Indonesia’s investment climate and generate millions of new job opportunities, although critics argue that it heavily favors employers.

However, economist Chatib Basri expressed optimism that the law would yield significant long-term benefits for the national economy, particularly by attracting new investments to create employment opportunities.

“If investments flow smoothly, I won’t be surprised if our economic growth reaches 6-7 percent, a level that we truly deserve. Accelerating growth is contingent upon increasing investments,” Chatib said during the Investor Daily Roundtable in Jakarta.

Chatib also serves as the deputy chairman of the government task force for the job creation law.

He noted that the law's implementation is impeded by ongoing efforts to harmonize regulations among ministries, the central government, and regional authorities. This phase is crucial for eliminating conflicting regulations that may deter investors.

“The key principle in investment is certainty. Businesses are willing to bear high costs as long as the returns are assured,” Chatib said.

The former finance minister highlighted that prior to the multi-faceted economic crises in 1998, Indonesia experienced an average annual investment growth of 12 percent. However, investment growth has since declined, with the highest recorded at 11 percent in 2012. Presently, the growth rate is below 5 percent.

“We must revert to the investment-driven economic growth model akin to the one pre-1998,” Chatib said.

Fellow economist and task force deputy chairman Raden Pardede echoed similar sentiments during the same forum, stating that the job creation law's primary objective is to stimulate investments that will, in turn, generate new employment opportunities and propel national economic growth.

"While we anticipate positive outcomes from this law, we must not take them for granted. Continuous improvement and a consistent monitoring and evaluation system are essential for its full implementation and to provide certainty for businesses," Raden said.

During his first term in office, President Joko Widodo's administration introduced 16 economic packages aimed at bolstering economic growth. However, these policies often clashed with one another, Raden noted.

At the onset of his second term, the president initiated efforts to streamline at least 74 related regulations under the omnibus law, Raden added.

“The primary objective of the omnibus law is to simplify investment procedures, expedite processes, and enhance certainty,” Raden concluded.

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