INDEF Said, The Job Creation Law Has The Potential To Reduce Investment, Why?

Demo of the Job Creation Law some time ago. (Diah Ayu Wardan / VOI)

JAKARTA - Researcher at the Institute for Development of Economics and Finance (INDEF) research, M. Rizal Taufikurahman, assessed that the reduction in regional authority in the Omnibus Law on the Job Creation Law has the potential to reduce investment in the regions in the short term.

According to him, this was due to an adjustment to the legislative regulations derived from the Job Creation Law which technically became the legal umbrella for investment activities in the regions. There is a lag time due to changes in regional regulations related to investments that are not automatically followed by the regions so that the potential for regional revenues from taxes and levies at the provincial level will experience a sharp decline.

"Regarding investment, it is possible that it will decrease. So the Omnibus Law, whose enthusiasm is to increase investment, has the potential to reduce it in the short term because there will be shocks first, adjustments to laws and regulations," he said as quoted by Antara, Monday, October 26.

Rizal explained that the reduction or rationalization of local government authority in the Government Administration Cluster Job Creation Law is considered to have reduced almost all of the Provincial Gross Regional Domestic Product (PDRB).

"The impact must be anticipated, so there must be harmony between the central and regional governments," he said.

In addition to the investment sector, Rizal also estimates the impact of reducing regional authority in the Job Creation Law, starting from decreasing consumption, although not all regions experience it, to export-import activities and employment.

However, he estimates that the negative impact will only occur in the short term, at least within a year or two of the implementation of the Job Creation Law.

"So in the short term, it is very possible that a year or two during the implementation of this law there will be a shock, especially revenue or real GDP from the regions because there are regulatory adjustments, implementation and even local government efforts will be distorted and have an impact on their economic performance, including the national one. , "he explained.

In the simulation, the decline in real GRDP at the provincial level varies in the range of minus 0.22 percent to minus 9.38 percent, with the lowest provinces in eastern Indonesia and the highest in the majority of Java Island.

"The consequences of this economic impact will make it harder for the government to recover (restore) our economy," he concluded.