Explainer: Indonesia’s jobs law endangers environment, say activists, investors

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JAKARTA/SINGAPORE (Reuters) – Environmentalists in Indonesia are calling for the reversal of a controversial law aimed at job creation because it is seen favouring business interests at the expense of the environment and labour.

A demonstrator holds an Indonesian flag during a protest against the government’s labour reforms in a controversial jobs creation law in Jakarta, Indonesia, October 8, 2020. REUTERS/Willy Kurniawan

Indonesia, the world’s biggest producer of palm oil and nickel ore for electric vehicle batteries, has forests bigger than any outside the Amazon and Congo, and environmentalists say the country’s abundant natural reserves could be exploited under the new law.

The reforms are contained in a so-called “omnibus” bill of changes in more than 70 laws, which allowed parliament to vote in a single swoop and pass the measure on Monday.

Thousands of people took to the streets of cities across Indonesia over the past three days, part of protests and national strikes against the law.

The government says the law is needed to improve the investment climate and create jobs in Southeast Asia’s largest economy. It says the environment will be protected.

Here are some of the changes to environmental rules:


The new law merges the approval of business permits with environmental permits.

To get an environmental permit under the previous legislation, companies exploiting natural resources had to produce an AMDAL – a study to assess the impact investments have on the environment and local communities.

The new AMDAL process has removed a requirement for companies to consult environmental experts by only allowing “directly impacted communities” to give input for the assessment.

“Sure, it (AMDAL) is still there, but it is weakened,” Asep Komaruddin, a senior forest campaigner at Greenpeace, told Reuters.

Environment Minister Siti Nurbaya Bakar says undermining environmental laws will now incur more risk to a company as its business permit would also be on the line.


The previous law required Indonesian islands have a forest cover of at least 30%. This requirement has been removed, raising concerns that palm oil plantations and mining companies could sharply step up land clearance.

The law risks provinces like Riau, Jambi and South Sumatra, home to massive palm oil plantations, losing natural forests within 20 years, environmental group The Sustainable Madani Foundation said.

“Losing forests is more than just losing tree cover,” said Teguh Surya, the foundation’s executive director.

“(It also means) increasing intensity of forest fires, floods and landslides, harvest failures, a lack of clean water”.

Bambang Hendroyono, an environment ministry official, said the previous 30% threshold was “unscientific” and would be replaced by new metrics.

The new law calls for minimum forest areas to be based on “geophysics”, and “socioeconomic conditions”, but does not provide any specifics.


In previous regulations, companies were responsible for environmental damage in their concessions, even if there was no proof that the company was at fault.

This is known in legal terms as “strict liability”.

Environmentalists say the wording of the section is vague under the new law and proof of wrongdoing is now required to prosecute the company.

Officials say this is to provide legal certainty in criminal investigations but environmentalists are worried it weakens an article commonly used to prosecute companies for forest fires caused by negligence.

The new law also removes criminal punishment for the illegal handling of toxic waste.

“(Toxic waste) dumping is illegal in America, Netherlands, Europe, even China. It was in Indonesia, but now no longer,” Andri Wibisana, law professor with the University of Indonesia said.

While the new law does not criminalise illegal toxic waste dumping specifically, it does prosecute those who dispose toxic waste that causes harm to the environment.


Banks like Citibank and ANZ say if the new jobs law is implemented well, there will be a better investment climate for Indonesia.

However, 35 global investors managing $4.1 trillion in assets have warned the new law may backfire in light of investors’ growing desire for environmental protections.

“Efforts to stimulate foreign investment by… easing restrictions on clearing land in palm oil concessions, are counter-intuitive,” said a spokesman for Sumitomo Mitsui Trust Asset Management, part of the alliance of investors.

Their opposition to the law however, does not mean they would dump Indonesian assets they hold, but the law could lower Indonesia’s market attractiveness.

Satu Kahkonen, World Bank Country Director Indonesia and Timor Leste, said in July that the reforms would “move Indonesia’s environmental legislation further away from international best practices and this is not basically helping Indonesia”.

Reporting by Fathin Ungku, Gayatri Suroyo, Bernadette Christina Munthe; Additional reporting by Fransiska Nangoy and Tabita Diela; Editing by Raju Gopalakrishnan

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