SINGAPORE: The Indonesian parliament has passed a new law that aims to boost employment prospects in the country.
While the cutback would appear significant, it is worth noting that the new severance payment remains quite high by regional standards.Vietnam, which has been increasingly seen as the leader in attracting FDI within the region, stipulates severance payment of half a month of pay for every year of service.
Of course, there is no guarantee that a lower, less onerous payment amount now would improve the compliance of the new law since 19 months of salary to be paid out by employers remains costly by many standards. This new law – if properly enforced to maximise its stipulated protection for workers – should go some way in helping Indonesia unlock that demographic potential.Another key aspect of the omnibus law is to provide a legal umbrella for the removal of the multiple layers of regulation at various levels of government that impede investment.
If the rules are not followed despite repeated warnings, the central government has the recourse to take over the administration of the investment approval process eventually. Meanwhile, with an eye on boosting the flagging property sector in Indonesia, foreigners are now allowed to own apartment units.
More broadly, the omnibus law marks an attempt to boost investment overall and not just FDI per se, by formalising the reduction of the country’s corporate tax.
It doesn’t make business sense to invest in a country with a population stricken with COVID. Bring the infection number down to boost investment confidence.