The Price of Progress: Indonesia’s Omnibus Law and the Environmental Sacrifice of Economic Expansion in Asia

On October 5, 2020, the Majelis Permusyawaratan Rakyat (MPR) — Indonesia’s main parliamentary body—passed a long-awaited “omnibus bill” amending existing production regulations and laying the groundwork for significant shifts in the nation’s economic policy. As news of the controversial new law’s passing reached the public, protests broke out in cities across Indonesia. 

Growing tensions between citizens and police after days of civil unrest turned the peaceful demonstrations violent. In the capital city of Jakarta, reports of mass arrests and officers assaulting protestors with tear gas as people threw rocks, burned transit posts, and vandalized buildings mirrored scenes of chaos throughout the nation.[i] The crowds consisted largely of labor union members, environmental activists, and university students who claimed the new law strips workers of their rights and exacerbates the nation’s existing deforestation issues. For many, the law demonstrates Indonesia’s struggle to reconcile its rapid economic growth with its goals for sustainable development.  

President Joko Widodo proposed the bill in 2019 as a means of dismantling administrative barriers in Indonesia’s hyper regulated market to encourage expanded domestic development and heightened foreign investment.[ii] The bill attracted public scrutiny due to a lack of accessibility and transparency in the drafting process, which primarily consisted of advisors from the private sector and no union representatives.[iii] The new law amends 79 existing laws, greatly diminishing workers’ rights and environmental protections. Central to the law’s criticism is its potential impact on Indonesia’s enduring deforestation crisis from decades of exploitation to supplement palm oil plantations, as it removes limitations on land cultivation and empowers the central government to permit industrial development in officially designated forests. Indigenous communities like the Iban and Orang Rimba fear the new policies will allow companies to encroach on customary lands, weakening their already tenuous authority in these regions.[iv] Additional amendments relax standards for environmental impact assessments, dispose of the minimum provincial forest cover requirement, and absolve businesses of any strict liability for forest fires.[v]  Calls for a repeal struggled to overcome the government’s firm position favoring market opportunity — a stance reinforced by economic contraction in Indonesia from the COVID-19 pandemic. As unemployment grips the nation and Indonesia no longer undergoes consistent economic growth, financial benefit to the state could continue to override social considerations. [vi]

Indonesia’s dilemma is part of a broader debate regarding economic development across Asia, particularly in Southeast Asia where nations are seen as new frontiers for large scale investment and market growth.[vii] Countries including Indonesia, Malaysia, Singapore, and Vietnam are all part of the Association of Southeast Asian Nations (ASEAN) and present unique opportunities for investors seeking diverse business models and large labor pools. However, ASEAN members still struggle to reach the economic heights of neighboring industrialized nations such as China and Japan. Many Southeast Asian states lack the comparative economic strength of East Asian giants due to a tumultuous history of European colonization, shifting political systems, crude infrastructure, and crippling policies preventing global market integration.[viii]  Furthermore, the economic development of Southeast Asian countries often comes at the cost of public welfare and environmental integrity, a stark contrast to Japan and other East Asian countries seen as global exemplars for balancing economic dominance with environmental consideration. [ix]

Asian nations continue to advance among leaders of the international environmental movement, but the results reveal regional disparities. Japan is the only non-European country, besides Australia, to rank among the Top 15 most sustainable nations in the 2020 Environmental Performance Index (EPI), increasing from #20 in 2018 to #12.[x] It is followed by South Korea (#28) and Taiwan (#40), both East Asian nations. Singapore was the only member of ASEAN to break the Top 50 at #39, narrowly beating Taiwan, while Indonesia sits at #116. These rankings demonstrate the existing gap between developing and industrialized nations across Asia, and it is one with historical roots. 

Japan and South Korea developed the majority of their economies in the years preceding the modern movement for environmental protection, securing their positions in the international marketplace without the widespread scrutiny of global eco-activists. This then allowed them to better implement extensive environmental policies alongside rising demands for sustainable production. Many Southeast Asian nations do not have the same luxury today, expanding their vulnerable economies in a time of higher standards for environmental conservation, increased accountability, and expensive sustainability measures. The notion that Asia has seemingly mastered the balance of mass production and sustainability reform ignores the inherent privileges of established economies compared to those still facing rapid growth and the threat of foreign exploitation disguised as investment. 

The progressive environmental policies of Japan and many of its East Asian counterparts come after years of consistent economic strength in which financial stability breeds social improvement. In contrast, Indonesia’s law embodies a different dynamic where economic shifts, including positive growth, are often accompanied by diminishing social liberties and environmental losses as the government seeks financial gains. This cross-national disparity is prevalent throughout Asia, a continent home to countries ranked among both the richest and poorest in the world. [xii] However, this phenomenon is not without reason or exception. The immense geographical, social, and political diversity of the Asian continent eliminates the possibility for a standardized path toward sustainable economic development. By only focusing on the methods employed by industrialized nations, the unique needs of developing economies are often overlooked. The flaws of policy generalization are especially potent considering not even all industrialized East Asian nations are making significant environmental progress. China, the continent’s biggest economy, continues to rank lower on the EPI than the majority of ASEAN nations, sitting at #120. The case of China challenges the notion that an established economy promotes environmental advancement and suggests that, regardless of relative financial stability, nations must make a conscious effort to work toward environmental protection. Asia indeed stands at the forefront of a new movement for large scale sustainable production, but there remains significant room for progress in both Eastern and Southeastern regions. 

Indonesia’s omnibus law represents the compromises many developing nations make in the face of a daunting international financial system that deprioritizes internal methods in favor of monetary outcomes and reported growth. Yet, Indonesia and other ASEAN states with flexible economies are uniquely suited to showcase the potential for tailored social and environmental policies that permit developing nations to expand their global influence and incorporate progressive reform. In fact, efforts have already begun in Singapore to adopt a “green economy” with eco-friendly production and distribution in mind. [xiii] This economic framework focuses on utilizing clean energy, fair labor, efficient manufacturing, and sustainable agricultural processes to underpin market expansion with systemic change. The implementation of these green economies in Southeast Asia may be the next step in ensuring a more sustainable global market and setting a standard for socially conscious production.


References

[i] Timmerman, Antonia. “Indonesia’s Omnibus Law: Jakarta MRT Partly Shut as Third Day of Protests Turn Violent.” South China Morning Post, October 8, 2020. https://www.scmp.com/week-asia/politics/article/3104750/indonesias-omnibus-law-jakarta-mrt-partly-shut-third-day.

[ii] Malik, Asmiati. “Jokowi’s Labor Law Reforms Risk Antagonizing Indonesia’s Unions.” Nikkei Asia, January 31, 2020. https://asia.nikkei.com/Opinion/Jokowi-s-labor-law-reforms-risk-antagonizing-Indonesia-s-unions.

[iii] Hamid, Usman; Hermawan, Ary. “Indonesia’s Omnibus Law is a Bust for Human Rights.” New Mandala, October 9, 2020. https://www.newmandala.org/indonesias-omnibus-law-is-a-bust-for-human-rights/.

[iv] “Indonesia: New Law Hurts Workers, Indigenous Groups.” Human Rights Watch, October 15, 2020. https://www.hrw.org/news/2020/10/15/indonesia-new-law-hurts-workers-indigenous-groups#.

[v] Grita Anindarini Widyaningsih, Isna Fatimah, and Raynaldo Sembiring. “Indonesia’s Omnibus Bill on Job Creation: a Setback for Environmental Law?” Chinese Journal of Environmental Law 4, no. 1 (June 2020): 97-109. https://doi.org/10.1163/24686042-12340051.

[vi] “Indonesia, Overview.” The World Bank, October 1, 2020. https://www.worldbank.org/en/country/indonesia/overview.

[vii] Varma, Suvir; Boulton, Alex. “Investing in Southeast Asia: What’s Behind the Boom.” Bain & Company, November 13, 2018. https://www.bain.com/insights/investing-in-southeast-asia-whats-behind-the-boom/.

[viii] Sally, Razeen. “What Can South Asia Learn from East Asia?” East Asia Forum, January 23, 2013. https://www.eastasiaforum.org/2013/01/23/what-can-south-asia-learn-from-east-asia/.

[ix] “Green Growth in Action: Korea.” Organisation for Economic Co-operation and Development, 2014. https://www.oecd.org/korea/greengrowthinactionkorea.htm; Smith, Brett. “Japan: Environmental Issues, Policies, and Clean Technology.” AZoCleantech, July 7, 2018. https://www.azocleantech.com/article.aspx?ArticleID=539; “Towards Green Growth in Southeast Asia.” Organisation for Economic Co-operation and Development, 2014. https://www.oecd.org/dac/environment-development/Final%20SE%20Asia%20Brochure%20low%20res.pdf.

[x] Wendling, Z.A., Emerson, J.W., Esty, D.C., Levy, M.A., de Sherbinin, A., et al. “2018 Environmental Performance Index.” Yale Center for Environmental Law & Policy. https://epi.yale.edu/downloads/epi2018reportv06191901.pdf; Wendling, Z.A., Emerson, J.W., de Sherbinin, A., Esty, D.C., et al. “2020 Environmental Performance Index.” Yale Center for Environmental Law & Policy. https://epi.yale.edu/downloads/epi2020report20200911.pdf.

[xi] “East Asia in the 21st Century.” Lumen, 2020. https://courses.lumenlearning.com/boundless-worldhistory/chapter/east-asia-in-the-21st-century/.

[xii] “Poorest Countries in the World 2020.” World Population Review, 2020. https://worldpopulationreview.com/country-rankings/poorest-countries-in-the-world.

[xiii] Bain & Company. “The Green Economy: Unlocking a More Sustainable Future in Southeast Asia.” Business Insider Press Release, November 26, 2020. https://markets.businessinsider.com/news/stocks/the-green-economy-unlocking-a-more-sustainable-future-in-southeast-asia-1029840407.