The global investment landscape has undergone significant transformations, and Indonesia is no exception.
With the enactment of the 2023 Jobs Creation Law (UU Cipta Kerja), the country has taken bold steps to simplify its regulatory framework, aiming to attract foreign and domestic investors.
This reform builds on the foundation laid by the 2007 Company Law, which modernized corporate governance and business operations. Together with Government Regulation No. 28 of 2025 on the Administration of Risk-Based Business Licensing, these legal instruments represent a pivotal shift in Indonesia’s approach to economic growth and investment.
The 2007 Company Law: A Foundation for Modernization
The 2007 Company Law (Law No. 40 of 2007) was a landmark regulation that redefined corporate governance in Indonesia. It introduced clearer guidelines on the establishment, management, and dissolution of companies. Key provisions included the simplification of company incorporation processes, the introduction of limited liability protections for shareholders, and enhanced transparency in corporate reporting.
This law was instrumental in creating a more business-friendly environment. By providing legal certainty and reducing bureaucratic hurdles, it encouraged both local entrepreneurs and foreign investors to establish businesses in Indonesia. However, despite its merits, the 2007 Company Law did not fully address the complexities of Indonesia’s regulatory environment. Investors often faced overlapping regulations, lengthy licensing processes, and inconsistent enforcement, which hindered the country’s competitiveness.
The 2023 Jobs Creation Law: A Game-Changer
Recognizing the need for further reform, the Indonesian government enacted the 2023 Jobs Creation Law. This omnibus law is designed to streamline regulations across multiple sectors, reduce bureaucratic inefficiencies, and foster a more conducive environment for investment and job creation. It builds on the foundation of the 2007 Company Law but goes further in addressing the structural barriers that have long plagued Indonesia’s business climate.
Simplification of Business Licensing
One of the most significant changes introduced by the 2023 Jobs Creation Law is the overhaul of the business licensing system. Previously, businesses had to navigate a labyrinth of permits and approvals, often leading to delays and increased costs. The new law simplifies this process by adopting a risk-based approach to licensing, as outlined in Government Regulation No. 28 of 2025.
Under this framework, businesses are categorized based on their level of risk. Low-risk businesses can now obtain licenses through a simplified online process, while higher-risk activities are subject to more stringent requirements. This risk-based approach not only reduces the administrative burden on businesses but also allows regulators to focus their resources on activities with greater potential for harm.
Labor Market Reforms
The Jobs Creation Law also introduces significant changes to labor regulations, aiming to create a more flexible and competitive labor market. Key reforms include adjustments to minimum wage policies, streamlined procedures for hiring and terminating employees, and the introduction of new types of employment contracts. These changes are intended to attract foreign investors by reducing labor costs and increasing workforce productivity.
However, these reforms have not been without controversy. Critics argue that they undermine workers’ rights and job security, leading to widespread protests and legal challenges. Despite these concerns, the government maintains that the reforms are necessary to boost economic growth and create new employment opportunities.
Investment Incentives
To further attract investors, the Jobs Creation Law offers a range of incentives, including tax breaks, customs exemptions, and simplified land acquisition processes. These measures are particularly targeted at priority sectors such as manufacturing, technology, and renewable energy. By reducing the cost and complexity of doing business, the government hopes to position Indonesia as a regional hub for investment and innovation.
Government Regulation No. 28 of 2025: Operationalizing the Reforms
The implementation of the Jobs Creation Law is supported by Government Regulation No. 28 of 2025, which provides detailed guidelines on the administration of risk-based business licensing. This regulation represents a paradigm shift in how business activities are regulated in Indonesia.
Risk-Based Licensing
The risk-based licensing system categorizes business activities into four levels of risk: low, medium-low, medium-high, and high. Each category has specific licensing requirements, with low-risk activities requiring only a business identification number (NIB) and self-declaration of compliance. Medium and high-risk activities, on the other hand, are subject to additional permits and inspections.
This approach not only simplifies the licensing process but also enhances regulatory efficiency. By focusing on high-risk activities, regulators can allocate their resources more effectively, ensuring that public safety and environmental standards are upheld without imposing unnecessary burdens on businesses.
Digital Transformation
Another key feature of Government Regulation No. 28 of 2025 is the integration of digital technology into the licensing process. The Online Single Submission (OSS) system has been upgraded to facilitate risk-based licensing, allowing businesses to apply for permits, track their status, and receive approvals online. This digital transformation reduces the potential for corruption and improves transparency, making it easier for investors to navigate Indonesia’s regulatory landscape.
The Impact on Investment and Economic Growth
The combined impact of the 2023 Jobs Creation Law, the 2007 Company Law, and Government Regulation No. 28 of 2025 is expected to be transformative. By reducing red tape and creating a more predictable regulatory environment, these reforms aim to attract higher levels of foreign direct investment (FDI) and stimulate economic growth.
Increased Investor Confidence
The simplification of business licensing and the introduction of investment incentives have already begun to boost investor confidence. According to data from the Investment Coordinating Board (BKPM), FDI inflows increased by 15% in the first quarter of 2025 compared to the same period in the previous year. This trend is expected to continue as more investors take advantage of the streamlined regulatory framework.
Job Creation
The Jobs Creation Law is also expected to generate significant employment opportunities. By attracting investment in labor-intensive industries such as manufacturing and agriculture, the government aims to reduce unemployment and improve living standards. However, the success of these efforts will depend on the effective implementation of labor market reforms and the ability of workers to adapt to changing economic conditions.
Challenges and Criticisms
Despite its potential benefits, the Jobs Creation Law has faced criticism from various stakeholders. Labor unions and civil society organizations argue that the reforms prioritize corporate interests over workers’ rights and environmental protection. There are also concerns about the capacity of local governments to implement the new regulations effectively, given the complexity of the risk-based licensing system.
Conclusion
The 2023 Jobs Creation Law marks a bold step forward in Indonesia’s efforts to attract investment and drive economic growth. Building on the foundation of the 2007 Company Law, it addresses many of the structural barriers that have long hindered the country’s competitiveness. Together with Government Regulation No. 28 of 2025, it represents a comprehensive approach to regulatory reform, combining simplification, digital transformation, and risk-based oversight.
However, the success of these reforms will depend on their effective implementation and the ability of policymakers to balance economic growth with social and environmental considerations. As Indonesia continues to navigate the complexities of global investment, the fear of missing out on opportunities will likely drive further innovations in its regulatory framework. By staying ahead of the curve, the country can position itself as a leading destination for investment in the Asia-Pacific region.