JAKARTA (Reuters) – Indonesia’s parliament is set to vote within weeks on a flagship job creation bill to improve the investment climate and streamline business rules in Southeast Asia’s biggest economy.

Some of its provisions have been controversial, especially regarding the environment and changes proposed to the 2003 labour law which trade unions view as being too pro-business.

Here are key elements of the bill agreed by parliament’s legislation committee, according to government presentations and lawmakers. They still need approval from ministers and further approval by parliament.


Lawmakers approved a cut in mandatory severance benefits paid by employers, to 23 times monthly wages from 32 times, with the government funding the shortfall.The original proposal was for a cut to 19 times, and for workers losing employment to receive state insurance and skills training.

Minimum wage limits at city and district levels stay, with annual rises tied to economic growth and inflation, but some sectors will lose special treatment.

Originally, the government had proposed setting minimum wages only at the provincial level, with increases pegged to economic growth, and for labour-intensive sectors to set their own minimum wages.

The committee agreed to drop mandatory paid leave for family weddings, baptism, childbirth, bereavement and menstrual leave for women, so employers and workers could fix their own terms.

MPs approved relaxing strict rules on outsourcing and scrapped a rule on a three-year maximum term for contractors.

Work overtime can be increased to four hours a day from three now.

BUSINESS PERMITS AND REGULATIONSBusinesses considered low-risk now only need to register before they begin operations, while medium-risk ones have to follow a set of standards and only high-risk investments must obtain a permit.Environmental studies are only required for investments considered to be high-risk.The process for investment permits for provinces and local governments will be standardised, with the central government able to take it over in some cases.The central government will take over the procedure for investment permits to projects considered of national strategic importance.

SOVEREIGN WEALTH FUNDThe bill lays the foundation for the formation of a Sovereign Wealth Fund.

LAND BANKThe government can set up a land bank and manage this to acquire land for public interest and redistribute the land.

NEGATIVE INVESTMENT LISTThe bill paves the way for reforms of the so-called “negative investment list” of sectors in which foreign participation is restricted or limited.

A separate government regulation will detail the sectors to be opened up. Ministers have said that after passage of the bill, only a handful of restricted sectors will remain, such as gambling, arms and narcotics.

(Reporting by Gayatri Suroyo and Maikel Jefriando; Editing by Ed Davies and Clarence Fernandez)