Risk-based approach in job creation bill lacks academic rigor

Tuesday, August 18, 2020

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Risk-based approach in job creation bill lacks academic rigor


The Jakarta Post, March 3, 2020


Mohamad Mova AlAfghani

Bogor. West Java 


Director, Center for Regulation, Policy and Governance (CRPG)


Despite the criticisms laid against the job creation bill, we need to commend the government for its courageous effort, not only to consolidate and harmonize around 70 laws, but also to introduce an overarching risk-based approach to our legal system. 

Most critics focus on two primary issues: (1) sectoral issues, arguments of which usually revolve around the “loss of protection”, be it for the environment, labor or certain aspects of human rights; and (2) procedural issues, with many criticizing the “omnibus” legislative process as lacking transparency.

However, few have paid enough attention to the risk-based approach used in the bill, even though this mechanism will fundamentally alter our regulatory system and may even raise question on whether it would be compatible with our Constitution.

Risk-based regulations require the government to prioritize regulatory burdens and resources toward “high-risk” activities. Risks, of course, constitute the “likelihood” and the “severity” of the potential impact of a particular activity: the higher the likelihood and the severity of the impact, the higher the risk.

The resources available to regulators for inspecting and monitoring are always limited. Thus, why spend taxpayer’s money on small risks? Regulations would be more efficient if resources are spent only on high-risk activities – or so the theory goes.

Indeed, the job creation bill follows this approach. Only high-risk businesses will require a license (Article 11) and the level of supervision depends on the level of risk: Hence, the higher the risk, the more intense the scrutiny. This sounds about right, except for the fact that theories on risk-based regulation have moved past this.

The bill overlooks two things that are addressed in the regulatory policy literature: volatile risk and cumulative risk.

The former refers to risks that could be high during a certain season but low during another. For example, theft and burglary in residential areas are volatile risks: They increase during long holiday seasons such as Idul Fitri when millions of people travel back to their hometowns, but are relatively low during normal days. Fortunately, these risks are predictable, so homeowners can hire additional security during Idul Fitri. However, other risks like those related to climate change may not be so obvious.

Other risks could be low or medium but they are actually systemic and thus, incur cumulative costs on society. Homeowners, for example, may park their second vehicles on a neighborhood street without permission. If we look at this individually, then the risk (in terms of severity) is low compared to truck owners who park their vehicles on the street. But if everyone does this (since a permit is not required), then the street will become clogged with vehicles and becomes a systemic risk.

We can see here that “locking down” regulatory resources and licensing only high-risk activities could be very dangerous, as this would mean that regulators will be legally required to ignore both volatile and cumulative risks.

The job creation bill contains a paradox: It aims to broaden the discretion of public officials, but the clauses in Articles 8 and 11 actually narrow it.

Targeting supervision to “high risk” (Article 11) also contradicts theories on regulatory policy. It is not always the case that high-risk activities must be exposed to intense supervision. Theoretically speaking, a risk-based regulatory approach shifts the burden of risk from regulator to the companies’ risk management system. In other words, if the companies manage their risks, no matter how high, the level of supervision can be reduced. This can be proven over time through their compliance records. Although this is the general rule, the UK’s Hampton Report of 2005 warned that random checks on historically compliant firms were still required.

Article 8 “locks down” the types of risk to several subjects: health, security, environment and natural resource use. Strictly speaking, anything outside of these four subjects are not considered a risk.

What if a certain cultural heritage might be lost due to certain business activities? Let’s say a traditional community holds a religious ceremony on a site they consider sacred, but the local government wants to build a shopping mall there. Is that activity not considered a risk? Unfortunately, no. If Article 8 makes it into law, then local governments can be legally forbidden from considering threats to cultural heritage as a risk.

This also shows that risk is a matter of perception. What constitutes a risk is different from person to person and from culture to culture. Whether a risk is deemed high or low can also differ from one person to another. Whether a risk is acceptable or not is also a matter of perception. The “risk” of risk-based regulation is that it may reduce regulatory activities into mere actuarial activities.

Another risk that risk-based regulations pose is the risk to public accountability. We cannot blame public officials from failing to address cumulative risks and other issues that are not considered a risk by law (such as the aforementioned cultural heritage).

In fact, risk-based regulations can be linked to bureaucratic incentives. For example, directorates and work units can be evaluated in terms of their budget. Have they used their budget “efficiently”, that is, in supervising only high-risk activities? If yes, then they are rewarded for their performance; if not, then they are penalized.

This can be dangerous, however, since officials are deliberately incentivized to ignore volatile and cumulative risks. Hence, “risks” can be used to measure the performance and budgetary accountability of a government unit, but at the same time, the government unit can evade accountability for activities that are not legally considered “risks”.

Finally, predetermining the types of risk in the bill (Article 8, point 3) will eventually cause confusion. In other countries such as the UK, risk identification always starts with a regulator’s interpretation of its statutory objectives (Black and Baldwin, 2012, Baldwin 2012), and “risks” are those issues that impede the attainment of those objectives. For the England-Wales water regulator (OFWAT), its objective is to “further the consumer objective”, and secondly to “secure … the functions of a water undertaker”. OFWAT then develops its risk-based approach for several items, from water shortages during drought to contamination and to burst pipes (OFWAT, 2015).

Therefore, in both the literature and practice, “risk” is determined by interpreting the statutes first and then detailing the subjects according to each agency’s regulatory objectives. OFWAT will thus have a different risk set compared to the telecommunications regulator OFTEL, for example.

Indonesia seems to be taking a different approach in the job creation bill, wherein the general types of risk are predetermined according to Article 8(3): health, safety, environment and natural resource use. If regulators actually experience certain risks in practice that do not fall into these categories, they will be overlooked. Our society will then bear the cost of this oversight. 

None of the above issues were discussed as far as the academic draft of the bill is concerned. The only relevant literature mentioned in the academic draft is the OECD’s 2010 “Risk and Regulatory Policy” report, which is wholly inadequate for a bill that could fundamentally alter our regulatory system.



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Apakah Perawatan Transformator Merupakan Jalan Masuk Kontaminasi PCB?

Wednesday, July 15, 2020

Selepas fase Pembatasan Sosial Berskala Besar (PSBB) industri berangsur-angsur memacu kegiatan produksi hingga dapat beroperasi hingga kapasitas penuh. Transformator listrik sebagai jantung penggerak mesin produksi tentunya juga akan beroperasi secara penuh sehingga mungkin akan membutuhkan perawatan setelah non-aktif selama beberapa waktu.
Perawatan transformator yang tidak sesuai prosedur diduga dapat mengakibatkan kontaminasi senyawa Polychlorinated biphenyls (PCBs) terhadap transformator. Sebagaimana diketahui, senyawa PCBs telah dilarang di Indonesia. Merujuk peraturan perundang-undangan yang berlaku, transformator yang terkontaminasi PCBs wajib dibersihkan dan/atau dimusnahkan sebelum tahun 2028 sehingga tentu akan menjadi beban ekonomi yang tidak sedikit bagi industri. Mencegah kontaminasi tentunya jauh lebih mudah dan ekonomis daripada menangani transformator yang terontaminasi PCBs.
Center for Regulation, Policy and Governance (CRPG) bekerja sama dengan PT. Ecoverse Indonesia Lestari (ECOVERSE) dan PT. Hyprowira Adhitama mengundang industri, khususnya Senior Manajemen dari Divisi/Bagian Kesehatan dan Keselematan Kerja dan Lingkungan (K3L) atau Health Safety and Environment (HSE) untuk menghadiri webinar guna membahas kemungkinan kontaminasi PCBs pada transformator listrik pada saat perawatan dan upaya pencegahannya. Webinar ini menghadirkan pakar dan praktisi yang telah berpengalaman dalam hal perawatan transformator dan pengelolaan PCBs.
Webinar akan diadakan pada:
Hari/Tanggal   : Rabu, 29 Juli 2020
Waktu              : 09.00 – 12.15 WIB
Link Registrasi : https://bit.ly/pcbperawatantrafo

Webinar ini tidak dipungut bayaran (gratis).

Jalan Rekonsiliasi AHY

Wednesday, June 5, 2019

Jalan Rekonsiliasi AHY
Oleh
Mohammad Jibriel Avessina
Analis Perilaku politik 

Momen kunjungan silaturahmi Agus Harimurti Yudhoyono (AHY) ke rumah Megawati adalah peristiwa sosial yang menarik untuk disimak.  Apalagi, hal ini merupakan aktivitas kunjungan yang pertama dilakukan AHY, selepas ziarah ke makam Ibunda Ani Yudhoyono, yang baru saja wafat pada 1 juni 2019 yang lalu.

Pilihan AHY untuk menempatkan prioritas kunjungan silaturahmi pada rumah Megawati pada hari pertama lebaran, sarat akan makna. 

Kunjungan ini menegaskan penghormatan AHY pada Megawati sebagai Ibu bangsa,dihormati seperti layaknya orang tua sendiri. Ada penghormatan atas perannya pada sesepuh bangsa

Padahal, relasi SBY-Mega selama SBY  sepuluh tahun menjabat dianggap oleh publik relatif dingin. Persepsi ini muncul, sebab keduanya jarang tampil bersama dalam acara publik.

Tetapi, persepsi tersebut rupanya tidak tepat . Kunjungan AHY ternyata berlangsung dengan hangat,guyub dengan semangat kekeluargaan, tak ada bekas guratan konflik.

Kegiatan merajut silaturahmi baik pada sesepuh bangsa maupun kalangan muda dalam komponen bangsa ternyata merupakan watak khas AHY.

Figur AHY misalnya tidak ragu untuk sowan pada tokoh tokoh bangsa senior.  AHY juga rajin melaksanakan silaturahmi pada putra dan putri presiden dan mantan presiden. Kiprahnya dalam merajut silaturahmi terlihat, AHY ikut ambil bagian dalam deklarasi bogor, yang diinisiasi oleh 9 tokoh muda bangsa.

Sebagai pemimpin muda, AHY memberikan teladan, _to lead  by example_ tak banyak kata kata yang diucapkannya, tetapi tindakannya menjadi contoh bagi kita.  Dari kiprahnya kita tahu, AHY merupakan kualitas yang relatif jarang dimiliki anak muda kita: Cerdas, Santun, rendah hati dan punya komitmen kemanusiaan. 

Sebagaimana wejangan yang selalu diucapkan oleh almarhum Gus Dur pada kita, diatas politik ada kemanusiaan.

A Critique to Community Based Water Model in Indonesia

Thursday, February 28, 2019

Our article is published in the Water Alternatives Journal: Not Built to Last: Improving Legal and Institutional Arrangements for Community-Based Water and Sanitation Service Delivery in Indonesia (download here). The article criticizes the community-based water model in Indonesia which are built, without paying attention to the legal and institutional framework, thus compromising its sustainability. 

This article is developed from four different research projects. 


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Kertas Posisi Masukan Jejaring AMPL untuk RUU SDA

Friday, October 12, 2018






Center for Regulation, Policy and Governance (CRPG) bersama dengan Global Water Partnership South East Asia, Jejaring AMPL dan UNICEF menyelenggarakan Focus Group Discussion "Dampak RUU SDA Terhadap Penyediaan Air Minum dan Sanitasi", 17 September 2018 di Jakarta. FGD ini kemudian dilanjutkan dengan workshop "Rekomendasi Multipihak atas Dampak RUU Sumber Daya Air Terhadap Penyediaan Air Minum dan Air Limbah" di Hotel Park Lane, Jakarta, 20 September 2018. Materi dari keseluruhan rangkaian FGD dan Workshop ini dipergunakan untuk memperkaya Kertas Posisi Jejaring AMPL yang disampaikan kepada DPR secara simbolis pada tanggal 20 September 2018.   

Bahan dan materi pada kegiatan diatas:

  1. Kertas Posisi Masukan Jejaring AMPL Kepada Dewan Perwakilan Rakyat Republik Indonesia Perihal Rancangan Undang-Undang Sumber Daya Air (RUU SDA) (Download)
  2. Workshop Hasil Focus Group Discussion (FGD) Multipihak atas Dampak RUU Sumber Daya Air Terhadap Penyediaan Air Minum dan Air Limbah, Hotel Park Lane, Jakarta, 20 September 2018 (Download

Bahan dan materi lainnya terkait RUUSDA

Berita terkait di situs Jejaring AMPL.

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CRPG Presentation at the 2018 Dioxin Conference

Thursday, August 30, 2018



CRPG Director Mohamad Mova Al'Afghani gave a presentation at the Dioxin 2018 Conference in Krakow, Poland. His presentation was based on an earlier publication: AlAfghani, MM and Paramita, D, "Regulatory Challenges in the Phasing-out of Persistent Organic Pollutants in Indonesia", the International Chemical Regulatory and Law Review 01/2018 https://doi.org/10.21552/icrl/2018/1/5

His conference presentation can be downloaded here.

Seri Kajian Rancangan Undang Undang Sumber Daya Air (RUUSDA)

Thursday, August 23, 2018





Center for Regulation, Policy and Governance (CRPG) telah menyelesaikan serangkaian kajian terkait pembahasan Rancangan Sumber Daya Air di Dewan Perwakilan Rakyat. Seluruh hasil kajian (dalam Bahasa Indonesia) dapat diunduh pada link yang disediakan dibawah.


  1. Masukan awal Untuk Dewan Perwakilan Rakyat Republik Indonesia Dalam Hal Penyusunan Rancangan Undang-Undang Sumber Daya Air (Download Makalah ; Download Presentasi
  2. Kertas Kebijakan 01/2018 Kajian Dampak Penggolongan Air Minum Dalam Kemasan (AMDK) Sebagai Bagian dari "Pelayanan Air" dalam Rancangan Undang-Undang Sumber Daya Air (Download)
  3. Kertas Kebijakan 02/2018 Pengertian "Swasta", "Pengusahaan" dan "Syarat Tertentu dan Ketat" Dalam Putusan Mahkamah Konstitusi Atas Undang-Undang 7/2004 Mengenai Sumber Daya Air dan Rancangan Undang-Undang Sumber Daya Air (Download)
  4. Kertas Kebijakan 03/2018 Kajian Dampak Pasal 63f Rancangan Undang-Undang Sumber Daya Air (RUU SDA) Mengenai Kewajiban Untuk Membuka Akses Sumber Air Yang Berada di Tanah Yang Dikuasainya (Download)
  5. Ringkasan Hasil Seri Kertas Kebijakan CRPG Mengenai RUU SDA (Power Point, Bahasa Indonesia) (Download)