Covid-19 Pandemic Perppu: will it end like Perppu 4/2008?

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Anthony Budiawan Managing Director of Political Economy and Policy Studies (PEPS)

IO – Near the end of 2007, the global financial crisis broke out, dragging the world economy down into a recession. 2008 world economic growth was recorded at a negative 1.85 percent. This crisis impelled the Indonesian government, or in this case the President, to issue a Government Regulation in place of Law (Perppu) on October 15, 2008. Perppu is a decree (Act) that is unilaterally issued by the President, without involving the Parliament – while in fact the Act was accepted by both parties: the government and the Parliament. 

The issuance of a Perppu is the President’s subjective right when the President feels that there is a dangerous threat or an emergency. In connection with the global financial crisis, the President at that time felt that there was an urgency that forced him to issue 3 Perppu simultaneously. First, Perppu No. 2 of 2008 concerning Bank Indonesia, established on October 13, 2008. Second, Perppu No. 3 of 2008 concerning the Deposit Insurance Corporation established on October 13. And Perppu No. 4 of 2008 concerning a Financial System Safety Net. 

A Perppu was issued because the state needed a law that had to be applied immediately because there was an emergency. In such a case there is no law covering the matter, or there are not enough. Since it was issued unilaterally by the President, the Perppu must obtain the approval of the Parliament in the following parliamentary season. In such a case, the Parliament can agree to accept or reject the Perppu. 

In connection with Perppu No. 4/2008, the Parliament refused to ratify the Perppu into law. The rejection is generally related to Article 29 which imparts legal immunity to officials and all parties implementing a Perppu. Article 29 reads: The Minister of Finance, the Governor of Bank of Indonesia, and/or parties who carry out their duties following the Government Regulation in place of this Law cannot be punished for any decisions they have made or policies that are in line with their duties and authorities as referred to in this Government Regulation in place of Law. 

Perppu No. 4/2008 is also considered to give authority beyond the limits to the Financial System Stability Committee (KSSK) in determining the status of problem banks and their handling. KSSK only consists of the Minister of Finance as chairman and the Governor of Bank of Indonesia as a member. And absolute power is vested in the Minister of Finance because if there is a difference of opinion, the Minister of Finance as the head of the KSSK can make a decision. 

Perppu No. 4/2008 is also considered to give absolute authority to the KSSK by eliminating the functions and authority of the Parliament related to state finances, as stipulated in the Constitution, because the Minister of Finance can issue state funds in the name of a crisis without asking for the Parliament’s approval. 

Now the Parliament’s decision was proven correct. Liquidity loan funds provided to Century Bank turned out to be problematic, and detrimental to the country’s finances. Because Perppu No. 4/2008 was not ratified, no party was immune from the law. Some of those involved were prosecuted, from both Bank Century and Bank Indonesia. 

The government recently also issued Perppu No. 1 of 2020 concerning State Financial Policy and Financial System Stability for Handling Corona Virus Disease 2019 (Covid-19). The scope of Perppu No 1/2020 is much broader and more “radical” than Perppu No 4/2008. Perppu No. 1/2020, in addition to regulating Financial System Stability (or a Safety Net) also regulates State Finance policies in the face of threats that endanger the national economy. 

Perppu No. 1/2020 is considered to be more “radical” because the government can unilaterally set the State Budget (APBN) without the need for Parliamentary approval, with a budget deficit initially indicated a maximum of 3 percent of GDP becoming unlimited, with a tenure of 3 years. Besides, all articles that were the reason for the Parliament to reject Perppu No. 4/2008 still exist in this Covid-19 Pandemic Perppu, including the article of impunity that received much public scrutiny, and absolute authority of the government in the field of the budget that does not require the approval of Parliament, even for 3 years. Further, the authority and power of the Bank Indonesia and the government are very large in determining and providing liquidity loans and capital participation for all banks and companies suffering financial difficulties, all without the approval of the Parliament. 

Therefore, logically, the Parliamentary factions that had previously rejected Perppu No. 4/2008 were also expected to reject the Perppu Pandemic Covid-19. If not, the public can judge these factions as political adventurers who only defend momentary interests, because the reasons for rejection in Perppu No. 4/2008 are still very valid in this Perppu No. 1/2020. Whereas the factions that had previously accepted Perppu No. 4/2008 to be passed into law, the Democratic faction and the PKS faction, are also expected to reject the Perppu Pandemic Covid-19. The reason is simply to obey the law and be consistent with past decisions. With calculations like this, Perppu Pandemic co-19 faces a challenge of being rejected by all factions. 

In the field of law, the name is jurisprudence. That is the legal decision in the past that can be used as a reference to decide the same case now. Will there also be a “politics of prudence” in our political realm?