Indonesian President Joko Widodo has endorsed a new controversial omnibus law which has sparked massive protests across the country by those who see it as eroding labour rights and weakening environmental protection.

The Job Creation Law was passed in Parliament on Oct 5 and signed off by Mr Joko on Monday. Even if he had not signed it, the Bill would automatically have taken effect in 30 days.

However, signing off on the law showed Mr Joko's commitment to see through his reform agenda during his second term in office.

The law is set to simplify more than 70 overlapping regulations, cut bureaucracy, standardise permit procedures to attract foreign investment, create jobs and boost the economy, which has been badly battered by the coronavirus pandemic.

South-east Asia's largest economy is expected to shrink this year for the first time since the 1998 Asian financial crisis, according to government estimates.

Mr Joko painted a bleak economic outlook on Monday, telling his Cabinet that the gross domestic product is expected to contract by more than 3 per cent on an annual basis in the third quarter and urging them to speed up spending.

The law has received support from the business community which has long bemoaned unclear and conflicting regulations and excessive red tape which make it hard to do business in the country.

In a statement on Oct 16, the World Bank had praised the new legislation as "a major reform effort to make Indonesia more competitive and support the country's long-term aspiration of becoming a prosperous society".

At home, labour unions, green groups, workers, students and even Muslim organisations had opposed the law, taking to the streets to demand that Mr Joko - often referred to as Jokowi - revoke it through a Perppu, or a regulation in lieu of the law.

They said the new regulations would hurt workers by slashing severance pay, affecting minimum wages and making it possible for people to be employed on a contract basis indefinitely.

Environmentalists also objected, pointing out the removal of a strict liability clause that provides a legal basis to sue corporations for causing environmental damage such as in the case of forest fires.

The protests are unlikely to abate. Hours before Mr Joko signed off on the law on Monday, thousands rallied peacefully in the capital Jakarta, as well as other cities including Yogyakarta, Banda Aceh, Medan and Makassar.

Two labour unions, the Confederation of Indonesian Trade Unions (KSPI) and the All-Indonesia Workers Unions Confederation (KSPSI AGN), yesterday filed a judicial review of the law at the Constitutional Court.

KSPI president Said Iqbal said in a statement: "After we studied the content of the law, especially on labour, almost everything is unfavourable to the workers."

He added: "KSPI will continue to carry out actions and strikes in line with the constitutional rights of the workers and which are non-violent in nature."