Indonesia's parliament is expected to pass a new criminal code this month that will penalise sex outside marriage with a punishment of up to one year in jail, officials have confirmed.

The legislative overhaul will also ban insulting the president or state institutions and expressing any views counter to Indonesia's state ideology. Cohabitation before marriage is also banned.

Decades in the making, the new criminal code is expected to be passed on December 15, Indonesia's deputy justice minister, Edward Omar Sharif Hiariej, told Reuters.

"We're proud to have a criminal code that's in line with Indonesian values," he told Reuters in an interview.

Bambang Wuryanto, a lawmaker involved in the draft, said the new code could be passed by as early as next week.

The code, if passed, would apply to Indonesian citizens and foreigners alike, with business groups expressing concern about what damage the rules might have on Indonesia's image as a holiday and investment destination.

The draft has the support of some Islamic groups in a country where conservatism is on the rise, although opponents argue that it reverses liberal reforms enacted after the 1998 fall of authoritarian leader Suharto.

A previous draft of the code was set to be passed in 2019 but sparked nationwide protests. Tens of thousands of people demonstrated at the time against a raft of laws, especially those seen to regulate morality and free speech, which they said would curtail civil liberties.

Critics say say minimal changes to the code have been made since then, although the government has in recent months held public consultations around the country to provide information about the changes.

Some changes that have been made include a provision that could allow the death penalty to be commuted to life imprisonment after 10 years of good behaviour.

The criminalisation of abortion, with the exception of rape victims, and imprisonment for "black magic", remain in the code.

According to the latest draft dated Nov. 24 that was seen by Reuters, sex outside marriage, which can only be reported by limited parties such as close relatives, carries a maximum one-year prison sentence.

Insulting the president, a charge that can only be reported by the president, carries a maximum of three years.

Indonesia, the world's most populous Muslim-majority nation, has hundreds of regulations at the local level that discriminate against women, religious minorities, and LGBT people.

Just weeks after Indonesia chaired a sucessful Group of Twenty (G20) meeting that saw its position elevated on the global stage, business sector representatives say the draft code sends the wrong message about Southeast Asia's largest economy.

"For the business sector, the implementation of this customary law shall create legal uncertainty and make investors re-consider investing in Indonesia," said Shinta Widjaja Sukamdani, the deputy chairperson of Indonesia's Employers' Association (APINDO).

Clauses related to morality, she added, would "do more harm than good", especially for businesses engaged in the tourism and hospitality sectors.

The changes to the code would be a "huge a setback to Indonesian democracy", said Andreas Harsono of Human Rights Watch.

The deputy justice minister dismissed the criticism, saying the final version of the draft would ensure that regional laws adhered to national legislation, and the new code would not threaten democratic freedoms.

A revised version of the criminal code has been discussed since Indonesia declared its independence from the Dutch in 1945.