Written by: Rizky Sanjaya, SH.
Economic and national development in Indonesia must certainly be supported by capital because economic growth will be not actualized if there is no capitalization system. Recently, one of fund’s resources is coming from domestic income. However, the resource is certainly not enough to maximize national and economic development in Indonesia; therefore, Indonesia’s government opens opportunities for foreign investors who would like to invest in Indonesia. They thought that foreign investment has an important role in the national development and economy of the country, especially in a developing country. The development of the investment climate in Indonesia has not shown significant improvement or development even though basically Indonesia has great potential to carry out investment activities. This is related to the problems that are still often faced by foreign investors in realizing their investment in Indonesia, including:
- Inadequate and patchy infrastructure throughout Indonesia;
- Employment-related issues;
- Issues related to regulation;
- Problems related to bureaucracy;
- Problems related to the quality of human resources;
- The problem of less credible dispute resolution mechanisms;
- The existence of regional regulations, ministerial decrees, or laws that contribute to distorting investment activities;
- The problem of uncertainty in investing;
- The issue of legal certainty.
Efforts built to attract investment in Indonesia are not followed by guarantees of legal certainty for investment activities. This problem makes investors reluctant to invest in Indonesia. This can be seen from the increasing number of industrial companies that close or move their businesses to other countries, such as Vietnam and China. In fact, there is a tendency for those who have invested for a long time in Indonesia to leave Indonesia and move their investments to other countries. Even in the current era of economic globalization, these three elements are becoming increasingly important, among others with the development of market mechanisms. In general, the obligation of the government and local governments is to ensure certainty and business security for the implementation of investment. To ensure certainty and security, it is necessary to regulate the authority of the government, provinces, and districts / cities in the implementation of investment. This legal certainty includes the provisions of laws and regulations that in many cases are unclear and even contradictory and also regarding the implementation of court decisions. These difficulties can be said to be difficulties faced by developing countries that invite foreign investment to help their economic growth. The legal certainty factor is closely related to the issue of guarantees provided by the government of the recipient country to foreign investors so that these investors do not feel hesitant to invest their capital. Related to this, one form of the commitment of the Government of Indonesia to provide guarantees and protection to foreign investors is by issuing Law Number 25 of 2007 concerning Investment. In the law, there are several provisions related to the protection of foreign investors, including provisions regarding the provision of equal treatment to all investors, provisions regarding nationalization and compensation, and provisions regarding the transfer of assets and transfers and repatriations in foreign currencies.
Discusses the implementation of several provisions of the Investment Law related to the protection of foreign investors against risks (may) be faced by foreign investors, especially non-commercial risks. Article 4 Paragraph (2) Letter a of the Investment Law states that in establishing the basic investment policy the government gives equal treatment to domestic investors and foreign investors. Furthermore, in letter b it is said that the government guarantees legal certainty, business certainty, and business security for investors from the licensing process to the end of investment activities. Regarding equal treatment for all investors, Article 6 of the Investment Law states that the government provides equal treatment to all investors from any country whose carry out investment activities in Indonesia in accordance with the provisions of laws and regulations. Such equal treatment does not apply to investors from a country that obtains privileges under an agreement with Indonesia. These privileges include privileges related to customs unions, free trade areas, common markets, monetary unions, similar institutions, and agreements between the Government of Indonesia and foreign governments that are bilateral, regional, or multilateral relating to certain privileges in the implementation of investment. Article 6 of the Capital Market Law is a realization of the principle of equal treatment and does not distinguish national origin as stated in Article 3 Paragraph (1) letter (d) of the Capital Market Law. The arrangement is appropriate considering that so far there is an assumption circulating in the community that there are significant differences in treatment for fellow investors both between domestic investors and foreign investors, especially with the treatment for foreign investors in the form of tax holidays and tax concessions and breaks given in connection with foreign investment. What is stipulated in Article 6 paragraph 2) of the Investment Law relates to the existence of a number of international agreements that are bilateral between the Government of Indonesia and Foreign Governments in the form of Investment Guarantee of Agreement (IGA) relating to foreign investment carried out by the state and / or its citizens based on the Investment Law which has privileges. Furthermore, regarding nationalization and compensation (Article 7 of the Investment Law). It said that the government would not carry out acts of nationalization or expropriation of investors’ property rights, except by law. In the event that the government takes an act of nationalization or expropriation of property rights, the government will provide compensation in the amount of which is determined based on market prices. If there is no agreement between the parties on compensation or damages, then the settlement is carried out by arbitration. The guarantee of protection for foreign investors against non-commercial risks in planting activities is expected to be one of the factors to create a conducive investment climate. In turn, this will encourage an increase in foreign investment activities in Indonesia. Investor protection guarantees are one of the factors supporting the increase in foreign investment activities in Indonesia in the long term, especially in the era of free trade marked by increasingly competitive competition. Entering the era of world free trade under the WTO, the guarantee of investor protection against non-commercial risks is expected to encourage trade activities and increased trade will encourage further investment. The Indonesian government can take advantage of the advantages of foreign investment companies, especially those in the form of multinational companies. This can be done by providing opportunities for foreign investment companies to export their products abroad because trade between multinational companies has become the main factor driving world import exports. In addition to increasing the competitiveness of Indonesian products in the international market, the international production and distribution system in foreign investment companies will generally also support the domestic market to have access to the flow of world goods and services (a market that has special access). Foreign investment companies can also open markets for local companies that have the status of small and medium enterprises if the local company has access to foreign investment companies. If a local company has access to international markets, it will be able to face competitors in international markets. In turn, it can increase the competitiveness of Indonesian products in the international market. The impact of a lot of foreign investment on imports is not so great. This shows that in the long run, foreign investment only contributes a small contribution to Indonesia’s import performance, meaning that in the long run the amount of foreign investment entering Indonesia does not greatly affect the value of Indonesian imports. This indicates that Indonesia’s import performance tends to be influenced by other factors such as economic growth, international economic conditions, exchange rates, and others. In addition, because basically imports of capital goods are durable goods so that the increase in imports caused by the entry of foreign investment will only affect the initial periods but in the long run the effect will be smaller. Investment activities carried out by foreign investors not only bring benefits to increase the volume of international trade in Indonesia as a recipient country, but also bring benefits to trade activities in the investor’s home country. In this case, with foreign investment activities, various technology products in the investor’s home country can be sold in Indonesia as a recipient country. Technology develops through foreign investment as an international technology transfer channel. By encouraging foreign investment, developing countries depend not only on efficient imports of foreign technology but also on the creation of technological spillovers for local companies.
CONCLUSION Legal protection against foreign investment in Indonesian national law is regulated in Law Number 25 of 2007 concerning Investment. This law has provided adequate protection to foreign investors against various risks including non-commercial risks in foreign investment in Indonesia. This can be seen in several provisions of the law, among others through the regulation of foreign investor rights related to several matters (Article 6 to Article 9), namely the guarantee of equal treatment for all investors and guarantees for nationalization and other expropriation actions. The implications of legal protection for foreign investors for foreign investment activities in Indonesia, among others, can contribute or benefit significantly to the increase in foreign investment activities. The guarantee of protection for foreign investors against non-commercial risks in planting activities is expected to be one of the factors to create a conducive investment climate.