Law Observation toward Direct Investment and Portfolio Investment in Indonesia
Globalization era gives economical effect, such as information flow which quickly reaches society. It’s more clearly along with state economic growing. Today, global economy experiences rapid globalization which can be seemed from the growth of foreign investment in any companies. This more rapid foreign investment is like nullifying any limitations of economical international relations.
Indonesia is one of developing country which wants to try developing its own country. To reach the primary goal, Indonesia are opened themselves by building relations with other nations in order to receive some supports in developing their nations, particularly in national economy sector.
Indonesia ever had a promising economic condition in 1980 to middle 1990; all aspects could be fulfilled by domestic resources and outcomes. The strategy government had that time is inviting foreign investor; particularly those who will do long-term/direct investment (PMA). Foreign investment policy (PMA) was carried out because investment was very significant for national economy growing.
Direct Foreign Investment (FDI) has positive externalities such as the entry of stable inflow of foreign capital, the increasing of work opportunities, the increasing of national revenue, the emendation of balance sheet-payment, and the technology and managerial skill transferring from multinational companies. These positive externalities are primary goal of public policy in pulling FDI.
If a state wants to be investment destination, the procedural and activities investment-related law should be able to create assurance. However, it’s different to the ideal condition, most of study about investment climate in Indonesia placed uncertainty of law as which hampers investment growth for either foreign investment or domestic investment, either direct investment or portfolio investment. Study of World Bank published in 2005 noted that in firm level they found some of obstacles for investing which was included in macro economy instability category, uncertain policy and regulation and the higher degree of corruption. Other problems consist of the low or difficulty to access financing, the low supply of electricity, the low skill of employee, regulation of labor sector, and some decentralization authority-related problems in local government level. Furthermore, it is said that Indonesia government had done some strategic efforts by adopting more of fiscal reformation, trade liberalization, financial sector reformation, taxing, labor and regular business reformation. However, the main problem is the gap between political will of government with the implementation in reality, including of gap between regulations and its implementation. Article 3 ACT Number 25 Year 2007 places assurance principle of law as the top from 10 principles of investment implementation in Indonesia. This principle emphasizes Indonesia position as state law which places law and legislative regulations as basis for every policies and actions in investment. Yet, not all of law certainty problems in investment implementing are decided by the law in the ACT mentioned above. Law certainty in the term of substance has to be supported by law substance in other business law and also decide assurance aspect in the law enforcement structure.
This paper aims to analyze direct investment and portfolio investment in Indonesia from perspective of law.
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