Indonesia is one of few countries that is very open to Foreign Direct Investment. The government keeps encourage investment interest from foreign investors in Indonesia by issuing various policies that facilitate foreign investors to invest in Indonesia.
It is undeniable that investment or Foreign Direct Investment is very important for economic development of a country which becomes its investment land. Foreign Direct Investment is an investment activity to do business in the territory of the Republic of Indonesia carried out by foreign investors, both those who use foreign capital fully and those who joint with domestic investment (Article 1 section 3 Law Number 25 year 2007 About Investment)
This foreign direct investment has some positive and negative impacts for the state and the society. The positive impacts that occur as a result of this investment are :
1. Opening new jobs for the community.
Middle Path Theory states that Foreign Direct Investment (FDI) can be an engine and turn on growth in world development, benefit the local economy through the flow of funds and technology, a new generation of labor and the creation of new opportunities for export.
2. Increased income through tax revenues and payments.
Neo Classical Economy Theory argues that foreign direct investment has a positive impact on host countries because the capital brought adds quality and quantity to host countries, the flow of funds and reinvestments increase total saving in host countries and increase government revenue through tax revenue. Fact shows that foreign capital brought to the host country encourages domestic capital to use it for various businesses. In line with Sonarajah's conclusion foreign investment as a whole is beneficial or beneficial to the host country so that it encourages economic growth and national development.
3. Fulfillment of community ends.
In the Foreign Direct Investment industry sector increases the flow of goods. Therefore it increases the supply elasticity due to increased production of the foreign company industry.
Those above are positive impacts of Foreign Direct Investment. But its important to know that Foreign Direct Investment not only has positive impacts, but it also has negative impacts along with it. Therefore, its important carry out various forms of supervision , in this case the government , through regulations or laws that can guarantee the smoothness and orderly implementation of Foreign Direct Investment.
The negative impacts of Foreign Direct Investment are:
1. Reduced productive land.
The more foreign companies that run businesses and establish companies in Indonesia, the area that can be used as productive land such as for agricultural businesses will be depleted because it is used to set up factories, this is related to the reduction of labor in agriculture.
2. Enviromental damage.
Foreign Direct Investment can result in environmental pollution caused by pollution from industrial activities, both air pollution and waste pollution. The more foreign companies in Indonesia will cause further increase of waste production. Pollution in the environment can disrupt human health, as well as animal and plant life. Therefore it is necessary to enforce clear rules regarding the management of industrial waste.