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Development of Investment Law in Indonesia

20 Maret 2010   11:48 Diperbarui: 26 Juni 2015   17:18 498
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Politik. Sumber ilustrasi: FREEPIK/Freepik

By: Dimas Julianto*

Indonesia is a developing country that needs to improve and achieve economic growth which aims to provide employment opportunities, develop of import substitution industry, encourage of industry goods, technology transfer, build the infrastructure, and develop of disadvantaged area (poor area).

Economic development can be seen from the flows of investment, especially foreign investment that have purposes to get the cheap labor costs, close to the source of production materials, find new markets, technology transfer royalty, profit on sale of goods and spare parts, other incentives such as tax and import duties, also a legal status of certain countries in international trade.

Investment destination state in order to obtain foreign capital requires three conditions as follows: 1. Economic Opportunity, where as investments provide economic benefits to investors; 2. Political Stability, where as investments will be influenced by political stability; 3. Legal certainty.

Indonesia needs due process and effective legal system to obtain expected recovery of economic, politics, life, social, and justice. To determine the existence of legal certainty in a country can be measured from the legal system which consists of three factors are legal substance, legal structure and legal culture. In the investment activities, law must provide certainty. This legal certainty should include aspects of the legal substance that is supported by the legal structure and legal culture.

Legal substance means legislation that produced by the party mentioned as in legal structure inside the legal system. A study of relevancy about legal substance and investment is how to create a law that could provide foreign investors to have confidence to invest their capital by creating legal certainty, fairness, and efficiency.

At the time before the issuance of new Investment Law, there are many existing problems, which are related to the implementation of regional autonomy under the Constitution of Law Number 32 Year 2004 concerning Regional Government which dealing about licensing issues between central and local governments and related departments that have become the real problem of investment. Legal uncertainty causes the high cost and time inefficiency regarding investment permit. In addition to licensing issues, issue of legal uncertainty on the restriction of foreign capital causes an obstacle to determine of capitals ownership to foreign investors in PMA Companies.

After Constitution of Law Number 25 Year 2007 concerning Investment ( "New Investment Law") issued, the government has much to reform the laws and regulations related to investment problems, at least until the first quarter of 2010 in thecontext of licenses issuance, the Government and the Indonesia Investment Coordinating Board (“BKPM”) have issued the implementing regulations of New Investment Law that provides convenience in granting investment permits, such as Government Regulation Number 27 Year 2009 concerning One-Stop Integrated Services and Head of BKPM Regulation Number 12 Year 2009 concerning Guidelines and Procedures of Investment Application which revoked Head of BKPM Regulation Number 57/SK/2004 and 1/P/2008 also 89/SK/2007.

In the mining sector, by the publication under the Constitution of Law Number 4 Year 2009 concerning the Mineral and Coal Mining (“Mining Law”) has causes changes in procedures to obtain the mining management permits. The procedures was changed from an agreement form both of investors and Government such as the Contracts of Works (“KK”) and Coal Contract of Work (“PKP2B”) to licensing procedures in accordance with laws and regulations. At this time the government has issued Government Regulation Number 23 Year 2010 concerning the implementation of Mineral and Coal Mining Business Activities. Thus, there is rule of law in granting mining permits from the regulatory implementation of mining legislation.

At this time, Legal certainty of capital ownership restriction to foreign investors in a business line is regulated by Presidential Regulation Number 111 Year 2007 concerning Lists of Business Fields That Are Closed To Investments and Business Fields That Are Conditionally Open for Investments (“Investment Negative List”). This regulation intended to provide clarity of capital ownership restriction to foreign investors, but in practice, it is obvious there are problems in the areas of business which they called it the "gray" area. It means a business line can be classified into two or more business lines are regulated differently in Investment Negative List. Thus, Investment Negative List has obscurity of capital ownership restriction to foreign investors in related to establishment of PT PMA that based on shareholders agreement in Joint Venture Agreement. The implementation of this regulation also unclearly explained in order to PT PMA establishment that wanted to operate different business lines that have different capital restriction in DNI. For example, if PT PMA wants to operate business lines of operation of fixed networks (49%) and operation of closed fixed networks (65%) (point 44. a&b of DNI).

One of Investment Law substance has a purpose to provide legal certainty to investors. Absence of investment implementing regulations involved a legal vacuum that affect the uncertainty of investment itself. In practice, found some weaknesses in the laws and regulations in the investment, such as, the regional regulations that contradict the higher regulations are still valid. The Government needs to publish investment implementing regulations to regulate something that has not been regulates. One of the investment problems that has not been regulates is the minimum capital amount of investment. Government needs to publish its investment implementing regulation, because during this time, minimum capital amount of investment is regulated by the BKPM policy and it affected an in-transparency and legal uncertainty.

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