Foreign investors need judicial security<\/p>\n
By T. Mulya Lubis<\/p>\n
JAKARTA (JP): It is only natural that there should be some
\neuphoria after the announcement of Government Regulation No.
\n20\/1994 (PP 20\/1994), which opens up the Indonesian market wider.
\nIt cannot be denied that this is the regulation that has been
\nmost anxiously awaited by foreign investors, and logically the
\nnew decree should make Indonesia more attractive.<\/p>\n
I do not believe that PP 20\/1994 will make Indonesia the
\nsweetheart of foreign investors because their first love is still
\nChina, and possibly also Vietnam. But it does not seem
\nexaggerated to say that the Indonesian maiden will not be too
\nlonely and certainly there will be more attempts to seduce
\nIndonesia.<\/p>\n
Generally speaking it can be said that PP 20\/1994 provides
\nforeign investors with diverse opportunities which so far have
\nbeen closed or contingent on links with domestic investors. Now,
\nforeign investors can control 100 percent of their investment
\nwithout being limited by minimum investment requirements and
\nwithout obligation to invest only in eastern Indonesia.<\/p>\n
Should a foreign investor wish to form a joint venture, it
\nwill be possible for him to retain 35 percent of the shares. What
\nmakes it even more attractive, virtually no divestments will be
\nrequired. His majority share ownership position could practically
\nbe maintained. Thus, any fears that he will eventually be pushed
\naside by his local partner become totally unfounded.<\/p>\n
What is also interesting is the opening up to foreign
\ninvestors of public sectors such as seaports, shipping,
\ncommercial aviation, electricity, telecommunications and the mass
\nmedia, all of which have been considered off limits. The
\n\"negative list\" that has so far barred the free entry of foreign
\ninvestments has thus been disposed of. Moreover, PP 20\/1994
\nallows an expansion of ventures by acquisition of take-over of
\nother businesses, or to set up affiliate companies. Market shares
\ncan thus be enlarged. In this country, foreign investors need
\nhave no fear of anti-monopoly or anti-oligopoly measures.<\/p>\n
Another aspect of PP 20\/1994 is the simplification of
\ninvestment procedures and easing of restrictions with regard to
\nlocation. Location in bonded and industrial zones are no longer
\nmandatory. This is most helpful since foreign investors can now
\nchoose their own locations and do no longer have to deal with
\nhigh costs imposed by the owners of such zones.<\/p>\n
This deregulation package must therefore be welcomed,
\nparticularly in the light of the adjustments which we have to
\nmake to accommodate the globalization trend and the GATT
\nrequirements. However, it must in all honesty be admitted that
\nderegulation alone is not enough. Foreign investors, particularly
\nthose with long-term business operations, demand political
\nstability and legal certitude. Foreign investors need a climate
\nof security. Therefore efforts must be made to make sure that
\nsuch a climate of security prevails and the only way to do this
\nis by ensuring legal certitude. This means that our laws must be
\nconducive to the achievement of such a climate and this must be
\nsupported by the presence of a clean, fearless and authoritative
\njudicial apparatus.<\/p>\n
Any neglect to ensure such a legal certitude will discourage
\nforeign investors from investing their capital in Indonesia. In
\naddition, we must also promote the emergence of a government that
\nis clean of corruption and manipulation. Our economy must not be
\na high cost economy. If this situation continues, foreign
\ninvestors will be reserved in investing their capital in
\nIndonesia.<\/p>\n
In essence, the problem of economic growth is not merely one
\nof luring foreign capital. Of no less importance is the provision
\nof legal protection for investors as well as the presence of a
\nfree, clean and authoritative judiciary. It is in this context
\nthat we must view the PP 20\/1994 regulation. Not all views that
\nare critical of the regulation must be regarded as being against
\nforeign capital and against deregulation. We accept foreign
\ncapital and deregulation. However, we must keep in mind that PP
\n20\/1994 without strong legal guarantees could very well turn the
\nregulation into an empty and meaningless document.<\/p>\n
We have entered an era of regard for the law. The time has
\ncome that the factor of law becomes a determining element in this
\ncountry's economic development efforts.<\/p>",
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