Foreign investors need judicial security

Foreign investors need judicial security

By T. Mulya Lubis

JAKARTA (JP): It is only natural that there should be some
euphoria after the announcement of Government Regulation No.
20/1994 (PP 20/1994), which opens up the Indonesian market wider.
It cannot be denied that this is the regulation that has been
most anxiously awaited by foreign investors, and logically the
new decree should make Indonesia more attractive.

I do not believe that PP 20/1994 will make Indonesia the
sweetheart of foreign investors because their first love is still
China, and possibly also Vietnam. But it does not seem
exaggerated to say that the Indonesian maiden will not be too
lonely and certainly there will be more attempts to seduce
Indonesia.

Generally speaking it can be said that PP 20/1994 provides
foreign investors with diverse opportunities which so far have
been closed or contingent on links with domestic investors. Now,
foreign investors can control 100 percent of their investment
without being limited by minimum investment requirements and
without obligation to invest only in eastern Indonesia.

Should a foreign investor wish to form a joint venture, it
will be possible for him to retain 35 percent of the shares. What
makes it even more attractive, virtually no divestments will be
required. His majority share ownership position could practically
be maintained. Thus, any fears that he will eventually be pushed
aside by his local partner become totally unfounded.

What is also interesting is the opening up to foreign
investors of public sectors such as seaports, shipping,
commercial aviation, electricity, telecommunications and the mass
media, all of which have been considered off limits. The
"negative list" that has so far barred the free entry of foreign
investments has thus been disposed of. Moreover, PP 20/1994
allows an expansion of ventures by acquisition of take-over of
other businesses, or to set up affiliate companies. Market shares
can thus be enlarged. In this country, foreign investors need
have no fear of anti-monopoly or anti-oligopoly measures.

Another aspect of PP 20/1994 is the simplification of
investment procedures and easing of restrictions with regard to
location. Location in bonded and industrial zones are no longer
mandatory. This is most helpful since foreign investors can now
choose their own locations and do no longer have to deal with
high costs imposed by the owners of such zones.

This deregulation package must therefore be welcomed,
particularly in the light of the adjustments which we have to
make to accommodate the globalization trend and the GATT
requirements. However, it must in all honesty be admitted that
deregulation alone is not enough. Foreign investors, particularly
those with long-term business operations, demand political
stability and legal certitude. Foreign investors need a climate
of security. Therefore efforts must be made to make sure that
such a climate of security prevails and the only way to do this
is by ensuring legal certitude. This means that our laws must be
conducive to the achievement of such a climate and this must be
supported by the presence of a clean, fearless and authoritative
judicial apparatus.

Any neglect to ensure such a legal certitude will discourage
foreign investors from investing their capital in Indonesia. In
addition, we must also promote the emergence of a government that
is clean of corruption and manipulation. Our economy must not be
a high cost economy. If this situation continues, foreign
investors will be reserved in investing their capital in
Indonesia.

In essence, the problem of economic growth is not merely one
of luring foreign capital. Of no less importance is the provision
of legal protection for investors as well as the presence of a
free, clean and authoritative judiciary. It is in this context
that we must view the PP 20/1994 regulation. Not all views that
are critical of the regulation must be regarded as being against
foreign capital and against deregulation. We accept foreign
capital and deregulation. However, we must keep in mind that PP
20/1994 without strong legal guarantees could very well turn the
regulation into an empty and meaningless document.

We have entered an era of regard for the law. The time has
come that the factor of law becomes a determining element in this
country's economic development efforts.