Group established to push legal reform in Indonesia
Group established to push legal reform in Indonesia
Adianto P. Simamora, The Jakarta Post, Jakarta
The International Finance Corporation (IFC), the investment arm
of the World Bank, has set up a working group to monitor the
implementation of law reform in Indonesia, according to a senior
executive.
IFC director for East Asia and the Pacific Javed Hamid said on
Friday that the working group would propose concrete steps to the
government to improve the functioning of the legal system in the
country.
"This (law reform) will help rebuild the confidence of private
sector investors and stem the current massive outflows of private
capital from Indonesia," Javed told reporters following a half-
day discussion on law reform.
The working group is chaired by noted-lawyer Kartini Muljadi
from Kartini Muljadi and Partners and has members that include
judges, lawyers, legal practitioners, legal academics and also a
number of businessmen.
Javed said that legal uncertainty in this country had been one
of the main reasons for causing a capital outflow of around US$10
billion per year since the 1997 financial crisis.
In comparison, Indonesia enjoyed a private capital inflow of
$11.5 billion in 1996.
"The private sector will play a key role in the restoration of
the investment flows that are crucial for the recovery of the
country's ailing economy," he said.
He said that investors' willingness to invest in this country
would largely depend on the ability of the government to create
legal certainty.
Javed acknowledged that most Indonesian legal products were
good but their enforcement was weak.
He noted, however, that some laws, particularly on the mining
industry, were out of date and needed immediate improvement to
encourage new investors to return to this sector.
Javed added that the IFC had resumed its support for some
projects already in the pipeline.
He, however, said that it would maintain a freeze on new
funding to Indonesia until there was concrete evidence of
improvement in the legal environment.
"We still accept that we have to suspend our operation until
we see some improvement in the legal environment," he said.
The IFC has been embroiled in legal disputes involving
companies it had invested in, particularly PT Panca Overseas
Finance Indonesia (POFI).
An bankruptcy petition brought against POFI was rejected by
the commercial court last year due to what the IFC suspects were
fictitious creditors voting in favor of POFI.