Foreign Investment – Historically the existence of foreign investment in Indonesia is actually not a new phenomenon, given the foreign capital has been made in Indonesia since the colonial era. However foreign investment in the colonial era is different with foreign investment after independence, because the purpose of foreign investment in the colonial era is solely dedicated to the interests of the colonizers and not for the welfare of the Indonesian nation.

The history of foreign investment in Indonesia can not be separated from the beginning of international trade in Indonesia around the year 1151, when at that time, European traders, especially the Portuguese began to rule Malacca in terms of the trading of commodity spices that have a very strategic value at that time.

The International Trade Activity develops to be an activity of colonialism in the territory of Indonesia, not only by the Portuguese, but also by other nations, the Netherlands (1596-1795 and 1816-1942), France (1795-1811), English (1811-1816) and Japan (1942-1945). In the early days of Dutch colonization the presence of multinational companies such as the Verenigde Oost Indische Compagnie (VOC) in spice trade activities in Indonesia also played a very important role, especially in presenting the interests of the Dutch government.

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After the National Independence, foreign investment in Indonesia also continued with various dynamics, from the beginning of independence (1945-1949), the Old Order (1949-1967), the New Order (1967-1998), and from the reform era in 1998 as of now). Foreign investment in Indonesia becomes something inevitable, and even plays a very important and strategic role in supporting the implementation of national development.

This is because the national development of Indonesia requires a very large funding in order to be able to support the expected rate of economic growth. The need for funding can not only be obtained from domestic sources, but also from abroad.

The importance of foreign investment in Indonesia’s economic development is also reflected in the objectives stated in Law Number 25 Year 2007 concerning Foreign Investment (Investment Law) as the legal basis for investment activities in Indonesia. The Investment Law sets out the purpose of the investment as, among others:

  1. Increasing national economic growth.
  2. Opening job opportunities.
  3. Promoting sustainable economic development.
  4. Improving the competitiveness of the national business world.
  5. Enhancing national technology capacity and capability.
  6. Encouraging the development of people’s economy.
  7. Processing potential economy into real economic power by using the funds originating, both from within and outside the country
  8. Improving people’s welfare.
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The increase in the foreign investment in Indonesia does happen by itself. It requires hard work to create a favorable investment climate. One of the most significant classical issues in creating a favorable investment climate in Indonesia is law enforcement, in addition to other issues, such as limited infrastructure, security, and socio-political stability.

In law enforcement, there are three elements that must be considered, namely: legal certainty (rectssicherheit or legal certainty, benefit (zweckmassigkeit or benefit), and justice (gerechtigkeit or justice) that must go along in harmony. If law enforcement only takes into account to legal certainty, its implementation may ignore justice and its usefulness in society, and vice versa if one of the elements is too prioritized, then the implementation may ignore the other elements.

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