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The Role of Law in Creating Favorable Foreign Investment Climate

Foreign Investment

Foreign investment has a tightly related to law enforcement problem, which is realized in the form of legal certainty over the applicable legal provisions, not only on the regulations governing investment issues in particular, but also other regulations of sectoral and cross-sectoral nature. Therefore, the principles of investment as stipulated in the Investment Law are laden with law enforcement terms, such as :

  1. Legal Certainty : the principle of a lawful country that lays down the laws and regulations of the Laws as the basis for policies and measures in the field of investment.
  2. Transparency : A principle that is open to the right of the people to obtain proper, honest and non-discriminatory information about investment activities.
  3. Accountability : The principles determining that any activity and the end result of an investment shall be accountable to the public or the people as the highest sovereign of the state in accordance with the provisions of legislation.
  4. Equal and Non-
    **Discriminatory Treatment –
    **Of Country of Origin : Principle of treatment of non-discriminatory services based on the provisions of laws and regulations, whether between domestic investors and foreign investors or between investors of a foreign country and investment from other foreign countries.
  5. Togetherness : Principles that encourage the role of all investment together in their business activities to realize the welfare of the people.
  6. Fair Efficiency : The principle underlying the implementation of investment by promoting fair efficiency in an effort to create a fair, favorable and competitive business climate.
  7. Sustainable : Principles that are planned to allow the development process through investment to ensure welfare and progress in all aspects of life both in the present and the future.
  8. Environmentally
    **Aware : The principle which regulates that investment is done with due regard to and prioritize the protection and preservation of the environment.
  9. Independence : The principle which regulates that investment is done by prioritizing the potential of the nation and the state by not closing themselves to the incoming foreign capital for the realization of economic growth.
  10. Balance
    **Progress and Unity
    **Of National Economy : The principle that seeks to maintain the balance of regional economic progress in the national economic unity.
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Based on the above description, it is  clear that the role of law in creating a favorable investment climate is an absolute requirement, given that foreign investors will not invest in places that have no legal certainty (legal certainty) that can lead to a very high legal risk (regulatory risk or legal risk).

Such legal certainty does not only implies the availability of legislation required in investment activities but also those closely linked to the enforcement or enforcement of legislation required in investment activities but is also closely linked to the enforcement of legislation (law enforcement).

In other words, the availability of a comprehensive set of laws and regulations does not necessarily make a country attractive to foreign investors. The important thing to note is whether the existing legislation is effective and whether its implementation is consistent.

Factors affecting law enforcement in the field of foreign investment in Indonesia can also be seen from four factors, namely:

  1. Factors of availability of legislation instruments that clearly regulate matters relating to foreign investment issues, both regulations issued by the central government and local governments, such as regulations on foreign investment permit management are therefore required not only comprehensive but also must be compiled systematically so as not to cause problems that are overlapping or conflicting with each other.
  2. Factors of law or institutional apparatus that conduct law enforcement in the field of foreign investment such as the Government through the Investment Coordinating Board (BKPM) or local government through its instruments in the region, such as Provincial Region Investment Board (PDPPM) or Regional Device of Regency/City of Investment (PDKPM).[1] Factors of the law and institutional apparatus that are certainly closely related to the factor of human resources quality, for the development of the existing human resources) is very important to do systematically and sustainably.
    Article 1 number (7) and (8) of Presidential Regulation no. Law No. 27 Year 2009 on One-Stop Integrated Services in the Field of Investment defines PDPPM as an assistant element of the regional head in the implementation of provincial government, with the form in accordance with the needs of each provincial government, while PDKPM is an assistant element of the regional head in the implementation of local government districts/municipalities, with forms in accordance with the needs of each district/city government, which performs the main function of coordination in the field of investment in district/city governments. Therefore PDPPM or PDKPM in each region has different plantings.
  3. Factors of facilities and facilities in the field of foreign investment arrangements, such as the availability of facilities and facilities of informatics technology in the management of licensing and non-licensing in the field of investment through one-door integrated service. This is certainly closely related to the coordination between agencies that have authority in the field of licensing and non-licensing of foreign investment, where one of the efforts made is through the Information Services and Electronic Investment Permit (SPIPISE) system.
    This system is an integrated licensing and non-licensing service between BKPM and the Ministry/LPND which has licensing and non-licensing authority, PDPPM or PDKPM as regulated in Presidential Decree no. 27 Year 2009 on One Stop Service in the Field of Investment juncto Head of BKPM Regulation no. 14 Year 2009 on Electronic Information Services and Investment Permit System. Even though the facilities and infrastructure in the licensing process such as information technology is a problem that can not be ignored, it can not be denied that the procurement of facilities and infrastructure is often hampered due to limited funds, especially for certain regions in Indonesia, which prevent business licensing system online to optimally.
  4. Factors of legal culture that support the development of foreign investment. This factor is inseparable from the view or value system prevailing in the society (social) on the importance of the presence and regulation of foreign investment in Indonesia. In this case the society’s point of view on the importance of the role of law in the development of foreign investment also needs to be developed so that growing legal culture that supports the creation of law enforcement in the field of foreign investment.
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Article 1 number (7) and (8) of Presidential Regulation no. Law No. 27 Year 2009 on One-Stop Integrated Services in the Field of Investment defines PDPPM as an assistant element of the regional head in the implementation of provincial government, with the form in accordance with the needs of each provincial government, while PDKPM is an assistant element of the regional head in the implementation of local government districts/municipalities, with forms in accordance with the needs of each district/city government, which performs the main function of coordination in the field of investment in district/city governments. Therefore PDPPM or PDKPM in each region has different plantings.

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