The Strategy to Increase Investment in Indonesia and Obstacles of Perfection of Investment Law

The Strategy to Increase Investment in Indonesia and Obstacles of Perfection of Investment Law

Suradiyanto (Universitas Mulawarman, Samarinda, Indonesia)
DOI: 10.4018/IJPMPA.2020010104

Abstract

This study aims to examine and find barriers to the refinement of investment law development as an effort to implement strategies to increase investment in Indonesia. This article is qualitative research. Examine and find barriers to the refinement of investment law development as an effort to implement strategies to increase investment in Indonesia.The reconstruction of the capital investment law is conducted by the issuance of Law Number 25 Year 2007 regarding investments which regulate domestic investment and foreign investment. The consideration of the appointment of BKPM as the only government agency that handles investment activities in the framework of PMA and PMDN is in order to increase the effectiveness in attracting investors to invest in Indonesia. Previous researches have not discussed the strategy of increasing capital investment so that it becomes the difference between this research and previous research (originality).
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2. Literature Review

Since the 1990s, foreign investment has been presented as a strong means for development. Foreign investment serves to climb the value ladder, bridge the investment gap, and maintain a ‘maxim effective utilization of economic resources.’ [i] Yet, attracting and enabling foreign investment is not an easy task for governments. In a context of fierce competition for capital, this requires an active state promoting policies that match the needs of foreign investors. As a result, the control and steering of foreign investment of the 1960s and 1970s was quickly replaced with a model in which governments must facilitate foreign investor initiatives and reap the benefits of multinational corporate activity. The basis of this development model is to organise local resources around the expectations of foreign investors, and rely on sovereign powers as a means to reach this objective: e.g. as a means to implement extractivism and maquilas.

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