Unit Guide

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A. INTRODUCTION

Foreign direct investment has now become a part of world economy. As a result of globalization, countries are now more open towards trade (exports and imports), as well as business expansion done by one particular company in foreign country towards another country in order to enlarge and expand its market and business scope, and also definitely to increase revenue and profit.

Indonesia is one of the developing country whose one of its business and economic activities is Investment. Investment activies in one particular country is meant to cultivate potential economy into a real economic power. If the domestic capital is considered insufficient, the country will seek to attract foreign capital as a complement which often possess a very important role towards nation’s economy. As mentioned on the Act 25 of 2007 about investment, Foreign Direct Investment can be done by local player using fully foreign capital, or the join venture between them and the domestic investors. The background philosophy of foreign investment policy can be indentified by tracing the constellation of political and economic influence during the period, therefore, the substance of the policy on foreign investment constantly evolving in accordance with the political and economical dynamics.

As a matter of fact, Indonesia is currently one of the hot attraction among foreign investors. Indonesia is an archipelago country which covers nearly 18,000 islands. With the population of around 270 millions people, low labour wages, tropical country where sun shines all year round, and outstanding natural resources, it surely makes Indonesia as one of the main attraction in the far east.

However, the development of foreign investment in Indonesia today often go against so much constraints resulting in the less condusive business investment climate in the country. One of the causal factor that will be discussed here is the political issues occur in Indonesia, that will drag down the level of foreign direct investment. The foreign investment growth in one particular country is so much influenced by the political condition in the country. Why? Because the main purpose of political policy in one country is to increase the welfare of the community. And the right investment decision might result on the improved welfare for the people. But as the above understanding, prosperity will go hand in hand with justice and safety for everyone. Likewise in the world of business and investing in Indonesia, the most fundamental task is to seek security guarantees. Simple analogy for the statement; it’s unlikely for someone to establish or develop a business in an unsafe place. Same goes to foreign investment towads a country like Indonesia.

On the last part of the discussion, author will also try to give solutions and suggestions in which foreign companies are able to do the business in Indonesia more smoothly and condusively.

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B. POLITICAL ISSUES IN INDONESIA

1. Licensing

Licensing is one form of implementation of the functions and settings as control held by the government of Indonesia towards the activities undertaken by the society. (Sutedi, 2011). While licensing within the framework of investment is any approval to conduct investment that are issued by the government and local government which have the authority in accordance with the provisions of regulations. In order to improve its services to foreign investors, ICB (Investments Coordinating Board) in Indonesia, has initiated the implementation of OSS (One Stop Service). During the implementation of OSS, this system aims to create simplified and acceleration on the completion of licensing process in Indonesia.

As a matter of fact, in the practice of investment licensing process in Indonesia, investors are facing the layered and cumbersome licensing procedures which is seen to be ineffective and...
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