A. General Discussion
Over the past ten years, Indonesia has undergone dramatic changes, starting with the crash of its economy during the South East Asian economic meltdown. Shortly thereafter, the Indonesian political structure underwent its most drastic changes in decades when President Soeharto was ousted in May 1998 and democratic elections were held in November 1999 to elect a new president. Since then Indonesia has gone through the growing pains and turmoil of a newly-democratised country.
In 2004 Indonesia suffered the disturbances of an election year, and with some of the capital that flowed overseas during the political upheavals now returning to the country, Indonesia needs now, more than ever, a cohesive and certain legal system and investment regime, both to continue the implementation and development of the recent reforms and also to attract new investment that might otherwise be attracted by the dynamic economies of China and other SE Asian nations.
A. Regulations and Restrictions
The financial crisis in Asia had a disastrous effect on the Indonesian economy but it also had some positive by-products for its foreign investment climate as the Indonesian Government, in an attempt to attract a new flow of foreign capital and investment, opened up industry sectors which were previously closed to foreigners and implemented legislation aimed at making certain aspects of business, such as mergers, consumer rights, antitrust and bankruptcy, more efficient and transparent.
A. The areas of business in which PMA companies are allowed to operate are restricted by a so-called Negative List. Although this list has now become very short (as most areas are now open for foreign investment) recent amendments to the List have increased the number of business areas where a local shareholding is required.
B. Investment Coordinating Board (BKPM)
Most forms of foreign investments are governed by the Foreign Capital Investment Law of 1967 which has... [continues]
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