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Indonesia Passes Law to Attract Foreign Investors

  • Trish Anderton

Investors are beginning to show renewed interest in Indonesia, whose economy has finally been shaking off the effects of the 1997 Asian economic crisis. But one legal expert says the country's judicial system needs a total overhaul to guarantee justice and reassure investors that the country is safe for business. Trish Anderton reports for VOA from Jakarta.

Indonesia has embarked on a campaign to make itself more attractive to foreign investors, and it appears to be getting results.

The country's Investment Coordinating Board says realized foreign direct investment rose 17 percent in the first half of 2007, compared to last year.

A revamped investment law aims to make it easier for foreign investors to enter the market and to take out profits. The law also provides improved procedures for resolving disputes.

Darmawan Djajusman is the coordinating board's deputy chairman for investment promotion. Speaking at a forum sponsored by the Jakarta Foreign Correspondents Club Wednesday, he said the new law has helped.

"The government introduced some law to make ... improvement of our investment climate. I believe it is working," he said.

But Indonesia is also notorious for its corrupt and unpredictable courts. Lawyer Andrew Sriro, who works with foreign companies here on legal issues, told the forum the judiciary simply has too many shortcomings for a quick or partial solution.

"Underpaid, overworked, lack of access to law and support, lack of respect in the community, constant temptation, antiquated procedures, no binding precedent, no penalties for frivolous and litigious cases, career judges without practical experience - all work against justice," he said. "The entire system has to be scrapped and rebuilt."

Sriro says investors themselves are partially responsible for Indonesia's failings. He says foreign and domestic corporations in the past have promoted an atmosphere of lawlessness by failing to respect, or even trying to understand, Indonesian law.

"Management often confuses the lack of the rule of law for the lack of law itself. A laziness has developed in Indonesia based on its reputation as a place where anything can be arranged through corruption," he said.

Despite the problems, the economy has been growing at its fastest clip in two years, averaging more than 6 percent growth in the first half of 2007. Moody's Investors Service recently said it was considering upgrading the country's credit rating to reflect improvements in its finances.

The government's aggressive development goals, such as cutting poverty by half, are going to require a huge infusion of cash. For the five years ending in 2009, the government target is $426 billion in new public and private investments.

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