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OECD Investment Policy Reviews: Indonesia 2010

image of OECD Investment Policy Reviews: Indonesia 2010

OECD Investment Policy Reviews: Indonesia charts Indonesia’s progress in developing an effective policy framework to promote investment for development. It focuses on policies towards investment, competition, infrastructure, finance and other areas of the business environment and suggests ways the climate for both domestic and foreign investment might be further improved.

It finds that Indonesia has undertaken a decade of political and economic reform, under very difficult circumstances. Democracy is now firmly established, and the economy is growing at a steady pace in spite of the global financial crisis. Reforms over the past decade have done much to improve the resilience of the Indonesian economy, and the government has made substantial progress in creating a better climate for investment. New laws have been enacted in almost all sectors, and new institutions have been created to advise the government, implement and enforce laws, regulate newly liberalised sectors and settle disputes.

Foreign investors have taken notice. Foreign direct investment in Indonesia in the past five years has exceeded the earlier peak achieved in 1996, before the Asian financial crisis in 1997-98 brought economic contraction and net outflows of foreign investment. This investment is also becoming increasingly diversified by sector and by country of investor.

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Investment Policy

The investment climate was one of the worst casualties of the 1997-98 financial crisis. Over the past decade, the government has made considerable progress in creating a policy environment conducive to both domestic and foreign investment. This chapter describes efforts to reduce red tape, create a complete registry of land ownership, strengthen protection of intellectual property rights and improve systems to enforce contracts and settle disputes. A new Investment Law was enacted in 2007 which offers both national treatment for foreign investors and compensation based on market values in the event of expropriation. This chapter discusses the new Investment Law, as well as remaining restrictions on foreign investment contained in the Negative Investment List. The chapter is structured around the questions set out in the Policy Framework for Investment (PFI). Each section is preceded by the relevant PFI questions, which serves as general context for consideration of the main policy areas.

English

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