Investment and Capital

Market Law
INTRODUCTION – Bu Yetty
Nicolette Alicia Johnson
Syllabus
EXAMS !!
• UTS March 16 - investment
• FINALS May 11 – Capital Market
• Group 4 : Nikki, Amanda, dimas, djuan, echa

• Feb 10 & Feb 17 Group Presentation

• Feb 10: legal framework of Indonesia's foreign direct investment UU 25/2007
• Incentives vs limitation
• nationalization
• Foreign investment and technology transfer
• Feb 17: legal framework of Indonesia's foreign direct investment UU 25/2007
• Business form for both domestic and foreign investment and investment procedure
The Origin
• Hukum investasi (swasta) dan pembangunan
• Hukum pasar modal (capital market law)

• -> investment and capital market law

Investment law
• Private invest law and development ->
domestic perspective -> ordinary
business/commercial
• Difference in types of investment ->
domestic/national investment (uu 2/1968) &
foreign investment law (UU 1/1967) -> ended
in 2007 by the enactment of UU 25/2007 on
investment
• Public inter law influence -> BIT (llAs)
• FHUI -> 2013 curriculum -> KBK ->
competence based-curriculum -> simplicity
spirit
• Review on existing curriculum -> the proposal
-> will be separated
Capital market law
• Capital market governed by -> UU 8/1995 capital
market (securities)
• Market -> where u “sell” or “buy” capital -> the
seller/buyer does not appear physically in “the
market” = the country
• “market access” ? = a country may apply barriers
(hambatan) for a foreign product or goods that
will enter to this country. The prohibitions will be
considered as trade barriers, but the process of
entering a product to a one country is market
access.
• There is no market access issue in capital market
Investment
• Investment law → international law on foreing investmene or national law
• International law or foreign investment : a set of rules that govern international
investment → state responsibility to protect alien → tanbgible goods → intangible goods
• National investment law : investment is a commercial or business activity.
Commercial/business actitivies are governed by commercial code/law. Commercial law
cuts actross both the law of obligations (hokum keperikatan) and the law of property
(hokum kebendaan). That means commercial law includes some part of the law of
obligations and the law of property

• Direct investment u bring your money to a state and investment it in that state
• Indirect investment as an investor u may buy the shares in the capital market and u don’t
have to invest in that country
Direct Investment
• Foreign investment is an
investment made to acquire a
lasting interest in an enterprise
operating in an economy other
that that of an investor
• The investor’s purpose being to
have an effective choice in the
management of the enterprise.
Effective control of the
enterprise
Indirect/ portfolio Investment
• There is separation between management and
control of the company and the share of
ownership in it
• Investor takes upon himself the risks involved
in making of such investments; cannot sue the
domestic stock exchange or the public entity
which runs it if he were to suffer loss (no basis
on which he could seek a remedy)
• Not protected by customary international law
• If u buy shares in the capital market it is only
for short term interest. The govt will provide
no guarantee even in the international law.
• What you are buying is basically intangible
goods
• FDI
• INVESTOR-> HOME COUNTRY
• HOST COUNTRY
Why FDI flows to one country?
• PROFIT ORIENTED
• Natural resources
• Easy to invest
Why FDI flows to one country
1. Low labour cost
1. Cultural factors
2. Labour regulations
3. Economic responsiveness in supporting goods and services
4. Taxes and infrastructure
5. Commercial law
2. Closer to raw material
• Comparative advantage
• Forestry – 30% of the land
• Sugar and palm oil industries
• Potential investment region – east Indonesia region
Why FDI flows to one country
3. Find new Market
• Large population – around 250 mil people
• Domestic market → automotive industry: 2015 year NOT UPDATED
• Toyota 32 %
• Daihatsu 17%
• Honda 15%
• Suzuki 12%
• Mitsubishi 11%
• Others 8%
• Nissan 3%
• Isuzu 2% (Kuatai III 2015)
Why Indonesia needs FDI?
• Economic growth will only be achieved by job opportunity
• Support non-oil export → foreign exchange
• Develop import industry substitution → → save foreign exchange
• Transfer of technology – even though it creates a problem. The issue
of IPR
• Provide infrastructure
• Develop rural area
How to attract FDI?
ASSIGNMENT