In this study, we develop and employ a systematic methodology for the comparative examination of international commitments and national laws and regulations. As illustrated in Figure 1, this method consists of a stepwise approach: first, the analysis starts with a mapping of all IIAs that a country has signed; second, these IIAs are compared with national investment-specific and then investment-related laws; third, individual and controversial measures should be considered in more detail, and their potential implications discussed; and finally, the nature of inter-ministerial coordination and stakeholder consultations related to investment issues should be examined through empirical research.
Throughout these four steps, we develop and employ an innovative pattern-matching technique to compare Indonesia’s international commitments on investment with relevant national laws and regulations. Our aim is to examine the interactions and consistency between the two, and evaluate
5 Later chapters show, however, that Indonesia has recently begun to make attempts in shifting parts of its economic policy towards a pattern that resembles a more state-directed approach.
the processes and institutional structures involved in bringing Indonesian national and international rules in line with each other. To analyse the above questions, both the commitments made in IIAs and related national laws need to be examined in parallel. Thus, a broad range of legal texts related to Indonesia’s investment policy framework were collated and examined for the purposes of this study. Initially, the texts of Indonesia’s IIAs were gathered and mapped to allow for comparisons between IIAs along individual provisions and in order to evaluate the extent of the international commitments made by Indonesia. Next, the relevant national laws, regulations and measures – especially those related to investment – were identified, collected and examined. The Indonesian investment-specific laws were identified and their content compared with that of the IIAs. Other investment-related laws were collected and also matched with relevant IIA provisions and investment-specific laws. Legal texts and events in Indonesia up to late 2012 were considered for this study. Developments in 2013 and thereafter were not taken into account.
It has generally been shown that many investors, in practice, do not consider the detailed clauses of IIAs, or sometimes even ignore their existence,6 though they are more prone to pay attention to national law. This highlights the critical importance of national law, even in relation to international commitments. This entire approach made possible the creation of an overview of Indonesia’s entire investment policy framework that included both international treaties and national laws. One major contribution of this study is that it allows for a direct comparison of these two distinct areas of investment law.
6 In a recent survey, Yackee (2010), for example, found little evidence that IIAs are an important factor in investment decisions of US MNEs. For a similar finding, see also European Commission (2000).
Jan Knörich / Axel Berger
Figure 1: Method for comparison of international commitments with national laws
The value of this methodology is that it is quite holistic in examining investment law and policy, and it can provide insights on issues such as consistency between domestic laws and regulations and international commitments, potential risks of inconsistencies, and implications for national policy space and economic development. The methodological approach used within this study is also quite straightforward and can be easily replicated for examinations of other countries and contexts.
Not all material was readily available, and a period of fieldwork in Indonesia was necessary in identifying and gathering many of the legal texts. The fieldwork was also used to gain more insight about the broader political economy dimensions surrounding Indonesian investment law that could not be determined from a mere analysis of legal documents. Fieldwork in Indonesia was undertaken in late July and early August 2012. In addition to the pursuit of legal texts and information about investment policy in Indonesia, meetings with a variety of relevant stakeholders and experts in Indonesia were arranged in order to triangulate the findings gathered through the analysis of IIAs and national investment law. Although government officials constituted the primary source of information, discussions were also held with academics, consultants, representatives of non-governmental organisations and chambers of commerce, and experts from foreign
institutions in Indonesia.7 Obtaining information from a mix of different stakeholders reduced the likelihood of selection bias. In all, 17 meetings with 24 people from 16 institutions were arranged, each lasting between 45 minutes and 4 hours, summing up to a total of 25 hours of discussions. The primary purpose of these meetings was to source and confirm information about legal texts and other facts and insights related to Indonesia’s economic policy. These meetings with experts yielded important and useful information on issues such as Indonesia’s current economic and political situation, foreign investment in Indonesia, Indonesia’s legal environment for investment and intergovernmental relations among Indonesia’s ministries.
Since the main purpose of the meetings was to gather and confirm available information rather than seeking opinions or individual viewpoints, most of the information provided in the meetings was verified and cross-checked in available textual sources. The identity of the experts is kept anonymous.8 As research on this study’s subject of interest is still in its infancy, such in-depth empirical work – combined with a broad examination of laws and legal texts for one country – promises to create the kind of data that is currently needed to gain further understanding about the subject. Future studies could then examine other countries and complement the present study’s findings.