PRINCIPLES OF FOREIGN INVESTMENT AND ITS IMPLEMENTATION IN CUSTOMARY LEGAL COMMUNITIES

PRINCIPLES OF FOREIGN INVESTMENT AND

IMPLEMENTATION IN CUSTOMARY LEGAL COMMUNITIES[1]

 

Josina AY Wattimena

Introduction

In human life, interdependence is natural and undeniable. This reality can also be found in life between nations (international interactions). Mutual influence and interdependence of interests, whether economic, political, or defense, are essential.

 This fact is closely related to the issue of foreign investment as part of international economic interests. Foreign investment by one or more countries significantly influences a country's economic growth and is a determining factor in the basic policies for the development of micro, small, and medium enterprises. The presence of foreign investors in the form of multinational companies, with business activities in various sectors, such as production and services, will significantly change the way of life of a nation (the recipient country).

According to An An Chandrawulan,[2] The flow of foreign investment into a country (recipient country) has a significant impact, particularly on factors such as technology transfer, employment, and capital transfer. However, on the other hand, the existence of foreign investment is subject to different interpretations. First, it can provide benefits and advantages to developing and underdeveloped countries. One of these is an increase in the standard of living and welfare of its people. Second, negative implications have also been found, namely the marginalization of indigenous peoples' rights to natural resources, their natural environment, and their habitats, which have been passed down from generation to generation.

 The influx of foreign investment into Indonesia is significantly influenced by various factors. These factors include a relatively large population, lucrative market opportunities, and abundant natural resources. The latter is a particular attraction for foreign investors. All of this is also fueled by the advent of globalization, followed by free trade, which has opened up opportunities for massive foreign capital inflow.

In many developing countries, including Indonesia, financial support for development is obtained from the World Bank and foreign investment.[3]The key sectors funded by foreign funds are primarily oriented toward the natural resource industry. The natural resource industry is considered to play a crucial role in economic development and growth.[4]To attract foreign investment in this sector, the government typically issues regulations in the form of laws and various economic policies that benefit foreign investors. The government even doesn't hesitate to adopt regulatory policies from other countries or international organizations. According to Hikmahanto Juwana, these regulatory policies [5] used as an instrument to achieve interests, directly or indirectly. Such laws are stigmatized as instruments of oppression, forcing the oppressed state to comply with their policies. Hikmahanto further stated that such laws become political instruments of those in power.[6] As a result, social, legal, economic, environmental, and other facts are being denied. Thomas Walde stated that if this occurs, the neglect of human rights, including the rights of indigenous peoples, is vulnerable and could happen at any time.[7].

 In fact, foreign investment is predominantly directed at the mining, oil, and forestry industries. These natural resource sectors have the greatest impact on the rights of indigenous peoples. The oil, mining, and forestry industries have higher priority and extensive land use for their operations. These industries have resulted in the appropriation of indigenous peoples' land, sometimes on a very large scale. This land is easily taken for mining activities, with little or no compensation.[8]

The government consistently undermines the interests of national development, resulting in various laws and policies related to indigenous communities tending to ignore, marginalize, and even seemingly eliminate their position within the fabric of national life. Even where national laws recognize these rights, their implementation is extremely weak.

In establishing agreements between recipient countries and foreign investors, the tendency is that the agreements only regulate the behavior or actions of recipient countries towards investors. These agreement documents only facilitate and grant legal rights for economic expansion, such as foreign investment, without any regulations to prevent the negative impacts of such activities. Therefore, whether realized or not, the implications of foreign investment on the enjoyment and ownership of indigenous peoples' rights to land, natural resources, and the right to development are increasingly neglected. Nurjaya calls this the "politics of neglect."politics of ignorance)

This article attempts to critically examine the principles of foreign investment as outlined in Law No. 25 of 2007 and how they relate to the rights of indigenous peoples. The principles emphasized are legal certainty, transparency, accountability, equitable efficiency, togetherness, sustainability, and environmental awareness.

 

 

 

Principles of Foreign Investment Related to Natural Resource Management

Foreign Investment Law No. 25 of 2007 puts forward a number of important principles that form the basis for the formation of the law. The principles contained in Law No. 25 of 2007 at least describe an ideal or hope to be achieved. According to Sudikno Mertokusumo, legal principles or legal principles are not concrete laws but rather general and abstract basic thoughts or are the background of concrete regulations contained in the legal system embodied in statutory regulations that constitute the image of positive law.[9]. Thus, it is intended to convey that the principles contained in the Foreign Investment Law describe the hopes and objectives to be achieved through its future implementation.

The principles contained in the Foreign Investment Law can be mentioned, among others[10]

Principle of Legal Certainty; is the principle of a state based on law which places laws and provisions of basic laws and regulations in every policy and action in the field of investment.

Principle of Transparency ; is a principle that prioritizes openness to the public's right to obtain correct, honest and non-discriminatory information about investment activities.

Principle of accountability; is a principle that determines that every activity and final result of the implementation of capital investment must be accounted for to the community or people as the holders of the highest sovereignty of the State in accordance with statutory regulations.

The principle of equitable efficiency; is the principle underlying the implementation of capital investment by prioritizing fair efficiency in an effort to create a fair, conducive and competitive business climate.

The principle of togetherness; is a principle that encourages the role of all investors together in their business activities to realize the welfare of the people.

Sustainable principles; is a principle that is planned to ensure the development process runs through investment to ensure prosperity and progress in all aspects of life, both for the present and the future.

Environmentally aware principles ; is a principle of capital investment that is carried out by paying attention to and prioritizing environmental protection and maintenance.

In essence, the foreign investment principles outlined in Law No. 25 of 2007 express the state's policy to stimulate national economic growth through the exploitation of Indonesia's natural resources (mining). The process of establishing national legal instruments is inextricably linked to global political and economic interests. These legal instruments are oriented toward facilitating the interests of foreign investors in the exploration and exploitation of natural resources. Indigenous peoples' rights are not included in this legal policy.

It is characteristic of every law on natural resource management that it always has the characteristics or adheres to a centralistic paradigm, centered on the state (state-based natural resource management).[11] Prioritizing a sectoral approach and ignoring the protection of indigenous peoples' rights to land and natural resources that they have accessed so far.

The paradigm of natural resource management is stated in Article 33 of the 1945 Constitution, which states that "the land, water, and natural resources contained therein are controlled by the State and used for the greatest prosperity of the people." "The State's right to control" can be interpreted from two perspectives: as a reflection of the implementation of the State's values, norms, and legal configurations that regulate the State's control over natural resources. On the other hand, it describes the State's authority and legitimacy to control and utilize natural resources within its sovereign territory.[12].

The concept of state sovereignty over natural resources has actually been recognized by UN General Assembly Resolution 1803 (XVII) as “permanent sovereignty over natural resources.” The struggle of developing countries to initiate this resolution is based on the interests of national development and the welfare of their people.[13]

How and to what extent a country or government utilizes this principle (sovereignty over natural resources) to achieve the greatest possible benefits for the people's well-being depends largely on the state's "power." Power here refers to the economic system, natural resources, politics, and law. These aspects have a significant influence on overall state policy, including Indonesia's.

The meaning of state sovereignty over natural resources can be indicated by the state's ability to externally carry out relations (cooperate) with other countries to manage Indonesia's natural resources, for example, bringing in foreign investors for development purposes. A state's internal sovereignty is guaranteed if it has legal sources such as a constitution, laws and regulations, or unwritten customs practiced by the community.[14]In this regard, MU Resolution 1803 also emphasized that the entry of foreign investors must be in accordance with the laws and conditions of the recipient country.[15]

Here it can be linked that the sovereignty of the State over natural resources for the benefit of development must be respected by foreign investors while still respecting the laws in force in that country. On the other hand, the recipient country must be able to regulate the activities of foreign investors within the jurisdiction of the State with its national laws. The legal implementation is that the pluralistic Indonesian legal system must continue to be respected and honored along with the rights of indigenous peoples inherent in the management of natural resources. Meanwhile, if the formation of a national legal system, general principles accepted by nations must be prioritized without abandoning the principles of native law or customary law that are still valid and relevant.[16] .

Indigenous Communities Versus Foreign Investors in Natural Resource Management

The term indigenous peoples is usually used to refer to individuals and groups who are descendants of the original inhabitants of a country. The term "indigenous" (English), derived from the Latin "indegenae," is intended to distinguish between people born in a place and those who come from elsewhere.[17] . Meanwhile International Labor Convention (ILO) Number 169 of 1969 in Article 1 (1b) states that what is meant by indigenous communities is a community that has its own value system, ideology, politics, economy, culture, social and territorial areas.[18]

The constitutional recognition of the existence of indigenous communities in Indonesia is stated in Article 18 B paragraph (2) of the 1945 Amendment to the Constitution which reads "The State recognizes and respects customary law communities and their traditional rights as long as they are still alive in accordance with the development of society and the principles of the Unitary State of the Republic of Indonesia as regulated by law."[19] De jure the existence of indigenous communities is recognized and ratified in Article 28 I paragraph (3) of the 1945 Constitution which stipulates that; "The cultural identity and rights of traditional communities are respected in line with developments in the era and civilization."[20]The state's recognition of the existence of the community is not limited to the state's basic law, but has been further operationalized in various laws and regulations. Among them is Law No. 39 of 1999 concerning Human Rights. Specifically, it is contained in Article 6, which states:

(1) In the context of enforcing human rights, differences and needs in customary law communities must be taken into account and protected by law, society and government;

(2) The cultural identity of customary law communities, including rights to customary land, is protected, in line with developments over time.[21]

Formal recognition by the State through legal products for indigenous communities so that they are considered to "exist" within the State's space, does not actually demonstrate their existence, which together with other communities entered into a political contract (in J.J.Rosseauw's sense) in forming the State. In this case, it can be said that if not legally recognized, the existence of indigenous communities is considered non-existent – ​​disappeared (excluded). In this context the contractual concept between State and society has lost its meaning.[22] It is not surprising that the State is present and provides four criteria for the existence of customary law communities in the 1945 Constitution.

The Indonesian state treats indigenous communities by recognizing one identity and excluding the other (ambiguity). In many cases, this other identity is often linked to the accumulation of foreign capital to exploit natural resources.[23] Indigenous legal communities are always in a weak position in defending their rights amidst the power of capital that exploits land and natural resources.[24] In fact, land, territory, and the natural resources contained therein are very important and meaningful for the survival, culture, and civilization of their people. Land is raison d'etre for their entire existence such as social, cultural, spiritual, economic and political life.

The portrait of the state of indigenous legal communities that are depressed, excluded, marginalized, in their own land, amidst the abundance of natural resources is an undeniable fact. Various legal instruments that have recognized the rights of indigenous communities seem to have no legal force and no benefits whatsoever in the face of the rulers, businessmen (read; foreign investors). Just look at the various legal instruments related to the management of natural resources such as Law No. 5 of 1994 on Biodiversity containing free and prior informed consent, Law No. 11 of 1967, Law No. 41 of 1999 on Forestry, Law No. 12 of 2005 on Economic, Social, Cultural Rights (the result of ratification of the Convention), Law No. 32 of 2004 on Regional Government. These legal instruments express more of the government's power with a legal model that is developed with a more repressive character.

The implication of a repressive legal model is that land, territory, and natural resources can be seized at any time under the pretext of development. Conversely, the government consistently favors the interests of foreign investors. The entry of foreign investors should, in fact, improve the people's welfare and provide equal opportunities to enjoy national development.[25] identify the problems of indigenous communities in relation to rights to natural resources and. These problems are as follows:

1. Failure or reluctance of States to recognize the rights of indigenous peoples to land, territories and natural resources

2. Discriminatory laws and policies that impact indigenous peoples in relation to their land and natural resources.

3. The failure and reluctance of the State to delimit their customary lands

4. Failure or unwillingness of States to implement or apply laws that protect indigenous peoples' lands.

Furthermore, it is said that this condition occurs in almost all countries where indigenous communities exist and it seems to be their long struggle to survive. The role of law as a means of national development is not only based on legal principles and concepts that are generally adopted by humans or are universal, and benefit one party (for example; foreign investment). However, legal development as a means of improving people's welfare must also be placed on the principles of original law or values, norms, and unwritten laws that are still valid and relevant in the existence of indigenous legal communities.

Recognizing the pluralistic context of Indonesian society, the type of law needed is a responsive-progressive type of law, not a repressive one, which is only centered on the rulers.[26] Indonesia's socio-cultural and political context should be considered. Thus, the law paves the way for the aspirational channeling of society's desires, wishes, and needs toward the common goal of "prosperity."

 

Conclusion

Based on the description above, several conclusions can be put forward as follows;

1. The entry of foreign investment into Indonesia plays a significant role in economic growth and national development. Regulation of foreign investment in Indonesia is regulated by Law No. 25 of 2007. This law contains a number of principles that underlie the formation of norms and rules outlined in its articles. The Foreign Investment Law, as well as other laws governing natural resource management (mining), adheres to a ruling paradigm with a repressive legal style. This perpetuates serious threats to indigenous communities through excessive prioritization of investment.

2. The existence of indigenous communities must be viewed in conjunction with their land, territory, and natural resources. However, the reality is that indigenous communities are marginalized and even marginalized when confronted by authorities and businesspeople (foreign investors). Various legal formulations containing criteria aim to limit their space and freedom to enjoy, manage, and participate in public decisions regarding all aspects of their social, cultural, economic, and political existence.

3. Laws that are used as development instruments in achieving welfare goals should be based on legal pluralism in Indonesia which is still maintained and applies to this day.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

READING LIST

An, An Chandrawulan,The Role and Impact of Multinational Companies in Indonesia's Economic Development Through Investment and International Trade, in the Book of National and International Legal Discoveries (In the context of the retirement of Prof. Yudha Bakti), Publisher, Fikahati Aneska, Bandung, 2012.

Barber Charles V, The State, The Environment and Development: The Gesis Transformation of Social Forestry in New Order Indonesia, Doctoral Dissertation of California, University

Berkeley, 1989, pp. 14-15. And Peluso Nency L, Rich Forest Poor People, Resource Control and Resistance in Java, University of California Press, Berkeley, 1992.

Bernadinus Steni, The Politics of Indigenous Peoples' Recognition of Land and Natural Resources; From the Dutch East Indies to Indonesian Independence, Indonesian Torch Foundation, Jakarta, 2009.

Dahlan Thaib, Constitutional Theory and Law, PT Rajagrafindo Persada, Jakarta, 2001.

Hikmahanto Juwana, International Law from the Perspective of Indonesia as a Developing Country,, PT Yarsif, Watampone, Jakarta, 2010.

I Nyoman Nurjaya, Basic Principles of Natural Resource Management from a Legal Anthropology Perspective, Achievement, Library, Publisher, Jakarta, 2008.

Grace of Intercession et al., State, Society and Local Wisdom,In-TRANS Publishing Malang and ANA Legal Consultant, Semarang, 2008.

Rafael Edy Bosko, Indigenous Peoples' Rights in Natural Resource Management,ELSAM Publisher, Jakarta, 2004.

Satjipto Rahardjo, in the book by HM Wahyudin Husen and H. Hufron,  Political Law and Interests, LAKSbANG PRESSindo, Yogyakarta, 2008.

Sudikno Mertokusumo, The Discovery of Law, An Introduction,  Liberty, Yogyakarta, 2007.

Thomas Walde,”Environmental Policies Towards Minimize In Developing Countries” in 30 Public Land and Resources Law Digest, Vol 30 No 1 1993 .

VictoriaTauli-Corpus, “Three Years After Rio; Indigenous Assessment” in Indigenous Peoples, Environment and Development, IEGIA, 1977.