As a rapidly developing country, Indonesia realizes that foreign direct investment (FDI) remains necessary to fuel growth in the capital-scarce country. Yet, along with its development, Indonesia is facing more complex challenges both because of domestic issues and its problematic bilateral investment treaties (BITs) which do not provide explicit policy space for the government. The problematic implementation of the desentralisasi system, a limited rule of law and difficulties in dealing with corruption continue to reduce Indonesia’s attractiveness to foreign investors. Indonesia has decided to discontinue its old BITs and has expressed an interest in designing a new BIT model. This article attempts to suggest ways in which Indonesia can deal with its domestic challenges and to improve its new international investment agreements to create a more conducive investment climate.
Ben Bland and Shawn Donnan‘Indonesia to Terminate More Than 60 Bilateral Investment Treaties’Financial Times(London 26 March 2014) <http://www.ft.com/cms/s/0/3755c1b2-b4e2-11e3-af92-00144feabdc0.html#axzz35Qatebp7> accessed 21 October 2014. Indonesia has notified its BIT termination to the Netherlands. Netherlands Embassy in Jakarta ‘Termination Bilateral Investment Treaty’ <http://indonesia.nlembassy.org/organization/departments/economic-affairs/termination-bilateral-investment-treaty.html> accessed 21 October 2014.
Hikmahanto Juwana‘Indonesia Should Withdraw from the ICSID’Jakarta Post(Jakarta 2 April 2014) <http://www.thejakartapost.com/news/2014/04/02/indonesia-should-withdraw-icsid.html> accessed 21 October 2014.
Raras Cahyafitri‘New Law Scraps Local Govts’ Power in Mining’Jakarta Post(Jakarta 6 October 2014) <http://www.thejakartapost.com/news/2014/10/06/new-law-scraps-local-govts-power-mining.html> accessed 26 March 2015.
Stephan W Schill‘Fair and Equitable Treatment Under Investment Treaties as an Embodiment of the Rule of Law’International Law and Justice Working Papers 2006/6(2006) 11–23; Kingsbury and Schill (n 63) 10; see also Kenneth J Vandevelde ‘A Unified Theory of Fair and Equitable Treatment’ (2010) 43 NYU JILP 43 49 52;.