JRSSEM 2022, Vol. 01, No. 8, 1160 – 1175
E-ISSN: 2807 - 6311, P-ISSN: 2807 - 6494
DOI : 10.36418/jrssem.v1i8.134 https://jrssem.publikasiindonesia.id/index.php/jrssem/index
THE EFFECT OF LEGAL AND POLITICAL ON THE
DEVELOPMENT OF FOREIGN INVESTMENT IN
INDONESIA
Budi Pramono
1
Ayu Larasati
2*
1
Universitas pertahanan,
2
Esa Unggul University
e-mail: budindonesia@gmail.com
1
, ayu.lr@esaunggul.ac.id
2
*Correspondence: ayu.lr@esaunggul.ac.id
Submitted: 25 February 2022, Revised: 05 March 2022, Accepted: 15 March 2022
Abstract. Indonesia is a country that is rich in natural potential and is the target of the world
market. As a developing country with abundant natural resources that can use a source of funds to
advance its economy, it is in dire need of assistance from foreign investors, both in terms of funding
and management technology. Indonesia must create a comfortable climate for foreign investors in
attracting foreign investors. Because these foreign investors are pretty sensitive to legal and political
stability issues and do not want to take risks, the government needs to make policies that make
them willing and comfortable to invest their capital. In making these policies, it is inseparable from
political members who sit in the state legislature. These legal policies must be able to accommodate
the needs of the state for the welfare of its citizens and, on the one hand, must also be able to
provide leniency for these foreign investors. Law and politics here very closely relate to influencing
the arrival of foreign investors. Politics that have a position more independent from the law will
determine the direction of policies and legal products taken. Law acts as a product of current
politics.
Keywords: business; environment; in the legal-political sector.
Budi Pramono, Ayu Larasati | 1161
DOI : 10.36418/jrssem.v1i8.134 https://jrssem.publikasiindonesia.id/index.php/jrssem/index
INTRODUCTION
Indonesia is one of the developing
countries in Southeast Asia, which is
enough to catch the eye of the world as the
Bermuda triangle of the world economy
(Rahayu & Day, 2017). Whether we realize
it or not, the developing country of
Indonesia is very influential in the path of
the world economy; this is because
Indonesia is a consumptive country for
products produced by producing countries.
Indirectly means that these producing
countries have a dependence on the
marketing of their production goods to
Indonesia (Mohamad, Ramayah, &
Puspowarsito, 2011). However, Indonesia's
status as a consumptive country is also not
very good if left alone because it results in
Indonesia's dependence on products
produced by other countries. Indirectly, it is
the same as being colonized by other
countries in the economic field (King, 2015).
Indonesia has tremendous potential to
become a developed country because
Indonesia has sufficient natural resources. It
is only a matter of managing these natural
resources to advance the Indonesian
economy (Badia-Miró, Pinilla, & Willebald,
2015).
As a developing country, Indonesia has
tremendous potential to become the most
developed and prosperous country in the
world (Schweisfurth, 2011). We can see this
potential from the abundant natural wealth
in the thousands of islands spread across
the archipelago. This considerable
potential will be more and can contribute
to the world if reliable and innovative
human resources support it in developing
ideas that can make Indonesia a country
recognized by the world (Fahmi, Koster, &
Van Dijk, 2016). Of course, much homework
must be done to achieve these goals,
starting from the economic, social, cultural,
political, and legal are the leading
indicators of the prosperity of a nation.
Indeed, many aspects can affect economic
development, such as social, cultural,
political, legal, Etc. (Chang, 2011). The
existence of the Indonesian can be said to
have started after Indonesia's
independence on August 17, 1945.
Since the year of independence,
Indonesia has changed its presidents
several times. With this, policies regarding
the economy and development have
changed as desired by those who have
policies (Rai, 2013). Along with changing
policies, Indonesia's economic
development direction also experiences
fluctuating ups and downs. The main goal
of development is to achieve welfare for its
people. Following the mandate stated in
the constitutional basis of the Indonesian
nation, namely the 1945 Constitution of the
Republic of Indonesia (UUD 1945) article 33
paragraph (3), which states that the earth,
water, and natural resources contained
therein are controlled by the state and used
for as much as possible. For the welfare of
the people. It is apparent in the article that
it has been regulated that the state
guarantees the welfare of its people by
utilizing all the natural resources that exist
in Indonesia (Sugiri & Adiputra, 2011). As
time goes by and the country gets older,
the government continuously improves
development. However, the government's
development seems slow compared to the
development of other countries, even
though Indonesia's natural resources are
1162 | The Effect of Legal and Political on the Development of foreign Investment In
Indonesia
relatively abundant and can be used as an
economic source (Yilanci, Aslan, & Ozgur,
2021). In general, there are three stages of
economic by a country, from a developing
country to a developed country. These
stages are the unification stage with an
emphasis on how to achieve integration
political to create national unity and
integrity; the stage is the Industrialization
stage with a focus on the struggle for
economic development and political
modernization, the third stage is the
welfare state where the main task of the
state is to protect the people from the
negative side of industrialization. The
country of Indonesia is currently only at the
stage of industrialization where the new
country is struggling to build the country's
economy by focusing on industrialization.
The government carries out these
developments in all fields. However, no
matter how intense the government's
efforts are in building the economy if it is
not balanced with human resources and
reasonable regulations, the economic
development carried out by Indonesia will
not be fast and robust. Even though the
state is willing to develop infrastructure
that can improve the economy for the
welfare of its people, the capacity of the
Indonesian state, which is only at a young
age, is not sufficient. Indeed, Indonesia's
natural resources are very abundant, but
Indonesia does not have human resources
that include human resources and
technology that can manage these natural
resources (Masrifah & MM, 2020). In the
absence of adequate management, the
results obtained from this management are
also not optimal, even though such
management uses a source of funds in
infrastructure development. For this
reason, an injection of funding from the
private sector, both foreign and domestic,
is needed to assist natural resource
management and infrastructure
development.
The amount of investment in Indonesia
depends on the policies that have been
made by the government (Patanakul &
Pinto, 2014). Each era of government has its
policies regarding investment. In addition
to domestic investment, Indonesia also
really needs foreign investment, which
generally has a reasonably large nominal
compared to domestic investment. The
policies made by the government also
influence the entry of foreign investment.
Talking about the policies issued by the
government, we will indirectly talk about
the legal products of the government's
legislative body itself in the form of
legislation. In addition to talking about
legal products, we also want to talk about
politics because it is the legislature that
makes laws that are very closely related to
politics.
For this reason, the author will review
how the influence of law and politics in
economic development, especially in terms
of foreign investment, and the relationship
between law and politics on the entry of
foreign investors.
METHODS
In a writing must use the right writing
method because it is very necessary and is
a guide in order to conduct an analysis of
the research data. The characteristic of
scientific work in the field of law is that it
contains conformity and contains truth that
Budi Pramono, Ayu Larasati | 1163
can be accounted for.
The type of research used is normative
juridical (Legal Research). The definition of
normative juridical type research is
research conducted by reviewing and
analyzing the substance of laws and
regulations, literatures that are theoretical
concepts on legal issues or issues in
consistency and conformity with existing
legal principles and norms. The author in
this case uses 3 (three) forms of problem
approach, namely the statutory approach,
conceptual approach, and case approach
which are described as follows:
1. The statute approach, which is an
approach that is carried out by
examining all laws and regulations that
are related to the legal issues being
faced.
2. Conceptual approach, is an approach
that moves on the views and doctrines
that develop from the science of law, so
that by studying the views and
doctrines that develop in the science of
law, legal concepts and legal principles
relevant to the legal issues at hand.
3. Case approach is an approach that
examines several cases for reference to
a legal issue. In contrast to social
research, the case approach in
normative research aims to study the
application of legal norms or rules in
legal practice. Especially regarding
cases that have been decided as can be
seen in the jurisprudence of cases that
are the focus of research.
As a normative legal research, the data
source used is in the form of secondary
data, consisting of primary legal materials
and secondary legal materials. Qualitative
analysis of research data, namely
comparing or applying applicable laws and
regulations, opinions of scholars (doctrine)
and other legal theories. Deductive
research conclusions, namely drawing
conclusions starting from the general to the
specific.
RESULTS AND DISCUSSION
1. Foreign Investment in a country
Investment or investment is an
activity carried out by a person or legal
entity, setting aside a portion of his
income so that it can be used to carry
out a business with the hope that at a
particular time will get a profit.
According to Reilly and Brown,
investment is a commitment to tie up
current assets for some time into the
future to get income that can
compensate for the sacrifices of
investors in the form of (1) phase
attachment at a particular time, (2)
inflation rate and (3) income
uncertainty. In the future. Therefore, the
role of investment is significant and
very strategic. Without sufficient
investment, it is not expected to be high
economic growth that can improve
economic welfare. Investments can be
classified based on (1) assets (Real
Assets and Financial Assets), (2) their
effects (autonomous/stand-alone
investments and induced investments),
(3) sources of financing (investments
originating from foreign capital/PMA
and investment originating from
domestic capital/PMDN), (4)
investment based on its form (portfolio
investment and direct investment). On
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Indonesia
this occasion, the author will only focus
on investments based on the type of
financing source, namely foreign
investment or foreign investment/PMA.
As the name suggests, foreign
investment is an investment whose
sources of financing or funds come
from abroad. To carry out development
in a country, it is undeniable that it
requires significant capital. If the people
only rely on capital from the
government, it will almost certainly be
challenging to achieve the goals that
the founders of the Indonesian nation
inspired.
For this reason, it is necessary to
look for other sources of funds, one of
which is through investment, both
foreign investment and domestic
investment. For this reason, it is
necessary to make regulations that can
provide a legal umbrella for these
investors, in this situation, where the
functions of the government's
legislative and executive bodies are
needed—responding to the role of
investment which is quite significant in
building the economy of many
countries. The world is competing to
invite foreign investors to invest in that
country.
From investors' point of view,
market openness in the era of
globalization is also competing to
invest their capital in developing
countries to help economic
development. There is a reciprocal
relationship between developing
countries and foreign investors who
invest in the country. In this reciprocal
relationship, what is very unfortunate is
that there is a difference in point of view
between the two where investors have
a point of view to seek profit. In
contrast, developing countries view
that investment can help increase the
pace of economic development.
Given the differences in point of
view, infrastructure is needed to
accommodate these two interests in a
clear norm. As stated by an expert
named Sumantoro:
“The motive of investors in investing
their capital is to seek profit. For this
reason, it is necessary to find a
relationship between the motives of
investors seeking profit and the goal of
the recipient country of capital, namely
efforts to achieve its national
development goals. For investors to
invest their capital, the government
must provide facilities and infrastructure
and other facilities. Consequently, the
government needs to carry out solid
planning, including establishing policies
for effective implementation and
supervision so that national
development goals are achieved. With
this approach, the role of investors can
direct to development priorities. With
such an approach, development theory
is a collaborative process and not a
matter of dependence and not a conflict
of interest."
5
It is very difficult to unite the views
or interests between the owners of
capital and the state. Suppose the
country where the investors invest their
capital is too strict in providing
regulations regarding investment in
their country. In that case, investors will
not feel at home to invest in that
Budi Pramono, Ayu Larasati | 1165
country because today is an era of
globalization where investors or capital
owners are very free to invest their
capital. In short, the state must make
policies that are comfortable to invite
investors to invest. This situation
encourages developing countries to
open up the widest possible
opportunities for investors to invest in
various fields so that liberalism occurs
in the country. As stated by Gregory
Chandra that "The era of globalization
and trade liberalism has colored the new
millennium (21st century). The business
world feels like a global village.
Advances in science,
telecommunications, information
technology, transportation networks,
and sectors of life have made the
flow of information easier and smoother
between individuals or groups.
Geographical boundaries and countries
are no longer significant. As a result,
consumers are increasingly educated
and demanding. These consumer
demands include 1. High-quality
products (high quality); 2. Fair price
accompanied by methods soft
alternatives payment; 3. Fast delivery of
products (fast delivery); 4. Special
services (Special Service); 5. Products
with a high degree of flexibility (high
flexibility); 6. Familiar with the user
(user-friendly).
With the globalization era where
investors have the flexibility to choose
which country will be the place to invest
their capital, every country and its
citizens must try their best to provide a
comfortable climate for investors or
investors; this is related to
competitiveness between countries.
Several things must be considered to
increase investment or invite investors
to invest; these factors include social
instability and security problems at the
center and regions, inadequate
conditions infrastructure, and instability
of currency and rupiah exchange rates.
Investors are a group of upper-class
people with wealth funds far more than
the usual population. This group is very
sensitive to business security issues as
well as to themselves, so just an issue
can make them feel worried and
uncomfortable, which can hinder
investment. With the infrastructure
condition in an inadequate area,
investors are reluctant to invest; this is
related to the absence of adequate
infrastructure. Their business processes
will stagnate and suffer losses. In
addition to these factors, the currency
stability factor is also very influential
because, with a stable currency, it can
be ascertained that the country's state
is also stable and can bring profits.
Currency stability is also strongly
influenced by money flow into a
country. If money easily enters and
leaves a country, it can be ascertained
that that country's currency is unstable.
This situation will happen if the money
is mostly only channeled into buying
shares and not investing in real
infrastructure development.
According to Sumantoro, there are
several advantages to foreign capital
recipient countries, including:
a. In the industrial sector, foreign
investment reduces foreign
exchange for imports.
1166 | The Effect of Legal and Political on the Development of foreign Investment In
Indonesia
b. Foreign investment increases state
forms of taxes/royals from foreign
companies engaged in the oil
sector.
c. Foreign investment increases job
opportunities or creates new job
opportunities, increases the skills of
the workforce working in the
foreign company, and gives effect
to modernization with the presence
of large and modern foreign
companies.
d. In the industrial sector, foreign
investment increases the flow of
goods, thereby increasing the
elasticity of supply due to the
increase in the industrial production
of these foreign companies.
e. The foreign investment adds to the
advantages associated with foreign
investment. Foreign investment can
be integrated with national
development.
1. Law and Politics
Law is a rule or regulation made by
the authorities that are coercive and
aim to create an order in society. The
law itself consists of the legal structure,
culture, and legal substance. Legal
structure, according to Friedman:
”First, many features of the working
legal system can be called structural
moving parts, so to speak of the machine
courts are simple, obvious examples;
their structure can be described; a panel
of such and such size, sitting at such and
such time, which has this or that
limitation on jurisdiction. The shape,
size, and power of the legislature are
other structural elements. A written
constitution is still another important
feature in the structural landscape of
law. It is, or attempts to be, the
expression or blueprint of basic features
of the country's legal process, the
organization and framework of
government". (Lawrence Friedman,
1984)
Based on the preceding, the legal
structure, part of the legal system,
includes created institutions such as
legal institutions and government
organizations. In this regard, the
government and state institutions' role
in encouraging a development process
is very necessary. For example, at this
time, it is necessary to strengthen
institutions in the regions to support
the creation of a conducive investment
climate in the regions. Law enforcement
officials state apparatus need to create
a conducive condition for creating an
investment climate in Indonesia.
Legal substance, Friedman stated:
”The second type of component can
be called substantive. These are the
actual product of the legal system- what
the judges, for example: say and do.
Substance includes, naturally, enough,
those propositions referred to legal rules;
realistically, it also includes rules which
are not written down, those regulations
of behavior that could be reduced to a
general statement. Every decision, too, is
a substantive product of the legal
system, as is every doctrine announced
in court, or enacted by the legislature, or
adopted by the agency of government”
(Wang & Lo, 2016).
Based on the above, it can be
interpreted as a court judge's decision
Budi Pramono, Ayu Larasati | 1167
and a product of legislation. Legal
development in developing countries
such as Indonesia generally applies the
existing legal rules in Western
countries, which are former colonial
countries (Choi, Park, Rho, & Zo, 2016).
Regarding economic development, the
role of legislation is very important,
where Indonesia must create legislation
that can encourage the creation of
increased economic development
(Diffenbaugh & Burke, 2019). One
example is Law No. 26 of 2007
concerning investment which is
expected to create a conducive
investment climate for foreign
investors, especially those who are
willing to invest in Indonesia. Legal
culture Is intended as views, attitudes,
and or values that determine the
running of the legal system and
become the culture of a nation.
People's views and attitudes towards
law vary widely, influenced by
subcultures, such as ethnicity, gender,
education, descent, belief (religion),
and environment.
Regarding economic development,
the concept of development is viewed
from various perspectives; people will
view development and the legal rules
that support it differently. Indonesian
society, which is diverse in culture and
ethnicity, has resulted in various
understandings of the meaning of
development. The development carried
out in the regions is in contact with the
community's real needs and certain
ethnic groups. The entry of foreign
investment needs to be balanced with
the concept of free, informed consent
in which the public is given the widest
possible information on the entry of
foreign capital into their area, which
aims to increase people's living
standards and increase the number of
job opportunities in the region so that
unemployment in the region can be
suppressed.
While the meaning of politics itself,
if viewed etymologically, namely the
word "politics," still has links with words
such as "police" and "policy." Looking at
the word "policy" earlier, "politics" is
closely related to behaviors related to
making a policy. So "politicians" are
people who study, pursue, practice
behaviors in politics. Therefore, the
definition or meaning of "POLITICS'' is a
behavior or activities carried out to
realize policies in the state order to
realize the real ideals of the state, to be
able to build and shape the state
according to rules for happiness
together in society in a country is easier
to achieve. According to Aristotle,
politics is an effort citizens make to
achieve the common good.
Politics and law are two different
disciplines, but in law, there is also a
discussion about politics which is
included in state administration. In legal
science, matters concerning politics are
better known as legal politics. Legal
politics is the basic policy of
implementing state policies in the field
of law that will, is currently, and has
been in effect, which originates from
the values that apply in society to
achieve the aspired state goals. Legal
politics is different from other
countries; this follows the historical
1168 | The Effect of Legal and Political on the Development of foreign Investment In
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background, outlook on life, socio-
cultural and political will of each
country.
2. Legal and political influence in
foreign investment
A developing country that is
carrying out development in all fields
can be said to be a good development
country if the development that is
carried out in addition to pursuing
economic growth must also pay
attention to the implementation of
guarantees for the protection of human
rights of its citizens. It has been
regulated in the country's constitution;
thus, it will attract public participation
in development. There are five qualities
of law that are conducive to
development planning and
implementation, namely:
(1) Stability (stability)
(2) Predictability (fairness)
(3) Education (education)
(4) Development of the legal
profession (the special
development abilities of the lawyer)
The essence of Indonesia's
development as stated in the
constitutional mandate by the pledge
and ideals of the nation is ideologically
contained in Pancasila, which in essence
development is to build the Indonesian
nation as a whole, and strategy
development is economic growth,
equitable distribution of social welfare,
and political stability. Then it is further
emphasized explicitly in the fourth
paragraph of the Preamble to the 1945
Constitution that; The essence of
national development is: to educate the
nation's life, to create public welfare, to
protect the entire homeland of
Indonesia, and to help implement world
order, eternal peace, and social justice.
According to Satjipto Rahardjo, the
law functions as a protection for human
interests, and therefore the law must be
implemented. Furthermore, Ronny
Hanitijo, by combing the opinion of
Talcott Parsons, the main function
of law is to integrate, namely
reducing conflicts and facilitating the
process of social interaction. The
internal function of the law itself is very
influential in human life, especially in
economic life.
So the task of law in the economic
field is to always maintain and create
security methods so that the
implementation of economics does not
sacrifice the interests of the weak. The
law also functions to resolve problems
that arise as a result of emerging
economic policies.
Talking about the function and
development of law in the economic
development of a country is
inseparable from the discussion of the
economic approach to law or vice versa,
the legal approach to the economy,
which is commonly known as economic
analysis of law. One concrete example
that there is scientific elaboration
between the two disciplines of
economics and law is the coercive
power of the flow of economic
globalization which forces legal
instruments as the regulation of
economic mechanisms to adapt to
international developments, and this is
Budi Pramono, Ayu Larasati | 1169
often referred to as legal globalization
so that the material content of
various laws and treaties as a source of
positive law must adopt the principles
and be harmonized with international
provisions which are carried out
through the ratification of treaties and
conventions as well as international
covenants, as well as relations and
agreements on the private sector and
new economic institutions. It can be
said that the scope of the field of
economic law (economic law) is a broad
field of law and is related to private
interests and public interests at the
same time. For this reason, an economic
approach to law will be one way to
avoid falling behind in economic traffic
within and between countries and other
countries, both nationally, regionally,
and internationally.
So the function and role of law in
development in the future stages of
national legislation need to prioritize
laws relating to capital accumulation to
finance development and
democratization of the economy to
achieve efficiency fulfills the
function of law as a business facilitator.
Therefore, legal experts who are
involved as legislators must be able to
comprehensively integrate studies legal
with disciplines other, so that there
is social order for the functioning of the
law due to social changes and social
arrangements between community
groups, countries, between countries,
be it the national level, regional and
international processes, which in the
process can run responsively to the
principle of a balance of progressive
development interests.
Based on the principle of the rule of
law, the government is the law, not
humans. Law is interpreted as a
hierarchical unit of legal norms that
culminates in a constitution, which
means a state of law requires
constitutional supremacy. Therefore,
the basic constitutional rules must be
the basis and be implemented through
laws and regulations governing the
administration of the state and people's
lives.
Legislation is part of the law made
intentionally by state institutions with
certain goals and reasons. The diversity
of objectives and reasons for making
laws and regulations are referred to as
legal politics (legal policy). According to
Hikmahanto Juwana, making laws and
regulations in legal politics is very
important for two things. First, as the
reason why it is necessary to establish a
statutory regulation. Second, to
determine what will be translated into
legal sentences and formulate articles.
These two things are important
because the existence of statutory
regulations and the formulation of
articles is a "bridge" between the
established legal politics and the
implementation of the legal politics in
the stage of implementing the
legislation. Considering that there must
be consistency and correlation between
what is defined as legal politics and
what is to be achieved as a goal.
One of the national development
program policies in the field of law
stated in the GBHN (Outlines of State
Policy) is to develop laws and
1170 | The Effect of Legal and Political on the Development of foreign Investment In
Indonesia
regulations that support economic
activities in the face of the era of free
trade. Legal politics is often made to
respond to the community's needs; this
is reflected in the considerations and
general explanations. Most Economic
Laws state that the laws established are
aimed at responding to the
community's needs or creating a just
and prosperous society.
In the publication of The World
Bank Poverty Reduction and Economy,
Cheryl W Gray, in her writing entitled
"Reforming Legal Systems in Developing
and Transition Countries," states that
there are three important prerequisites
that need to be considered so that the
legal system can function properly in a
market economy, namely: the
availability of market-friendly laws, the
existence of institutions capable of
effectively implementing and enforcing
the relevant laws. There is a need from
market participants for the said laws
and regulations.
Talking about politics, of course, we
cannot be separated from talking about
democracy that applies to a country.
This is because, in the democratic
process, it is clear that there must be
political activities of political ethnicities
who have their political interests.
Democracy is a political ceremony to
determine who is in power and what
policies should be taken in an issue
without ignoring the opinions of
minorities. Even though it is called a
democracy, it still carries political
interests in it. The relationship between
democracy and economic development
has become a fairly fierce debate
among scientists. This debate arises in
countries experiencing industrialization
and urbanization that has just been
separated from colonial rule. The
relationship between the people and
the government can be categorized
into two forms of relationship, namely a
dictatorial system that can relatively
influence the government, which can
lead to repressive actions against
minorities and a democratic system
where the adult public has the right to
vote or be elected in elections, and
there is recognition of minority rights.
Indonesia is a country that is
undergoing a process of democratic
transition. When military power is
overthrown, the power of capital
holders begins to control the power of
the state government. With the power
of capital, several rulers try to occupy
political positions in Indonesia; this can
be proven by several state positions
ranging from the lowest to the highest
being controlled by several
entrepreneurs. These entrepreneurs will
try to influence every policy in the
country.
Since the publication of The Wealth
of Nations two centuries ago, several
legal experts have argued that the
decentralization of political power and
market liberalization encourage
investment and economic growth.
During the New Order era, economic
power was more at the forefront, where
development relied on foreign
investment in Indonesia. To ensure the
entry of foreign investment, the
uniform form of development with an
emphasis on stability resulted in several
Budi Pramono, Ayu Larasati | 1171
parties opposed to government
policies under repressive pressure.
During the guided democracy,
with the concentration of power in one
person, namely the President, he took a
different attitude, namely anti-foreign
capital. In this case, the development
that must be carried out during the
Reformation period is economic
development which must also pay
attention to the rights of various people
(plural). On the other hand, the public
must also understand that the entry of
foreign capital will encourage a high
level of economic growth in Indonesia.
In real terms, it will open up job
opportunities for the people.
3. The relationship between law and
politics on the entry of foreign
investors Foreign
Investors or foreign investors are
middle and upper elite people who are
very sensitive to issues circulating in a
country that can affect their investment
activities to seek the greatest profit. In
this era of globalization, developing
countries urgently need an injection of
foreign funds to facilitate and
accelerate the process of economic
development that is being carried out
by these countries. Therefore, in the
competition to invite investors into
their country, a country will work very
hard to create a comfortable climate for
foreign investors. The comfortable
climate that arises is none other than
making laws and regulations that make
it easier for investors to invest in the
country. In terms of making regulations
that facilitate the entry of foreign
investors, it is carried out by the
legislature.
While the legislative body itself is an
institution that is very closely related to
politics in a country because the
legislative body contains people who
are elected through a political process
in the form of democracy so that in the
process of making laws and regulations,
of course, political forces intervene,
here the author assumes that the law is
a political product. Law is considered a
dependent variable (influential
variable), while politics is an
independent variable (influential
variable). The placement of law as a
variable that depends on politics or
politics, which is the determinant of this
law, is easy to understand. The
parliamentary session, which is made to
make laws as legal products, is
essentially a contestation scene so that
the interests and aspirations of all
political parties can be contained in
decisions and become law.
According to Daniel S. Lev, the
most decisive in the legal process is the
conception and structure of political
power. Namely, that law is more or less
always a political tool. The place of law
in the state depends on the political
balance, the definition of power, the
evolution of political, economic, social
ideology, etc.
From this fact, it is realized that
there is a legitimate space for the entry
of a political process through political
institutions to form a legal product. In
this regard, two keywords will be
studied further about the influence of
power in law, including "process" and
the word "institutions," in realizing a
1172 | The Effect of Legal and Political on the Development of foreign Investment In
Indonesia
statutory regulation as a political
product. This influence will be
increasingly seen in the products of
legislation by a political institution
strongly influenced by the great
political forces in political institutions.
Political forces can be seen from two
sides, namely the power possessed by
formal political forces (political
institutions) in this case which is
reflected in the power structure of state
institutions, such as the President, the
People's Representative Council, and
other state institutions and the political
power of the state. Political
infrastructure includes political parties,
community leaders, community
organizations, non-governmental
organizations, professional
organizations, and others.
This investment by foreign
investors is highly expected by
developing countries to help
improve
their country's economic development
and countries that need investors to
invest. Investors need that country to
seek profits about investment in
potential sectors in that country. In
investing this, investors, of course,
expect big profits, but the terms and
capital expenditures are kept to a
minimum. Emphasizing capital
expenditure to a minimum leads to a
reduction in the cost of business
licenses and business operating costs in
a country. In addition to being faced
with the issue of operating costs and
permits, foreign investors are also faced
with competition between investors
themselves to invest their capital.
Based on these reasons, it is not
uncommon for these foreign investors
to approach political cadres who are
influential in policymaking. In addition
to approaching political cadres,
investors are also often willing to
become a source of funds for political
candidates who want to fight for seats
on the board. By becoming a source of
funds for prospective board members,
investors hope that it will be easier to
invest their capital in the future. Of
course, the politicians who have
previously been assisted in funding this
campaign feel indebted to the investors
who helped them occupy parliamentary
seats, so this is very influential in
making policies related to foreign
investment. Policies made in such
situations usually do not heed the real
purpose of the policy but rather how
the policy will positively affect those
who make the policy. With such a
policy, the small people will become
victims of the policy. Things like this do
not reflect the sense of justice and
objectivity that the law should hold.
A modern legal system must be a
good law, in the sense that the law must
reflect a sense of justice for all parties
and be by the conditions of society.
From this, it appears that the guarantee
of the rule of law is determined by two
issues, namely whether the law is made
through an appropriate process and
then democratically ratified, and
whether the law is obeyed and
implemented by the government or by
the people it governs explicitly or
implicitly. Positive answers to these two
things also determine the political
Budi Pramono, Ayu Larasati | 1173
balance produced by the constitution
(law) in question. From this statement,
it can be understood that the
constitution (law) of the country must
be made based on the existing political
balance so that the law can
accommodate all groups and does not
tend to benefit one party. This is where
the need for a common view or
perception of the content of legal
regulations is created from various
parties, both from elements of society,
political parties, social organizations,
and government and other state
institutions.
CONCLUSIONS
It can be concluded that law and
politics are very influential in the entry of
foreign investors. The entry of foreign
investors is strongly influenced by several
things, including a comfortable climate in
the form of political stability and a clear
legal umbrella for foreign investors. In the
absence of these things, investors will
hesitate to invest their capital because
investors are very sensitive to such issues,
and they do not want to take risks in
investing their capital in a country. These
comfortable climates can be achieved if a
political power can make policy products
that can maintain stability in their country;
such stability includes political stability
legal and economic stability.
It can also be concluded that political
and legal relations are closely related to the
entry of foreign investors. In this case,
politics is a more influential variable than
law, which is the affected variable. The
formation of legal products is born from
the influence of political power through the
political process in state institutions that
are given the authority to do so.
Concerning the making of laws and policies
related to foreign investors, political forces
are very influential because the parties who
make the laws and policies are the
politicians who sit in the seats of the
legislative council. We know for ourselves
that these political forces are only pawns of
actors who have a large capital, none other
than businessmen. Of course,
entrepreneurs, through their political
pawns, will make legal policies regarding
the foreign investment that are profitable
for themselves, not for the prosperity of the
people.
From these conclusions, the author
suggests that the government should
emphasize eradicating corruption because,
with the relationship between politicians
and businessmen behind the scenes, it is
undeniable that corruption exists. The
author also advises the public to be more
selective in choosing their representatives
in the council members who can fight for
the fate of the people and better advance
this country with pro-people policy
products. The Indonesian government
must also work harder to make policies that
can attract foreign investors. Indonesia also
takes into account the welfare and security
of the nation itself.
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