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Articles contributed by Soewito Suhardiman Eddymurthy Kardono
Written by A. Supriyani Kardono
Investors looking to invest in Indonesia’s mining sector may feel a bit more relieved now as a central database on mining rights in Indonesia has been developed by the Ministry of Energy and Mineral Resources (“MEMR”). The Directorate General of Minerals and Coal of the MEMR (“DGMC”) has compiled and reconciled data of all national mining business permits (locally known as Ijin Usaha Pertambangan or “IUP”).
There has been almost as much press coverage as questions about the Indonesian Government’s announcement in May of MP3EI.
In recent years, Indonesia's labour environment has become exceptionally complicated, with labour laws and regulations changing frequently. The creation of a relatively new labour court has resulted in better reporting of important decisions but also some inconsistent decisions. Restrictions on the use of fixed term employment contracts, the need to obtain judicial approval of employment terminations and the rather generous separation pay entitlements of employees, taken together create an employee-friendly labour law regime.
Indonesia continues to attract favorable global investor interest in all sectors beyond the traditional sectors of oil and gas, mining and other natural resources.
The Indonesian Capital Market experienced an all time high at the end of 2009, resulting in many implications for 2010. The growing power of Indonesian Investors and the middle class, married with the increased potential for public offerings on the stock exchange should lead to more activity on the stock market and a subsequent growth in the economy. The Government of Indonesia has its eye set on achieving economic growth of 6 to 7 percent in the next few years, with the hope of enabling them to reduce poverty and unemployment significantly. They see increasing investment as a way of securing this economic growth. In order to build confidence in investors, thus encouraging investments, and to match regulations with current practice the Government is continuing to develop its investment and capital market.
In spite of the global crisis, Indonesia is still full of potential for foreign investors. The country seems to have been largely buffered from many of the worst impacts occurring in other economies. This is perhaps because, after the collapse of the banking system during the Asian crisis in the wake of 1997, the Indonesian financial sector was forced clean up its act, developing stronger fiscal resilience in the process. Banks were recapitalised and restructured by the Government and once the financial soundness of the banks was stabilised, many were sold to foreign institutions. The financial sector is now relatively healthy and provides a stable foundation for the Indonesian economy. There remains an attractive market for the acquisition of banks, insurance companies and securities companies.
The following paper is intended to provide a basic overview of Indonesian labour and employment law.