Medan, Indonesia For years, Indonesia has struggled to present itself as a welcoming investment destination to its rival neighbors Vietnam and Malaysia.
In 2016, during his first term, Indonesian President Joko “Jokowi” Widodo announced the opening of dozens of industries to foreign investment in what he called a “big bang” economic liberalization.
Six years later, the Southeast Asian country’s controversial new criminal code, which has made international headlines since its adoption earlier this month due to its ban on sex outside of marriage, poses questions about Jakarta’s commitment to fostering an open and welcoming business environment. .
In Indonesia, opinion remains divided over whether the revised penal code, which includes bans on blasphemy, cohabitation, witchcraft and insulting the government, helps or hurts Jakarta’s sales pitch to the world.
The Indonesian Business Association (APINDO) has expressed concern over several sections of the code, including penalties for corporate crimes that will have a “broad impact” and the recognition of customary law.
“For the business sector, the implementation of this customary law will create legal uncertainty and make investors reconsider investing in Indonesia,” APINDO said in a statement to Al Jazeera.
APINDO also said that the ban on non-marital sex “will do more harm than good, especially for the business sector involved in tourism and hospitality.”
Other industry figures have dismissed these concerns.
“Currently, the government is still implementing the new penal code. Of course, there will be some pros and cons, but there will be a period of three years before it is implemented in real life,” Clement Gultom, general manager of Boraspati Tour and Travel in Medan, told Al Jazeera.
“As such, I am more inclined to choose not to be aggressive with the new penal code,” Gultom said, adding that lawyers and activists could seek a judicial review of the code through the Supreme Court if necessary.
Khairul Mahalli, president of the North Sumatra Chamber of Commerce and Industry, expressed similarly optimistic sentiments.
“The role of government is as a regulator and the role of business is as an operator,” he said. “We need to support the government and make sure the new laws are co-ordinated across all levels of government.”
Mahalli said bodies such as chambers of commerce will be instrumental in connecting foreign companies with local partners and ensuring smooth business continuity after the code comes into effect.
“At the moment, the business world in Indonesia has not been affected and it is a world of opportunities,” he said.
The revised code, a complete overhaul of the code from 1918, when Indonesia was a Dutch colony, had been controversial for years before it was passed, sparking nationwide protests in 2019. Then, as now, critics feared it would violate basic human rights and erode Indonesia’s human rights. democratic freedoms.
The changes come as Indonesia has been making progress in its bid to attract investment, which includes a goal of attracting $89 billion in foreign investment next year.
Indonesia’s foreign direct investment (FDI) increased by 63.6 percent annually in the third quarter of 2022 to reach $10.83 billion, according to Investment Minister Bahlil Lahadalia.
China, Japan and Singapore were the main sources of investment, which was mainly driven by the development of resource processing, part of the country’s wider strategy to add value to its minerals.
Some environmental activists have suggested that the revised code, far from deterring investors, will encourage those who want to exploit fragile ecosystems.
Arie Rompas, an activist with Greenpeace Indonesia, said he believed the code had been ratified for the benefit of foreign investment and to silence critical voices.
“Investors will be happy because the articles on environmental crimes have been eased, meaning that environmental crimes have become more difficult to prove in court,” Rompas told Al Jazeera.
Rompas said many of the new laws that critics say will restrict dissent and protest are likely to be used against those who criticize foreign investment, especially projects that threaten the environment.
“The potential for criminalization really threatens local communities and activists if they protest or criticize projects deemed strategic by the government in cooperation with outsiders,” he said.
“This penal code was designed to strengthen the spirit of colonialism’s legacy of exploiting natural resources, damaging the environment and silencing critical voices in civil society.”
The new penal code imposes restrictions on “the organization of a march, rally or demonstration” and includes penalties of up to six months in prison for anyone who has caused “disturbance to the public interest, problems or disturbances in the community”.
Other articles make it a crime to insult public authorities and state institutions, punishable by up to 18 months in prison.
Usman Hamid, director of Amnesty International Indonesia, said the Batang Toru Dam project, a US$1.6 billion Chinese-funded hydroelectric business run by Jakarta-based PT North Sumatra Hydro Energy, is an example of the type of projects the government hopes to protect with the criminal code.
The project, which began in 2017, has been controversial from the start over what activists say is the threat it poses to the local population of Tapanuli orangutans.
“For large investments, the law aims to secure President Jokowi Widodo’s investment projects, including those with Middle Eastern sponsors and investments from China,” Hamid told Al Jazeera.
“Protests in different areas in the past have targeted Chinese investment projects, such as Batang Toru in North Sumatra.”
Hamid said the articles designed to stifle dissent, which critics say were deliberately written to be too broad, could be applied to criticism of industries such as the nickel sector.
Indonesia has almost a quarter of the world’s reserves of nickel, which is used in batteries and in the production of stainless steel. The country is a major exporter of nickel, but activists have long warned of the environmental effects of mining the metal in ever-increasing quantities.
Other business observers say the penal code could unnerve investors.
Customary law provisions that allow prosecutions under some local laws not written into the criminal code stand out as a particular concern, said Adinova Fauri, an economic researcher at the Center for Strategic and International Studies in Washington, DC.
“You need to look at the relationship between customary law and the certainty of investment in an area,” Fauri told Al Jazeera.
Fauri said there had been cases in the past where companies could not operate due to a conflict with customary law, even though they had a business license, and that investors needed more legal certainty after the approval of the new code.
“Investment laws need to be readjusted so as not to cause confusion among investors,” he said.
