Investments in
Indonesia
“Neocolonialism and destruction of small-scale economy”
Poor people are fighting over charity
of $US 3 before Idul Fitri
21 people died in the distribution of Zakat
before Idul Fitri in East Java province
distribution of charity in
moments close to 2009
presidential election
People queued for cash transfers
of Rp 100,000 / family/month
palm desert in Kalimantan
Newmont is the richest gold mining company in the world
Queuing to get fuel
Judicial Review of Investment Law
Violence against civilians in
Papua, at Freeport's mining site
Eviction of small traders and street vendors to be
replaced by malls and modern shopping centers
Protest against beef import
(2009)
Colonialism
large-scale land ownership by big
capitalists, especially foreign capital
 exploitation of natural resources
intensively for export purposes
 the mobilization of cheap labor through the
labor market flexibility.
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Investment History
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Mercantilism (1600-1800) ; through VOC, the biggest trading company in
Dutch, Nusantara (Now Indonesia) had been rough colonialized. Slavery
(rodi), cultivation, which mobilized worker under pressure, in order to supply
spices to Europe.
Liberal Colonialism (1870-1930); the participation of foreign investment to
companies in Indonesia which cover : agriculture, plantation, mining and
refinery sector. The resources are mobilized to developed countries in
Europe in purpose of industrialization. Indonesian people have been in the
crisis situation. The teritorry of Indonesia including Java and Sumatra
become primary source, while areas outside of Java are only of
administrative power.
Neocolonialism (1967-2009) ; right now, the foreign investment is controlling
all over Indonesia ; Java, Sumatra, Kalimantan and Sulawesi, also including
small island. The foreign investment has covered all sectors : agriculture,
plantation, mineral mining, and coal mining, oil and trade, finance and
services.
The development of Indonesia’s policy about investment in line with the
need of developed countries for raw materials and the market for surplus of
production. The act No.1, 1967 about the foreign investment, then act No. 5,
1967 about forestry and act No.11, 1967 about mining, start exploitation of
forest and mining in Indonesia by foreign capital in big scale.
Incentives for investment
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The Law no. 25. 2007 about investment in Indonesia gives facility
and incentive to the bigger investment especially in foreign capital.
Investment is practiced based on equal treatment with no
differentiate to the origin Country.
All kinds of trading are open to the investment, excluding some
sectors that are not important to Indonesia economy.
The investment giving the incentive tax like income taxes, fiscal
taxes for capital, engine, or equipment, the free tax for raw material,
value add tax, the acceleration of amortisation and property tax.
The investors can flow the asset into another party according to the
term and condition of law. The investor had a right to transfer and
repatriate on the foreign exchange.
Service and or right license for land by foreign party on the long term
(95 years) is very investor-friendly in Indonesia. In fact, the previous
law gives only 70 years.
Biggest investment
investment
No
Country
(USD million)
Percentage
1
US
3441
41,28%
2
Japan
1543
18,51%
3
European Union
1543
18,51%
4
China
229
2,75%
5
Korea
239
2,87%
6
Singapore
741
8,89%
7
Australia
56
0,67%
8336
93,47%
Total Investasi
Indonesia Central Bank, 2006
Amount of Indonesia debts
(millions of USD)
years
Government
Private
TOTAL
2000
74,916
66,777
141,693
2001
71,378
61,696
133,074
2002
74,661
56,682
131,343
2003
81,666
53,735
135,401
2004
82,725
54,299
137,024
2005
80,072
50,58
130,652
2006
75,809
52,927
128,736
2007
80,609
56,032
136,64
2008
86,576
62,565
149,141
Source : Bank Indonesia, 2009
Foreign Capital Domination
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The statistic data shows that the investment in Indonesia
runs into significant decrease in the last 10 year. Foreign
capital becomes dominant in the structure of Indonesia’s
investment. The amount of foreign capital is 86.79 %
from the total investment in 2008.
The investment in Indonesia includes all economic
sectors; agriculture, plantation, forestry, oil and gas
mining and mineral mining. Over 85% the investment of
oil and gas, 100% mineral mining and 70% coal and over
a half of plantation investment are controlled by foreign
capital.
Distribution of mining concessions
Control of land by investment
No.
The effectiveness
Total area
(million ha)
1.
Oil and gas contract
95.45
2.
Work contract (minerals)
6.47
3
Minerals contract
7.67
4
Coal exploitation (coal right by Local Government)
24.77
5
Coal contract (KKB/ PKP2B by Central Government)
6
Rights to control forest (HPH) natural
5.2
27.72
Forest for Industrial Cultivation
3.4
7
National Plantation *
3.3
8
Private Plantation*
1.08
Sources
Total
175.06
Total of Land area
192,26
: the data process from all sources, 2005
* Data year 2003
Agricultural Production Land for Peasants
Year
Supporting Land for Agricultural Production Rice
area
Growth
(millions of
hectare)
%
(thousands of ton)
%
1996
11,6
1,1
51.101
2,7
1997
11,1
-3,7
49.377
-3,4
1998
11,7
5,3
51.490
4,3
1999
12
2
50.866
-1,2
2000
11,6
-3
51.899
2
2001
11,5
-0,9
50.461
-2,8
2002
11,5
0,2
51.490
2
2003
11,5
-0,3
52.137
1,3
2004
11,9
3,8
54.089
3,7
2005
11,8
-0,9
54.056
-0,1
source : Statistic 2007
Production
Growth
Natural Resource Exploitation
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Plantation sector ; Indonesia is the world’s biggest production of
seeds number 6, tea biggest production no.6, coffee biggest
production no 4, chocolate on number 4 biggest production and
number 1 CPO production, white pepper number 1, black pepper
number 2, nutmeg number 1, natural rubber number 2, synthetic
rubber number no.4, plywood number 1 and fish produce number 6
in the world.
Oil and gas mining sector, Indonesia is among the 20 world’s oil
producing country compared to the Asia Oceania, Afrika in 2005.
Also, Indonesia is 10th gas produce country in the world (after
Rusia, Afrika, US, Canada, Algeria, UK, Norway, Montenegro,
Netherlands). In the 2008, Indonesia is on 7th gas exporting country
in the world. Besides, Indonesia is the 20th crude oil producing
country in the world (2005). Indonesia is at the 7th rank on the coal
produce in the world. Second order in terms of coal exports in the
world after Australia.
Mineral mining sector ; Indonesia is 7th world’s bauxite production.
2nd world copper produce and 6th gold produce, 3rd world nickel
produce, 11th silver produce, 2nd tin world’s produce right after
China.
Oil production by company

2005
VICO Petrocina
3%
3%
BP
4%
Unocal
6%
Total Fina /
ELF
9%
EXSPAN
6%
Exonmobil
2%
Connocophilips
3%
CNOOC
9%
Sumber : US Embassy, Tahun 2005
Caltek
55%
Gas Production by company

2005
Sumber : US Embassy, Tahun 2005
crude and condensate exports by
country
Thailand, 3.76%
Taiwan , 2.97%
Singapore, 6.13%
Australia, 16.07%
Newzealand, 0.82%
Malaysia, 4.32%
AS, 3.51%
Korea, 14.20%
China , 11.91%
Source : ESDM, 2007
Jepang, 36.10%
Gas Export By Countries

2005
Singapura
0%
Philiphina
3%
China
9%
Other
6%
Australia
2%
Taiwan
2%
Hongkong
2%
Jepang
76%
Coal Export By Country
UNITED KINGDOM
2%
TAIWAN
15%
SWITZERLAND
4%
UNITED STATES
2%
CHINA
1%
THAILAND
4%
HONG KONG
9%
INDIA
9%
SPAIN
4%
ITALY
3%
SINGAPORE
1%
PHILIPPINES
3%
JAPAN
25%
NETHERLANDS
1%
MALAYSIA
4%
KOREA, R.
10%

Gross Domestic Product of Indonesia
Year
Annual Amount
1999
1.009,732,00
2000
1.389.769,59
2001
1.684.280,49
2002
1.897.799,96
2003
2.045.853,49
2004
2.273.141,50
2005
2.784.960,40
2006
2.967.303,10
2007
3.540.950,10
2008
4.426.385,00
GDP and Consumption
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Indonesia’s GDP is contributed by the big consumption,
foreign investment, and government expenditure and
netto export, a half of which come from natural resources
such as ; oil and gas, mineral, coal and plantation
commodities.
The consumption supports over 70% of Indonesia’s
GDP, which are ; mass consumption, government and
company’s consumption
The value of Indonesian oil consumption in 2007 was
2,285,189.74 rupiahs per capita per month (total of
Indonesian population reached 220 million people). Thus
oil consumption equals to 72 percent of per capita food
consumption in Indonesia.
High Cost Economic

Oil Consumption
2007
(PSO) Oil
quantity
Price/Litre
Value
(kilo liter)
(Rp.)
(Rp.)
Premium
17.929.843
6000
107.579.058.000.000
Kerosene
9.851.812
2500
24.629.530.000.000
Solar
10.883.740
5500
59.860.570.000.000
Sub Total
38.665.395
189.424.514.052.000
Non PSO
Premium
16.582.173
7870
130.501.701.510.000
Kerosene
9.591.264
9572
91.807.579.008.000
Solar
9.857.880
9232
91.007.948.160.000
Sub Total
36.031.317
8891
313.317.228.678.000
Total
74.696.712
502.741.742.730.000
poverty
Unemployment
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Structure of Labour
Labor’s composition
Formal Sector
Informal Sector
Total
36,073,000
59,104,102
95,177,102
37,90%
62,09%
100 %
Formal Sector Labor
Non-proverty
Proverty
Total
19,291,000
16,782,000
36,073,000.00
53,48%
46,52%
100%
FDI and Employment
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The number of labors in all kinds of foreign
investments are 608 thousand people, and of
the domestic investment are 364 thousand
people or just 1% from 94 billion of labor in all
kinds of economic sector in the year of 2005.
Most of labors in informal sector which doesn’t
have relation with the investment in Indonesia.
From the total of 95,117 million labor in
Indonesia 2006 in all kinds of economic sector,
59,104 million work on the informal sector or
almost 62,09% from the total employed.
Conclusion
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Indonesia’s Position on the chain of global trade has not been moved since 200 years
ago. This country is the source of mineral, gas, and plantation in order to support
industry in the developed country. On the other hand, domestic economy moves into
de industrialization.
The entrance of big scale investment makes threat to the livelihoods of farmers. The
case study held by IGJ relate to the mining investments of Newmont Corporation,
Lombok Tourism Development Corporation and the making of Special
Economic Zone Batam, show that big scale of investment causes taking over of
farmers’ land areas, taking of natural resources and taking the benefit by foreign
capital and ecological impact and social conflict.
Large scale of investment makes the access of community vanish to the natural
resources especially the productivity of community decrease. As a result, Indonesia
becomes importer of food such as : rice, soybean, meat, milk, wheat, sugar, salt on
the big amount. Before that case, this food products can be produced by domestic
farmers. Case study of West Nusa Tenggara found per capita income amounted to
5,500 rupiahs per day, that is below the poverty line stated by World Bank (USD 1- 2
in a day)
And last, overall the economic liberalization through WTO and FTA make the loss of
access of farmers, labor, and small scale economy to the natural resources and
market
Solution
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Agrarian Reform ; Indonesian society needs real agrarian reform in
the form of land distribution, agriculture production tools, capital,
technology and access to the price and market in order to increase
their income.
National Industrialization ; In the last 20 years, Indonesian
economy entered de-industrialization phase where more than 70
percent component of Indonesian industry came from import.
National industry grew in a form of footloose industry. Indonesia has
experienced deindustrialization before reaching the phase of
industrialization. Thus, to build strong economic structure, it needs
good industrial policy.
Protection dan Subsidy ; at production level and productivity in
which farmers need subsidy from the state, WTO and FTA cause
farmer ‘s access to market and natural resources to decline.
Protection and subsidy should be provided by the government.
Terima kasih
Thank you