Investment Policies in Indonesia that Do Not Favor Investors from a Legal Protection Perspective

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FORMOSA NEWS - Jakarta - Investment Policies in Indonesia that Do Not Favor Investors from a Legal Protection Perspective. This research was conducted by Eddie Bachtiar Siagian, Tommy Arnold, Muhammad Aghna Graciano, and Hulman Panjaitan from the Christian University of Indonesia in a scientific article published in the International Journal of Law Analytics (IJLA) in 2026 revealed that Indonesia actually has a relatively complete investment legal framework through Law Number 25 of 2007 concerning Investment. However, the main problems lie in policy inconsistencies, weak coordination between the central and local governments, and bureaucratic practices that are not yet fully transparent and accountable.

Complete Regulation, Problematic Implementation

Normatively, the Investment Law guarantees the principle of legal certainty and non-discrimination. Foreign and domestic investors are legally treated equally in rights and obligations. The state also promises protection of assets, facilities, and dispute resolution mechanisms. However, based on the legal analysis conducted by the researchers, there is a gap between norms and practices. Regulations change frequently, central and regional rules often overlap, and licensing procedures still take a long time.

Some of the key barriers identified in this study include:

• Licensing is convoluted and takes months or even years.
• Land acquisition disputes, including conflicts with customary rights and soaring land prices.
• Policy inconsistencies due to changes in regional leadership.
• Weak interagency coordination, even though a one-stop service system has been implemented.
• The practice of unofficial levies in the administrative process.

This condition creates legal uncertainty that is detrimental to investors and reduces Indonesia's competitiveness compared to other countries in the region.

Legal Certainty Becomes a Determining Factor
This study uses a literature study approach by analyzing laws, local regulations, legal literature, and legal protection theory. The results show that investment problems are not caused by legal vacuums, but by weak harmonization of regulations and rule enforcement. The authors emphasize that legal certainty is a crucial factor in long-term investment decisions. Investors invest based on rational calculations of risk and returns. When regulations change or are applied inconsistently, legal risks increase and investment interest decreases. This research also highlights the role of investment service institutions that formally function as coordination centers. However, in practice, coordination between ministries and local governments has not been effective, so investors still have to deal with fragmented procedures.

Legal Protection Must Be Preventive and Firm
This research emphasizes two forms of legal protection that need to be strengthened:

• Preventive protection through stable, transparent, and consistent regulations.
• Repressive protection through effective dispute resolution mechanisms and strict sanctions against violations.

Law enforcement against officials who abuse their authority is considered an important step to rebuild investor trust. The researchers also highlighted the need for more active legislative oversight in evaluating the implementation of investment policies, so that there are no deviations between norms and practices.

Impact on Economic Growth

The findings of this study confirm that investment has a positive and significant impact on national economic growth. The increase in the realization of domestic investment is directly correlated with an increase in economic growth. This means that improving the investment climate is not only a legal issue, but also a strategic agenda for national development. Without strong legal certainty, Indonesia risks missing out on opportunities to accelerate economic transformation. Indonesia has advantages in the form of abundant natural resources and a strategic geographical position. However, these advantages can be reduced if the governance risk and regulatory uncertainty are considered too high by investors.

Author Profile

Dr. Eddie Bachtiar Siagian, Indonesian Christian University.
Areas of expertise: investment law and legal protection.

Tommy Arnold, S.H, Indonesian Christian University.
Focus on business law and economic regulation.

Muhammad Aghna Graciano, S.H, Indonesian Christian University.
Concentration in public policy and economic law.

Dr. Hulman Panjaitan, Indonesian Christian University.
Expert in investment law and business law.

Research Source

Siagian, E. B., Arnold, T., Graciano, M. A., & Panjaitan, H. (2026). Investment Policies in Indonesia that Do Not Favor Investors from a Legal Protection Perspective. International Journal of Law Analytics (IJLA), Vol. 4 No. 1, pp. 37–48.
DOI: https://doi.org/10.59890/ijla.v4i1.134

URL : https://slamultitechpublisher.my.id/index.php/ijla