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To Welcome The-Pro-Indigenous People-Investment

Indonesia, as a develop country, cannot avoid the need for foreign capital as fund resource for
development financing. After the Agreement Establishing WTO ratified in 1997, automatically,
Indonesia bounded also with Trade Related on Investment Measures (TRIMs) and had up to ten
years to make adjustment so the law related to investment in Indonesia be in accordance with
TRIMs. Then, in 2007, the foreign investment law and domestic investment law reformulated in new
act, Law of the Republic of Indonesia number 25 of 2007 concerning Investment (Investment Law).
This act, as said in General Elucidation, aiming to be the legal basis in facing challenges and needs to
expedite national economic enhancement through constructing the national law development in the
field of investment in order to be competitive and to side with national interest.
Furthermore, topic about economic, law, and national interest cannot be separated from The 1945
Constitution of The Republic of Indonesia (The Indonesian Constitution). Chapter XIV the National
Economy and Social Welfare of The Indonesian Constitution is the legal basis of all law/regulation
related to economic and the development of Indonesia. All regulation must be based on four
matters:
1. The economic shall be organized as a common endeavour based upon the principles of
family system;
2. Sectors of production which are important for the country and affect the life of the people
shall be under the power of the State;
3. The land, the waters, and the natural resources within shall be under the powers of the
State and shall be used to the greatest benefit of the people;
4. The organisation of the national economy shall be conducted on the basis of economic
democracy upholding the principles of togetherness, efficiency of justice, continuity,
environmental perspective, self-sufficiency, and keeping a balance in the progress and unity
of the national economy;
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In relation to Investment Law, this Law number 25 of 2007 was created so investment become a part
of the conduct of the nation economy to increase the national economic growth, to create job
opportunities, to improve sustainable economic development, to improve the capacity and
capability of national technology, to foster peoples economic development, as well as to realize
public welfare, in a competitive economic system
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. Especially in foreign investment, the form of
business entity of foreign investment shall be in limited liability Company established in accordance
with Limited Liability Company Act, Law Number 40 of 2007. Theoretically, this provision has aims so
the foreign investment subject to and governed by Indonesian Law, simplify and clarify the
jurisdiction if theres any dispute and on other hand, as a legal entity, the limited liability company of
foreign investment able to act as self supporting rights and obligations (rechtperson) owning
property or capital. Even so, theres some exception in petroleum and natural gas that if foreign
company wants to do business activity in petroleum and natural gas, such as exploration,
exploitation, processing, transport, storage, and commerce, they do not have to establish Limited
Liability Company. The business entity allowed in form of state-owned enterprises, regional
administration-owned companies, cooperative, small-scale businesses, and private business entity.

1
Article 33 section 1-3 The Indonesian Constitution, unofficial translation
2
General Elucidation of Law Number 25 of 2007 concerning Investment
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One other business form, Permanent Establishment shall only be allowed to undertake exploration
and exploitation of petroleum and natural gas. Permanent Establishment is business entities
established and being in the form of statutory body outside the territory of the Republic of Indonesia
that undertake activities in the territory of the Republic of Indonesia and are obliged to comply with
legislation in force in the territory of the Republic of Indonesia. Differ from limited liability
companies, this kind of Permanent Establishment do not subject to Indonesian Limited Liability
Companies Law. The Permanent Establishment conducting business activity in petroleum and nature
gas based on what so called Joint Cooperation Contract between Indonesian Government as the
holder of mining concession through the executing agency and The Permanent Establishment. The
Joint Cooperation Contract last no longer than 30 years. But, after 30 years or when the contract
reaches to its end, the Permanent Establishment can propose contract extension no longer than 20
years. The similarity rule is both limited liability companies and the permanent establishment are
obligated to develop surrounding communities and guarantee the rights of indigenous people
communities.
Theres no doubt that the existence of indigenous people in Indonesia is recognized and protected.
As well as state in Article 28 I section 3 of The Indonesian Constitution that the cultural identities and
rights of traditional communities shall be respected in accordance with the development of times
and civilizations. In Law Number 5 of 1960 concerning Agrarian, the existence of them stated in
Article 3, the implementation of ulayat rights and others similar rights of indigenous, as long as such
communities in reality still exist, shall be such that it is consistent with the national and state
interest, based on nation unity and shall not contradict against the laws and regulations of higher
level. Article 15 Investment Law also obligated the investors to respect the communitys cultural
traditions. Article 11 of Petroleum and Natural Gas Law stated that the commitment and obligation
of petroleum and natural gas business entities in developing surrounding communities and
indigenous shall be stated clearly in the joint cooperation contract. In forestry law, Law of the
Republic of Indonesia Number 41 of 1999 concerning Forestry, there is a special chapter regarding
indigenous people. Chapter IX titled Customary Law Communities
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. In chapter IX article 67 section 1,
indigenous people, if any and still acknowledge the existence shall be entitled with sort of rights:
1. Collect forest produce to fulfil daily needs of relevant customary law community;
2. Manage forest according to the prevailing indigenous law and not in-contravention of the
law;
3. Obtain empowerment for welfare improvement;
In 1999, Agrarian Minister established Guidelines in Settlement of Ulayat Rights of Customary Law
Communities (Indigenous People). In this regulation, the ulayat rights of indigenous people
considered the existence if:
1. Theres a group of people who still feel bounded by their legal order of customary law as a
member of a certain legal fellowship, recognizing and applying the customary law in daily
life;
2. Theres certain ulayat land becoming the environment where the indigenous people live and
take daily need;
3. Theres customary legal order about management, control, and the use of the ulayat land
applied and obeyed by the member of fellowship.

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Unofficial translation of Law of The Republic of Indonesia Number 41 of 1999 concerning Forestry
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Moreover, article 67 section 2 Forestry Law delegates the authority to state the affirmation of
existence and evanish of indigenous people to Regional Government by establishing Regional
Regulation But in fact, UNDP report in 2006 on ten provinces in Indonesia regarding the legal
recognition theres just a few Regional Government that already established Regional Regulation
concerning indigenous people. In this case, the existence of indigenous people in forest area, de jure,
is illegal. One of Regional Regulation about indigenous people rights is West Sumatera Regional
Regulation concerning Ulayat Land and Its Utilization. This regional regulation provides clearer
provisions about indigenous law in a regional. Others facts we often hear from news is many clash
happen in district between Investment Company and people around the company/site. These
people turned out to be the indigenous people in that area who feels their right has already violated
by the company.
The lack of awareness of the rights of indigenous people in investment, unsupported regulations to
them, or violation the rights of indigenous people in purpose has the same contribute to the clash.
The clashes that happen not only harm the indigenous people themselves but also endanger the
existence of the investment company in that area. Furthermore, it can bring damage to the
investment and if it happens often, the investors will think that it is not secure to invest in Indonesia.
To regional government, by mapping the indigenous people in their region and making regional
regulation about it, shall minimize the possibility of clashes between investors and local resident. To
all lawyers in Indonesia especially young lawyers, its time to study more about our local culture,
indigenous people and customary law so that we can help to develop the economy of Indonesia by
ensure the legal aspects of investment but also aware about our indigenous people rights, so their
rights wont be violated. We can be a part of global world without forgetting our responsibility to
guard our culture and nation. Make sure, that the investments in Indonesia shall not violate the
indigenous people rights