Indonesia’s bid to woo investors complicated by ‘sex ban’ code
Southeast Asian country’s businesses community is divided on how revised code will affect efforts to attract investment.
Medan, Indonesia – For years, Indonesia has strived to present itself as a welcoming investment destination to rival neighbours Vietnam and Malaysia.
In 2016, during his first term in office, Indonesian President Joko “Jokowi” Widodo announced the opening up of dozens of industries to foreign investment in what he termed a “big bang” of economic liberalisation.
Six years later, the Southeast Asian country’s controversial new criminal code – which has been blazed across international headlines since its adoption earlier this month due to its ban on sex outside of marriage – is raising questions about Jakarta’s commitment to fostering an open and welcoming business environment.
In Indonesia, opinion remains divided on whether the revised criminal code, which includes prohibitions on blasphemy, cohabitation, sorcery and insulting the government, helps or hurts Jakarta’s sales pitch to the world.
The Indonesian Employers Association (APINDO) has raised concerns about several sections of the code, including penalties for corporate crime that will have a “broad impact”, and the recognition of customary law.
“For the business sector, the implementation of this customary law shall create legal uncertainty and make investors reconsider investing in Indonesia,” APINDO said in a statement provided to Al Jazeera.
APINDO also said the ban on non-marital sex will “do more harm than good, especially for the business sector engaged in tourism and hospitality”.
Other industry figures have brushed off such concerns.
“Currently the government is still implementing the new criminal code. Of course, there will be some pros and cons, but there will be a three-year period before it is applied in real life,” Clement Gultom, managing director of Boraspati Tour and Travel in Medan, told Al Jazeera.
“As such, I am more inclined to choose not to be aggressive towards the new criminal code,” Gultom said, adding that lawyers and activists could apply for a judicial review of the code through the Supreme Court if necessary.
Khairul Mahalli, chairman of the North Sumatra Chamber of Commerce and Industry, expressed similarly upbeat sentiments.
“The function of the government is as a regulator and the function of businesses is as an operator,” he said. “We need to support the government and make sure that the new laws are coordinated at all levels of governance.”
Mahalli said bodies such as the chambers of commerce would be instrumental in connecting foreign businesses with local partners and ensuring the smooth continuation of businesses after the code comes into effect.
“For now, the world of business in Indonesia has not been affected and is a world of opportunity,” 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 its passage, sparking nationwide protests in 2019. Then as now, critics feared it would violate basic human rights and erode Indonesia’s democratic freedoms.
The changes come as Indonesia has been making strides in its bid to attract investment, which includes a target of attracting $89bn in foreign investment next year.
Indonesia’s foreign direct investment (FDI) rose 63.6 percent on a yearly basis in the third quarter of 2022, hitting $10.83bn, according to the investment minister, Bahlil Lahadalia.
China, Japan and Singapore were the biggest sources of investment, which was mainly driven by the development of resources processing – part of the country’s wider strategy to add value to its minerals.
Some environmental activists have suggested the revised code, far from dissuading investors, will embolden those who wish to exploit fragile ecosystems.
Arie Rompas, a campaigner at 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 articles on environmental crime have been made easier, which is to say that environmental crimes have been made 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 criticise foreign investment, particularly projects that threaten the environment.
“The potential for criminalisation actually threatens local communities and activists if they protest or criticise projects considered strategic by the government in cooperation with outsiders,” he said.
“This criminal 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 criminal code places restrictions on “organising a march, rally or demonstration” and includes penalties of up to six months in prison for anyone found to have caused “a disturbance to the public interest, trouble, or riots in the community”.
Other articles make insulting public authorities and state institutions a crime, punishable by up to 18 months in prison.
Usman Hamid, director of Amnesty International Indonesia, said the Batang Toru Dam project, a $1.6bn China-funded hydropower business run by Jakarta-based PT North Sumatra Hydro Energy, is an example of the kind of projects the government hopes to protect with the criminal code.
The project, which began in 2017, has been controversial from the start due to what activists say is the threat it poses to the local Tapanuli orangutan population.
“For big investments, the law is intended to secure President Jokowi Widodo’s investment projects, including those with Middle Eastern backers and investment from China,” Hamid told Al Jazeera.
“Protests across different areas in the past have been targeted towards Chinese investment projects, like Batang Toru in North Sumatra.”
Hamid said articles designed to crack down on dissent, which critics say were deliberately written to be overly broad, could be applied to criticism of industries such as the nickel sector.
Indonesia has almost one-quarter of the world’s reserves of nickel, which is used in batteries and the production of stainless steel. The country is a leading nickel exporter but activists have long warned of the environmental effects of mining the metal in larger and larger quantities.
Other business watchers say the criminal code could make investors nervous.
The customary law provisions allowing prosecutions under some local laws that are not written in the criminal code stand out as a particular concern, said Adinova Fauri, an economic researcher at the Washington, DC-based Center for Strategic and International Studies.
“It is necessary to look at the relationship between customary law and investment certainty in an area,” Fauri told Al Jazeera.
Fauri said there have been cases in the past where businesses were not allowed to operate as a result of a conflict with customary law, even though they had a business licence, and that investors needed more legal certainty following the passage of the new code.
“It is necessary to realign investment laws so as not to cause confusion among investors,” he said.