We begin 2012 with an optimistic outlook for the coming year and foresee the upcoming Year of the Dragon to be one of existing business growth and of new ventures that present significant opportunities to flourish despite of the bleak outlook in other regions. And we leave behind 2011 as a year that has been marked by steady growth for our firm and for Indonesia in an otherwise turbulent world. This sentiment applies equally to the economic growth of the archipelago, and to political developments, where, in both, there have been certain challenges, but where we have ultimately seen consistent improvements being made. Of particular note is that Indonesia has regained an investment grade rating, from Fitch Ratings, for the first time since the Asian financial crisis.
A pervasive issue that spans both the business and the political world in Indonesia is the ever-present spectre of corruption and the on-going struggle to eliminate this disruptive feature. In relation to this, the relative stability brought about by the appointment of four Commissioners and a new Chairman of the Corruption Eradication Commission (KPK) for the 2011-2015 term, is a welcome development. The fight against corruption, however, continues to face challenges, as the House of Representatives (DPR) persists in seeking to amend both the Corruption Eradication Law, which governs the broad anti-corruption framework, and the KPK Law, which governs the specialist prosecutor. In light of this, the uncertainty of the substance and effects of such amendments on anti-corruption organizations and the legislative framework continues to be of great concern.
In relation to the public focus and potential business and political impacts, two cases stood out in 2011. The first is the case of Gayus Tambunan, a tax office official, whose conduct highlighted the corrupt networks in operation throughout a range of our institutions. Even more egregious, his actions as a detainee exposed serious breaches in the law enforcement system. The second case is the on-going politically-linked case of Muhammad Nazaruddin, which risks undermining the public’s trust in our elected politicians. Also notable is the continuation of the Bank Century case, which recently saw the conclusion of the State Audit Board’s (BPK) forensic audit of the bailout, which did not find evidence of the wrongdoing that certain parts of the DPR continue to allege took place.
Indonesia has not been left unscathed by the global financial crisis, with a certain level of volatility affecting capital flows and Indonesian capital markets. However, compared to the economic and political challenges seen throughout a number of countries, within the region and globally, we have arguably remained an island of relative calm in an otherwise turbulent world. Not least because of this, and because of the government’s development-oriented policies and attractive features of the Indonesian market, we have seen continued foreign investor interest in a range of sectors. A welcome feature of recent investment flows is the focus on Foreign Direct Investment (FDI) instead of the more volatile portfolio investments that have proven to be more susceptible to short-term sentiments and spill-over effects from other jurisdictions.
Over the past year the government has introduced such programs as the Masterplan for the Acceleration and Expansion of Indonesian Economic Development 2011-2025 (MP3EI), which aims to provide a framework for structured economic development of Indonesia. Combined with incentives, such as tax holidays, the public-private partnership (PPP) framework, and infrastructure guarantees provided by the Indonesia Infrastructure Guarantee Fund (IIGF), on which LGS is advising the government, development is being steered in such a way that systematically addresses such core issues as the constraints of insufficient infrastructure and encourages the development of sectors that are seen as strategically important.
Indonesia’s recent economic growth has benefited companies that positioned themselves to take advantage of the growing Indonesian market and of Indonesia’s ample natural resources. However, it has also caused a number of challenges to emerge, such as the costly and disruptive labour disputes that have been spurred on by the labour force seeking to attain a larger share of the benefits of the recent growth. At the same time, the government is attempting to extract higher revenues, particularly from the natural resources sector, by seeking to renegotiate contracts and introduce export tariffs on certain resources.
LGS persists in building on our strength in corporate law and commercial dispute resolution as we endeavour to work with our clients to understand their problems, determine their needs, and arrive at practical solutions that are cost-effective and viable over the long term. Our three founders’ work continues to span a range of client matters across a variety of sectors and legal issues, while our Partners Abdul Haris Muhammad Rum and Arisia Arundati Pusponegoro head our signature corporate law practice. At the same time we have sought to further expand our growing commercial dispute resolution practice, as spearheaded by our Partner Harjon Sinaga, along with Rofik Sungkar who became the seventh partner of the firm in July of 2011. Rofik Sungkar’s significant experience in litigation, arbitration and administrative hearings (including at the Indonesian antitrust body, KPPU) will ensure that LGS remains at the forefront of commercial dispute resolution in Indonesia.
Over the course of 2011 we have concluded a major upgrade of our IT infrastructure, as well as a complete replacement of our law practice management tools. These upgrades have ensured that our internal operations are conducted in the most efficient manner possible, by providing our lawyers with the necessary tools to allow them to better serve our clients’ needs. At the same time, LGS Online continues to provide updates on the latest legal developments and in-depth research and analysis of a range of legal issues that are of interest to businesses operating in Indonesia.
As always, we would like to thank our clients for their continued patronage and all members of the LGS team for securing our position as the premier Indonesian corporate transaction and commercial litigation law firm.
18 January 2012, Arief Tarunakarya Surowidjojo
A New Cornerstone of Legal Services in Indonesia
Periodical Review of Indonesian Politics, Economy and Other Public Issues
LGS Newsletter on Various Legal and Business Issues
Government Officials and Prominent Business Actors in Indonesia
Important Addresses You Should Know