Medan, Indonesia – For years, Indonesia has tried to present itself as a welcoming investment destination to rival neighbors Vietnam and Malaysia.
In 2016, during his first term in office, Indonesian President Joko “Jokowi” Widodo announced the opening of dozens of industries to foreign investment in what he called a “big bang” of economic liberalization.
Six years on, the Southeast Asian country’s controversial new criminal code – which has made international headlines since its adoption earlier this month for banning sex outside marriage – is raising questions about commitment of Jakarta to foster an open and welcoming business environment. .
In Indonesia, opinion remains divided on whether the revised penal code, which includes bans 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 recognition of customary law.
“For the business sector, the implementation of this customary law will create legal uncertainty and make investors reconsider investing in Indonesia,” APINDO said in a statement provided to Al Jazeera.
APINDO also said that the ban on extramarital sex will “do more harm than good, especially for the business sector engaged in tourism and hospitality”.
Other industry figures have dismissed these 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 implemented 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 on the new penal 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 similar optimistic sentiments.
“The function of 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 the new laws are coordinated across all levels of government.”
Mahalli said that bodies such as chambers of commerce will be instrumental in connecting foreign businesses with local partners and ensuring smooth business continuity after the code comes into effect.
“At the moment, the business world in Indonesia is not affected and it 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 adoption, sparking nationwide protests in 2019. Then, as now, critics feared that it would violate basic human rights and erode Indonesia’s democratic freedoms.
The changes come as Indonesia has made strides in its drive to attract investment, which includes a target to attract $89 billion in foreign investment next year.
Indonesia’s foreign direct investment (FDI) rose 63.6 percent year-on-year in the third quarter of 2022, reaching $10.83 billion, according to Investment Minister Bahlil Lahadalia.
China, Japan and Singapore were the biggest sources of investment, driven largely by the development of resource processing – part of the country’s wider strategy to add value to its minerals.
Some environmental activists have suggested that the revised code, far from convincing investors, will encourage those who want to exploit fragile ecosystems.
Arie Rompas, an activist at Greenpeace Indonesia, said he believed the code was ratified to benefit foreign investment and silence critical voices.
“Investors will be happy because articles on environmental crime have become easier, which means environmental crimes have become more difficult to prove in court,” Rompas told Al Jazeera.
Rompas said many of the new laws that critics say will limit dissent and protest are likely to be used against those who criticize foreign investment, particularly projects that threaten the environment.
“The potential for criminalization actually threatens local communities and activists if they protest or criticize projects considered strategic by the government in collaboration with foreigners,” he said.
“This penal code is 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, assembly or demonstration” and includes sentences of up to six months in prison for anyone found to have caused “a disturbance of the public interest, trouble or disturbance in the community”.
Other articles make it a crime to insult public authorities and state institutions, punishable by up to 18 months in prison.
Usman Hamid, director of Amnesty International Indonesia, said the Batang Toru Dam project, a US$1.6 billion Chinese-funded hydropower venture run by Jakarta-based PT North Sumatra Hydro Energy, is an example of the type of projects the government hopes to protect with the criminal code.
The project, which began in 2017, has been controversial from the start because of what activists say is the threat it poses to the local Tapanuli orangutan population.
“For major investments, the law aims to secure President Jokowi Widodo’s investment projects, including those with Middle Eastern backers and investments from China,” Hamid told Al Jazeera.
“Protests in various areas in the past have been targeted at Chinese investment projects, such as 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 a quarter of the world’s reserves of nickel, which is used in batteries and in the production of stainless steel. The country is a major exporter of nickel, but activists have long warned about the environmental effects of mining the metal in ever-larger quantities.
Other business observers say the penal code could unnerve investors.
Common law provisions that allow prosecutions under certain domestic laws that are not written into the criminal code stand out as a particular concern, said Adinova Fauri, an economic scholar at the Washington, DC-based Center for Strategic and International Studies.
“It is necessary to look at the relationship between customary law and investment security in an area,” Fauri told Al Jazeera.
Fauri said there were cases in the past where businesses were not allowed to operate due to a conflict with customary law, even though they had a business license, and that investors needed more legal certainty after the new code was passed.
“It is necessary to reorganize investment laws so as not to cause confusion among investors,” he said.
