INTRODUCTION

There has been a considerable increase in foreign direct investment in Indonesia, from USD 22.9 billion in 2010 to USD 50 billion in 2016. Foreign investment rose to USD 57 billion in 2017 and to an estimated USD 78.4 billion in 2019. Sectors such as mining, manufacturing, transport and telecommunications have continued to attract fairly high levels of foreign investment.

The biggest investors come from Singapore, the United States and Japan. The growth of foreign investment since 2010 is partly due to Indonesia's stable economic growth, political stability, vast natural resources and its relatively lowcost production base.

The increase of investment has a close relation with the government's efforts to attract foreign investment to Indonesia over many years. These efforts are shown in the government's attitude towards foreign investment which has changed over time. The changes are mostly attributable to the changes of government policies towards foreign investment. These attitudes may be classified into three investment attitudes. First, is the ‘closed investment’ phase, from 1945 until 1966. Second is the ‘open investment’ phase, from 1967, when Law No. 1 of 1967 was promulgated, until 1998; and third is the ‘liberalisation of investment’ phase from 1998 to the present date.

CLOSED INVESTMENT PHASE

The closed investment attitude took place following Indonesia's declaration of independence in 1945. Since 1945, however, the government then, known as the old order regime, closed its door to foreign investment. The government also nationalised foreign plantation companies operating in Indonesia which had operated long before independence.

OPEN INVESTMENT PHASE

When the old-order government was replaced by the new-order administration in 1966, the attitude towards foreign investment changed. The government promulgated Law No. 1 of 1967 on Foreign Investment. The Foreign Investment Law provided the government's guarantee to foreign investors. The government pledged to protect foreign investment, not to nationalise the foreign investors’ assets, and the government's willingness to settle any investment disputes through international arbitration.