A Short History of Indonesia

Religion

Indonesia is a majority Muslim population country. The Indonesian Constitution (UUD 1945) grants freedom for people to embrace any religion promulgated by the Constitution. The Indonesian Constitution emphasizes “the one and only God” in belief as declared in the first principle of the Pancasila, the philosophy of Indonesian nationhood written by Indonesia’s Founding Fathers.

Indonesia is not an Islamic country, but Islam has a strong influence on political policy in Indonesia. This is because the majority of Indonesians are Muslim. And also, many Islamic religious movements and organizations that can influence political policy in Indonesia.

Even though it gives its people freedom to embrace religion, the Constitution only recognizes six official religions: Islam, Catholicism, Protestantism, Buddhism, Hinduism and Confucianism. People are obliged, and “only” may adhere to one of the six religions because the religion embraced is a mandatory personal identity which is stated in official documents such as Identity Cards, passports, and others.

Atheism is not an option and is a belief that is socially unacceptable in Indonesia. However, no law legally prohibits atheism in Indonesia.

Politics

Indonesia is a constitutional democracy country. After the collapse of the authoritarian New Order regime in 1998, various constitutional changes have been made to weaken the powers of the executive branches. This then makes it difficult for the dictatorship system to occur in Indonesia.

Currently, the sovereignty of the Indonesian people is manifested in the presidential (executive) and parliament (legislative) elections every five years. After the end of the authoritarian New Order regime led by Suharto for more than 30 years, the Reformation era was born. The transition from the New Order era to the Reformation era made Indonesian politics undergo a reform process to give Indonesians more power and politics. Indonesia’s electoral system and democracy have been considered freer and fairer since the Reformation era’s birth. But corruption, collusion and nepotism still plague Indonesian politics.

It is not surprising for presidential candidates or parliamentary candidates to do “money politics” in their election campaigns and strategies. But such dynamics are part of Indonesia’s process of developing into a better and “full” democracy.

It is crucial for those who are planning to invest or want to be involved in business relations with Indonesia to know about the national political conditions in Indonesia.

Business

Based on data and research released by the World Bank, Indonesia is ranked 73rd in Ease of Doing Business (EoDB)[1]. This shows that it is not easy to run a business in Indonesia because you will be busy with permits and licenses to take care of, which will be time-consuming and expensive.

But in October 2020, the Indonesian government and the House of Representatives (DPR) passed the Work Creation Omnibus Law Bill (RUU Omnibus Law Cipta Kerja) which is believed will increase Indonesia’s Ease of Doing Business (EoDB) quality. There are three aspects of the EoDB assessment that can be supported by the articles of the Work Creation Omnibus Law Bill: the ease of starting a business, building construction permits, and land acquisition.

Investors need to understand legal matters such as building permits, company establishment permits, business building permits, or other legal matters required.

To start and develop a successful business in Indonesia, it is important to establish a good network in the Indonesian government and business circles. It is also important for investors to understand and get to know the values ​​of Indonesian culture better before interacting with the community, business partners and the Indonesian government.

Indonesia is indeed a promising country from a macroeconomic perspective, but the risks of doing business in Indonesia also exist due to the political, social and cultural dynamics in Indonesia that influence the investment and business climate in Indonesia.

Law

Law in Indonesia is a mixture of the European legal system, religious law and customary law. Most of the systems adopted, both civil and criminal law, are based on European law, especially from the Netherlands because of the historical aspects of Indonesia’s past.

  • Civil Law (Hukum Perdata) is a series of legal rules governing the relationship between one person and another, with an emphasis on individual interests. Civil law is divided into four parts: law about a person (concerning humans as legal subjects), family law, property law, and inheritance law.
  • Criminal Law (Hukum Pidana) is part of the overall law in force in Indonesia which provides the basics and regulates the provisions on forbidden, prohibited acts accompanied by criminal threats for those who commit.
  • Religious Law (Hukum Agama) exists because most Indonesians adhere to Islam, so the dominance of Islamic law or sharia is more, especially in the fields of marriage, kinship and inheritance.
  • In Indonesia also applies a Customary Law (Hukum Adat) system that is incorporated in legislation or jurisprudence, which is a continuation of local regulations from the people and cultures that exist in the territory of Indonesia.

Understanding the law in Indonesia is very important for those who want to invest in Indonesia, especially laws related to business, licensing, investment, and other legal matters.

Hospitality

Indonesia is an archipelago which has more than 17,000 islands. Almost all islands and regions in Indonesia have the potential for travel and tourism. Investment in the hospitality business, especially hotels and resorts in Indonesia, has enormous potential.

Indonesia has the potential to become a centre for tourist and travel in the world. But with the enormous wealth and potential of the hospitality business in Indonesia, what is it that is causing the slow development of the hospitality sector in Indonesia?

Infrastructure and financing for infrastructure development.

Currently the Indonesian government is pushing the “10 New Balis” project, which targets the improvement and development of 10 tourist destinations in Indonesia: Mandalika in Lombok, Lake Toba and Samosir Island in North Sumatra, Tanjung Lesung Beach in Banten, Seribu Island in Jakarta, Mount Bromo (Bromo Tengger Semeru National Park) in East Java, Wakatobi in South Sulawesi, Borobudur Temple in Central Java, Tanjung Kelayang Beach in Bangka Belitung, Labuan Bajo, Flores in East Nusa Tenggara and Motorai Island in North Maluku.

The sectors worth diving into in the hospitality business in Indonesia are accommodation, retreats, culinary, resorts, and hotels. Currently, issues are circulating regarding the Indonesian government’s efforts to promote “halal tourism” in Indonesia. So “halal tourism” is also a potential investment target in Indonesia.


[1] Rankings (DoingBusiness.org)

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Further reading

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Indonesia is the largest archipelago nation in the world with 257.5 million inhabitants, containing thousands of islands scattered around the equator...