Legal Literacy - This article discusses the scope of investment in Indonesia. Investment is defined as the activity of investing capital or money in a company or project with the aim of making a profit. In Indonesia, investments are divided into two types, namely direct investment and indirect investment. Let's check out the following article!
By: Hafid Nafi Rozzaki
Definition of Investment
Before discussing the scope of investment, we need to understand what investment is. Investment in the Indonesian Dictionary is defined as the activity of investing capital or money in a company or project with the aim of making a profit.
The definition of investment has a very broad scope, because it includes direct investment (direct investment) and indirect investment (indirect investment) or commonly known as portfolio investment.
There is a fundamental difference between direct investment and indirect investment, especially in terms of company management and supervision, and in relation to shareholders in the company.
Scope of Investment: Direct Investment (Direct investment)
Direct investment, according to the World Bank, is defined as a form of long-term investment in a new or existing business activity by actively controlling the company's management. Thus, the investing party, namely the investor, is actively involved in the management control and has an influence on the company's performance and is responsible for the company's development.
Direct investment can be done in two ways, namely by establishing a new company or by investing in an existing company to expand its business, merger or acquisition. The investors in direct investment are domestic investment (PMDN) and Foreign Investment (PMA).
In Indonesia, direct investment is regulated in Law No. 25 of 2007 concerning Investment (Law 25/2007). The term investment in Law 25/2007 is intended as direct investment. This is emphasized in the explanation of Article 2 of Law 25/2007, where the investment in all sectors of the Republic of Indonesia is direct investment and does not include indirect or portfolio investment.
Scope of Investment: Indirect Investment (Indirect Investment)
Indirect investment, according to the World Bank, is defined as a form of short-term investment and is more speculative in nature, because investors can easily buy and sell securities (shares) as their investment instrument.
In contrast to direct investment, investors in indirect investment do not have control over the company, even though they are registered as shareholders. In general, this investment is not the focus of investment law. Indirect investment is generally regulated under different rules than direct investment.
Supervision of indirect investment is usually carried out by the central bank, the Minister of Finance, or a body specifically formed to supervise the capital market (security and exchange commissions).
In Indonesia, indirect investment is regulated under capital market law, namely provisions subject to Law No. 8 of 1995 concerning Capital Markets (Law 8/1995).
The Capital Market itself, according to Article 1 paragraph 13, is an activity related to securities trading activities, public companies that issue securities, and institutions or professions related to securities.
Article 1 paragraph 5 states that securities are valuable papers, which can be in the form of shares, bonds, and other investment instruments regulated in this Law. In Article 3 of Law 8/1995, it is explained that the development, regulation and supervision of capital market activities are the duties and functions of the Capital Market Supervisory Agency (Bapepam).
However, after the enactment of Law No. 21 of 2011 concerning the Financial Services Authority (OJK), the duties and functions of Bapepam as regulated in Article 3 of Law 8/1995, were transferred to the OJK.
Conclusion
An investor in direct investment or indirect investment has differences in the scope of their investment. Nevertheless, investors from both types of investments have the same goal, which is to obtain profits from their investment returns. Therefore, the existence of laws, both Law 25/2007 and Law 8/1995, is a form of certainty to provide legal protection for the rights of investors in Indonesia..
*This article is the personal personal author and does not represent the views of the Literasi Hukum Indonesia editorial team.
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