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Friday, April 24, 2015

Refer to as 'Jihad Constitution,' Muhammadiyah 3 sue Investment Act

Refer to as 'Jihad Constitution,' Muhammadiyah 3 sue Investment Act

Muhammadiyah sued three types of legislation, while echoing what they refer to as "constitutional jihad" which could be a blow to foreign investors in the oil and gas sector.

Muhammadiyah has also signed 115 laws that are believed to violate Article 33 of the 1945 Constitution that Indonesia's natural resources should be controlled by the state for the benefit of citizens of Indonesia.

"We will not stop as long as there are laws that are contrary to the Constitution. It is the jihad of our constitution," said Chairman of Muhammadiyah Din Shamsuddin told Reuters.

Muhammadiyah three laws proposed this week to the Constitutional Court for judicial review is Law No. 24 of 1999 on Foreign Exchange System and Exchange Rate System, Law No. 25 of 2007 concerning Foreign Investment and Law No. 30 Year 2009 on Electricity.

If granted the Constitutional Court, the legal basis for the exchange of foreign currency would be lost, which mean losing the guarantee to foreign investors that they will be treated the same as domestic investors. In addition, the rights of private parties to operate power plants will no longer be guaranteed by law.

"Jihad constitution" this group has managed to cancel two laws. In 2012, Muhammadiyah succeeded in limiting the space for governments to contract private companies in the oil and gas sector.

Two months ago, the judicial review filed Muhammadiyah withdraw legislation governing the use of water. The abolition of the law means the loss of water management permits for the private sector, causing uncertainty for various types of businesses ranging from textiles to bottling.

"The uncertainty and confusion"

Arif Budimanta, a special staff for the finance minister, told Reuters that the government, which requires a lot of foreign capital to realize infrastructure targets, will prepare a special legal advisory team to address the judicial review filed Muhammadiyah.

But foreign investors remain wary.

Not impossible for the Court to favor of Muhammadiyah, according to Arian Ardie, a risk consultant of US-Indonesia specializing in the shrimp business and power plants.

"There is a fundamental change in the laws that regulate
trade in Indonesia, "he added. Ardie says the changes are worried about the future of foreign investment in Indonesia.

Jakob Sorensen, head of the European Chamber of Commerce in Jakarta, said the government needs to intervene and convince foreign investors. "We do not see clarity here. We need a clear policy direction," he said.

The legal experts said the decision of the Constitutional Court could encourage other courts to support efforts for the cancellation of individual private contracts.

Jakarta district court decided last month to cancel the contracts of private companies including a unit of Suez Environnement of France, for water supply in Jakarta.

These companies, whose contract remains in effect during the appeal process, initially not affected by the decision of the Constitutional Court against the law waters because they provide water for public purposes.

Political analyst Kevin O'Rourke said the court has decided some cases erratic in recent years, and showed a "lack of appreciation for the fundamentals, as well as a tendency to side with the rigid interpretation of the constitution."

According to him, when Law No. 24 of 1999 on Foreign Exchange System and Exchange Rate System canceled, it does not automatically make the currency can not be converted, referring to the existing law, but Parliament will have to pass a new law on freedom of the courts to consider the views and foreign exchange control.

"In the meantime, uncertainty and confusion about the legal status, and the exchange of currencies, will weigh on investor sentiment and weighed on the market," according to O'Rourke in a research note. VOA

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