Doing Business in Indonesia: Enforcement of Contracts in the General Courts and the Creation of a Specialized Commercial Court for Intellectual Property and Bankruptcy Cases

AED - Attractivité Economique du Droit, Programme international de recherches, Working Paper AED-EAL-2007-4, Nanterre, le 4 avril 2007

28 Pages Posted: 13 Jun 2015

See all articles by Christoph Antons

Christoph Antons

Macquarie University - Macquarie Law School (Sydney, Australia)

Date Written: 2007

Abstract

Conventional theory suggests that the reliable enforcement of contracts is a basic precondition for businesses. Seen in this light, the situation in Indonesia, and indeed in much of East and Southeast Asia, seems paradoxical. Countries have achieved persistently high growth rates using often archaic and outdated legal systems. However, not only is the Indonesian system outdated, it is also costly and cumbersome. According to the World Bank Doing Business Report of 2006 it takes on average 34 days and 570 days to enforce a contract in Indonesia. The costs for the procedure amount to 126.5% of the actual debt. This leads to a ranking of 145 in the 'Enforcing Contracts' category out of 155 countries, the worst among Indonesia’s rankings in the report and still significantly lower than the country’s ranking at 115 for the overall ease of doing business.

This paper will examine the reasons for the neglect of much of private and commercial law and accompanying procedural laws in Indonesia. It will then examine how businesses operate under these conditions and how, in spite of these difficult circumstances, contracts continue to be used. After a short discussion of the effects of the Asian Crisis, it will look at most recent reform efforts, in particular with the creation of a Commercial Court responsible for bankruptcy and intellectual property cases only. An initial assessment of the performance of this court will be attempted. The paper concludes with some final remarks on the legal heritage theory advocated in the Doing Business report of 2004 and on the relationship between business law regulation, economic efficiency, development policies and foreign investment as exemplified by intellectual property laws.

Suggested Citation

Antons, Christoph, Doing Business in Indonesia: Enforcement of Contracts in the General Courts and the Creation of a Specialized Commercial Court for Intellectual Property and Bankruptcy Cases (2007). AED - Attractivité Economique du Droit, Programme international de recherches, Working Paper AED-EAL-2007-4, Nanterre, le 4 avril 2007, Available at SSRN: https://ssrn.com/abstract=2617566 or http://dx.doi.org/10.2139/ssrn.2617566

Christoph Antons (Contact Author)

Macquarie University - Macquarie Law School (Sydney, Australia) ( email )

North Ryde
Sydney, New South Wales 2109
Australia

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