Political Risks Faced by Investors of Direct Investment

Abstract

Investment always includes risk factors to affect investment development and it can change the Indonesian economy. Foreign investors also strive to avoid losses due to political risk. Governments of the countries should guarantee the protection of foreign investment from possibility of political risk. Therefore, this study examines what are the political risks faced by direct investment investors. Researchers use certain legal theories as the analysis basis to find answers of study problem. The theories used are Legal Protection Theory, Certainty Law Theory, Investment Theory, and Insurance Theory. The approach method used is normative juridical. This study uses 4 approaches, namely the statutory approach, conceptual approach, case approach, and comparative approach. This study is descriptive analysis to express the overall symptoms of investigated aspects to explain the conditions. Political risk is the change in political environment that can have a detrimental effect on the value of company’s business activities (Griffin, Ricky: 212). Assessment of Political Risk Map is done by the RGE method (Roubini Global Economics) (Roubini, 2014: 14). Roubini Global Economics (RGE) is an independent research company, the maker of global macroeconomic strategies developed by Roubini, a well known economist. RGE method has six risk measures, namely: Exchange Transfer, Non-Sovereign Payment, Political Interference, Supply Chain Disruption, Legal and Regulatory Risk and Political Violence.

Keywords: Political Risk, Direct Investment