PROPERTY RIGHTS
Although foreigners cannot own land freehold, they can own land on a long-term lease which for all intense purposes is similar to freehold. These lease holdings can be used as collateral for purposes of mortgages. Foreigners can hold land under long-term leaseholds which can amount up to 95 years. There is a long history of foreign property ownership in Indonesia for both residential and commercial property. A typical lease would be for an initial period of 60 years with an option to extend for another 35 years. Lease of buildings is usually granted for an initial 50 years with an option for renewal of up to 30 years.
COASTAL AND MARINE
Law 27/2007 enables private ownership of coastal zones through a system called HP-3 (which governs the right to commercialize coastal waters). The idea behind this system is to allow the exploitation of the currently neglected, but potentially profitable, 81,000 thousand kilometers of Indonesian coastline and its 12 mile wide territorial sea for uses such as mariculture. A HP-3 grants ownership to water columns (above the seabed to the water surface) in Indonesian territorial zones.
In most cases, the Law stipulates that HP-3s will be granted by local governments. The Law says that the first period of ownership is granted for a period of 20 years but can be extended. As the law does not impose any limitation for extension, it is presumable that HP-3s could be owned perpetually. It is also worth noting that a HP-3 certificate can be used as collateral to secure a loan.
INVESTMENT PROTECTION
The Government recognizes that security of assets held by foreign investors is of paramount importance. As a measure of assurance for foreign investors that it will avoid using any measures that would adversely affect their property rights, Indonesia has joined the Multilateral Investment Guarantee Agency (MIGA).
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As a member of the World Bank Group, MIGA's mission is to promote foreign direct investment (FDI) into developing countries to help support economic growth, reduce poverty, and improve people's lives. MIGA provides a facility which brings security and risk protection ability to investments in emerging markets.
ARBITRATION
The Government recognized that foreign investors must have an appropriate forum to resolve disputes that can not be settled amicably. To that end, Indonesia has become a member of the International Center for Settlement of Investment Disputes (ICSID) at Washington DC.
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ICSID is an autonomous international institution established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States with over one hundred and forty member States. The Convention sets forth ICSID's mandate, organization and core functions. The primary purpose of ICSID is to provide facilities for conciliation and arbitration of international investment disputes.
