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Investment law and realized investment in Indonesia: An empirical legal analysis of regulatory reform, institutional quality, and capital formation in 2019-2025

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  • Radha Aulia Putri

    (Universitas Lampung)

Abstract

Indonesia has repeatedly redesigned its investment laws to convert regulatory reforms into capital formation, industrial upgrading, and employment creation. This study examines whether the contemporary regime of capital investment law is consistent with observed empirical outcomes in 2019-2025. Using an empirical legal method, it triangulates public legal instruments, Badan Koordinasi Penanaman Modal (BKPM) realized investment statistics, United Nations Conference on Trade and Development Foreign Direct Investment (UNCTAD FDI) data, and institutional indicators from the World Bank and World Justice Project. The legal framework is anchored in Law No. 25 of 2007 on Capital Investment, the Job Creation Framework, Government Regulation No. 5 of 2021 on risk-based business licensing, and Presidential Regulation No. 10 of 2021 on investment business fields. The data show a record realized direct investment of Rp1,714.2 trillion in 2024 and Rp1,931.2 trillion in 2025. Foreign investment remained important, but domestic investment became a larger contributor in 2025. UNCTAD data show FDI inflows of US$24.212 billion in 2024, recovering from 2023 but remaining below the 2022 peak value. The study concludes that Indonesian investment law is more facilitative; however, high-quality investment still depends on implementation certainty, regional coordination, environmental due process, dispute prevention, and credible enforcement.

Suggested Citation

Handle: RePEc:prv:ijlgrp:1887
DOI: 10.55942/ijlgr.v1i1.1887
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