IMPLEMENTATION OF NATIONAL TREATMENT PRINCIPLE IN INDONESIA-JAPAN ECONOMIC PARTNERSHIP AGREEMENT (IJ-EPA)
Abstract
Investment activity between countries has developed rapidly. The flow of Foreign Direct
Investment (FDI) reaches a higher level per year. This activity is beneficial for both
investors and host countries. Interdependence and competition then emerge as a result
of investment growth. To cover the development of this investment, many multilateral
and bilateral investment agreements were concluded, where one of the main legal
sources was Trade-Related Investment (TRIMs). One of the most influential principles
based on this Agreement, national treatment creates challenges to the application of the
principles discussed. Both TRIMs which refer to the General Agreement on Tariffs and
Trade (GATT) and International Investment Agreements (IIAs) and other Bilateral
Investment Agreements (BIT) do not provide a clear standard measure of how to apply
national treatment. This will cause an open interpretation of the national treatment
clause. In this condition, Indonesia as a developing country must take steps carefully to
protect national interests. Although FDI offers many benefits to Indonesia, protection of
national interests must be taken into account in policy making. Because of the binding
nature of national treatment to Indonesia, the state must provide treatment that is no
less favourable to foreigners than citizens. Under these circumstances, the obligation to
protect national interests and provide national treatment is contested. Until now,
Indonesia has established investment relations with several countries and one of its
biggest investors is Japan. For decades Indonesia and Japan have established economic
relations through trade and investment. On August 20, 2007 the two countries agreed to
form the Indonesia-Japan Economic Partnership Agreement (IJ-EPA) which became
effective on July 1, 2008. With the aim of strengthening investment relations between the
two countries and guaranteeing legal certainty. IJ-EPA is classified as a more
comprehensive bilateral investment agreement.
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- Law [2308]