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

Radha Aulia Putri ()
Additional contact information
Radha Aulia Putri: Universitas Lampung

Indonesian Journal of Law, Governance, and Regulation, 2026, vol. 1, issue 1, 30-47

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.

Keywords: Indonesia; investment law; foreign direct investment; job creation law; risk-based licensing; legal certainty; empirical legal studies (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://journal.privietlab.org/download.php?id=12544 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:prv:ijlgrp:1887

Ordering information: This journal article can be ordered from
https://journal.priv ... GR/article/view/1887

DOI: 10.55942/ijlgr.v1i1.1887

Access Statistics for this article

More articles in Indonesian Journal of Law, Governance, and Regulation from Privietlab Research Center
Bibliographic data for series maintained by Mochammad Fahlevi ().