K&L Gates LLP (JD Supra Indonesia)

Indonesia’s fight against systemic public sector corruption commenced in earnest following the Asian Financial Crisis and the subsequent fall of President Suharto’s reign. As a condition of the bail out package received in 1998 from the International Monetary Fund, Indonesia was required to establish a comprehensive anti-corruption commission.

Indonesia, the world’s most populous Muslim nation, is currently taking action, at both the local and international levels, to distinguish the country in the global Islamic finance markets. Originally published in the Thomson Reuters, Islamic Research and Training Institute and the General Council for Islamic Banks and Financial Institutions Islamic Finance Report entitled “Prospects for...

This alert will bring to your attention the significant measures the Indonesian government has taken to provide the regulatory environment necessary to germinate and stabilise their Islamic finance market including: branchless banking; promoting Sharia’h-compliant capital markets; and regulating Sharia’h principles and experts.

With the world's largest Muslim population, one might question why Indonesia’s Islamic finance market lags behind that of neighbouring Malaysia. In 2013 only 4.9% of total banking assets were held by Indonesian Islamic banks, compared to more than 20% for the same period in Malaysia.

This insight aims to highlight new rules governing the Islamic finance sector in Indonesia and the enhanced role of the National Shariah Board, to set out the current state of the market including opportunities for foreign investment and to trace the roots of the industry in the country with the world’s largest Muslim population.

Resources nationalism is not confined to Africa. In 2009, the Indonesian Parliament passed a new Mining Law (Law No. 4 of 2009 on Mineral and Coal Mining). In addition to replacing the established "Contract of Work" system with a permitting (IUP) system, the Mining Law has two aspects which have caused a dampening effect on foreign investment in the resources sector.

BPMIGAS (the Indonesian state upstream oil and gas regulator) has effectively been invalidated by the Constitutional Court. On November 13, 2012, the Constitutional Court annulled certain provisions of Law 22 of 2001 on Oil and Gas ("Oil and Gas Law") that referred to the phrase "Regulator Company" as well as its function in representing the Government of Indonesia ("GOI") in contracts and...