[1]    INTRODUCTION
The world’s largest archipelago, Indonesia consists of over 17,000 islands, of which about 6,000 are inhabited, the largest being Sumatra, Java, Kalimantan (Borneo), Sulawesi (Celebes) and Papua (western Papua/New Guinea). The archipelago encompasses an area as wide as the United States, with a total surface area equal to four times the territory of France. The population of over 250 million at time of writing makes her the world’s fourth most populous country; and the population is expected to surpass that of the United States not long into this century. 

In the two decades leading up to the onset of Asia’s economic and currency crisis of the late 1990s, Indonesia had become one of the most rapidly developing countries in the world. Rich in natural resources, including manpower, oil, gold, copper and coal, the archipelago also enjoys a climate particularly conducive to staple and cash crops such as palm oil, rice, sugar, tobacco, coffee, timber and many others. In the 1970s and 1980s, revenues from the booming oil industry were sufficient to carry the costs of government and growing infrastructure. However, with the sharp decrease in oil revenues, Indonesia began to look to other sectors for funding and beyond her own borders in order to maintain her rate of development and allow import of new technology and improvement of management skills. New tax laws were enacted, effective in 1984 and have been revised and amended several times, with the intention of increasing the tax base and giving some certainty to what was previously a rather arbitrary system of tax collection. At the same time, the government commenced an ongoing program aimed at encouraging increased foreign investment in the private sector, and has since continued in its efforts to improve the investment and trade climate and encourage economic growth generally. Today there are relatively few restrictions on foreign investment, with foreign interests permitted to own up to 100% of local companies engaged in most activities, at least for the first 15 years, and between 67% and 95% in almost all activities indefinitely.

Foreign participation in so many Indonesian businesses, coupled with recognition of inefficiencies in the judicial process, have increased the awareness and interest in alternative methods of dispute resolution, particularly, those relating to cross-border commercial relationships, yielding in turn elevated recognition of the need for arbitration.

Indonesia’s legal system is civil-law based, as Dutch laws and practice were adopted by the new Indonesian nation at the time of its independence in 1945. A number of laws have since been revised, however, with others in process of revision and, over the past few years, new laws are being drafted all the time to fit in with ever-changing global economic trends. Although many of these new laws include principles from common law jurisdictions such as the United States and Australia, the basis of legal practice remains with civil law.