Take the right reform lessons from Indonesia, don't dress up a flawed system, Pg13

Key Highlights:

• In 2014, Indonesia scrapped its existing Bilateral Investment Treaties (BITs) and adopted a new model, leading to increased Foreign Direct Investment (FDI).
• Indonesia's net FDI rose from 1.1% of GDP (pre-2015) to 1.4% of GDP (post-2015), with annual inflows increasing from $14 billion to $20 billion.
• India cancelled its BITs in 2016 but introduced a highly restrictive 2015 Model BIT, requiring a 60-month cooling-off period before international arbitration.
• India's net inward FDI in 2025-26 was $41 billion, marginally below 2008-09 levels, and stood at 0.77% of GDP, the second-lowest on record.
• The Finance Minister announced a revision of India's 2015 Model BIT policy in the 2025 Budget, aiming to reduce the mandatory court reconciliation period.

Detailed Insights:

• Indonesia's decision to overhaul its BITs was triggered by disputes with foreign mining companies like Churchill Mining and Newmont, both of which Indonesia won.
• The Churchill Mining case highlighted corruption, with Indonesia's anti-corruption agency, KPK, indicting over 30 senior officials for fabricating resource permits.
• Indonesia's new BIT philosophy, exemplified by its treaty with Singapore, features a lean, neutral, and fast 12-month cooling-off period and a three-judge arbitration panel.
• India's response to a dispute with White Industries and Coal India led to its restrictive 2015 Model BIT, which mandated domestic court proceedings for five years before international arbitration.
• While India's gross inward FDI reached a nominal record of $94.5 billion in 2025-26, the more meaningful net inward FDI (after subtracting repatriated profits) showed stagnation.
• Indian companies also recorded a record $33.3 billion in outward FDI in 2025-26, indicating capital flowing out of the country.
• The proposed revision to India's BIT policy aims to trim the reconciliation period from five years to three years, but still routes disputes through Indian courts.

Key Concepts Involved:

• Bilateral Investment Treaty (BIT): An agreement between two countries on the terms for private foreign direct investment by investors from one country into the other.
• Foreign Direct Investment (FDI): An investment made by a firm or individual in one country into business interests located in another country.
• Arbitration: A legal technique for the resolution of disputes outside the courts, where a neutral third party reviews evidence and makes a decision.