Policies·indonesia_pma_foreign_investment_law_1967

Indonesia Pma Foreign Investment Law 1967

IDN·1966 – 1998candidate

movessectoral subsidy↑trade openness~rule of law↓property rights~

What the policy did

Law No. 1/1967 on Foreign Investment (Penanaman Modal Asing) opened Indonesia to foreign direct investment after the Sukarno-era nationalisations, offering tax holidays, profit-repatriation guarantees, and protection from arbitrary expropriation under a Berkeley-Mafia-designed framework. Paired with Law No. 6/1968 on domestic investment, it formed the legal foundation of New Order economic openness and underpinned subsequent oil-, manufacturing-, and resource-sector investment inflows.

Policy-content fingerprint — what this policy moved, on which axes

Per invariant 3, reforms are scored by what they did on each channel-separated axis, not by the party that enacted them. This fingerprint is how the policy-match engine finds historical analogues.

intended

↑

sectoral subsidy

fiscal.sectoral_subsidy

Targeted industrial and sectoral subsidies (renewable energy, chip manufacturing, agriculture, green hydrogen, etc).

increased · weak

expanded sectoral subsidies

Tax holidays and import-duty exemptions for approved foreign investors functioned as targeted subsidies.

trade openness

regulatory.trade_openness

Trade policy openness — tariffs, non-tariff barriers, FTAs, industrial protection.

mixed · weak

Foreign-investment opening combined with sectoral negative lists carving out protected industries.

↓

rule of law

institutional.rule_of_law

Rule of law as institutional substrate — contract enforcement, judicial independence, equal treatment before the law. Upstream of most other axes.

decreased · weak

weaker rule of law

Discretionary BKPM approval process embedded political-relationship considerations in implementation.

property rights

institutional.property_rights

Security of private property rights — formal recognition, expropriation risk, titling systems.

mixed · weak

Strengthened formal investor protection while local-partner mandates created soft expropriation risks.

Enacted by

indonesia_suharto_new_order_1965_1998

Empirical evidence — linked hypotheses

Explicit links are curated by the author. Inferred links are hypotheses in the library that test the same axes this policy moved — the framework's answer to "what does the data say about a policy like this?".

Estonia adopted among the most radical market-liberalisation packages of any post-Soviet state — flat tax (26% universal rate, 1994), currency board (EEK pegged to DM/EUR, 1992), rapid privatisation, unilateral free trade, and minimal capital controls — and by 2007 had recovered to Soviet-era GDP per capita levels and substantially exceeded them, while Belarusian and Ukrainian peers had not recovered comparably.

estonia_market_reform_post_soviet_growth_1991_2007inferred

viaregulatory.trade_opennessinstitutional.property_rightsinstitutional.rule_of_law

PARTIAL — recovery threshold pass=True (year_recovered=1998, 2007 vs 1991 = 70.53282727739165); Baltic−CIS gap pass=False (gap=5.1509956229348575)

partial

Singapore's long-run prosperity and frontier convergence are better predicted by extreme trade openness, strong rule of law, competitive product and services markets, and high economic freedom than by state ownership or industrial targeting alone.

singapore_state_capacity_market_openness_comboinferred

viaregulatory.trade_opennessinstitutional.rule_of_lawinstitutional.property_rights

PARTIAL — coef=-0.0001143, p=0.713 (above α=0.1); direction inconclusive

partial

Across a broad panel of economies 1980-2020, market reforms (privatisation, trade liberalisation, and price decontrol) produce durable gains in real GDP per capita growth only when rule-of-law scores exceed a minimum threshold (WGI Rule of Law > -0.5, approximately the 40th percentile of the global distribution).

rule_of_law_market_reform_complementarityinferred

viaregulatory.trade_opennessinstitutional.rule_of_lawinstitutional.property_rights

REFUTED — coef=-0.1483 (sign opposite claim +), p=0.00481

refuted

Starting from comparable 1945 post-war conditions — same ethnicity, language, pre-war German institutional and industrial inheritance, and with the GDR inheriting a larger share of pre-war industrial capital in Saxony and Thuringia — the Federal Republic's Soziale Marktwirtschaft (Ordoliberal market economy with welfare state) versus the German Democratic Republic's planned economy with administered prices, state-enterprise production, and soft budget constraints produced by 1989 a canonical divergence that pattern-matches >=7 of 10 pre-registered extreme-outcome metrics, each drawn from a different publisher or methodology family.

west_east_germany_economic_system_divergence_1950_1989inferred

viainstitutional.property_rightsinstitutional.rule_of_lawregulatory.trade_openness

INCONCLUSIVE_DATA_PENDING — no outcome variable loaded; missing: ['derived: count of canonical_metrics with threshold met']

run pending

Across emerging-market and developing economies 1990-2020, higher expropriation risk — measured by ICRG expropriation risk index, Heritage investment-freedom score, and political-risk ratings — predicts shorter investment horizons (higher share of short-term investment, lower share of structures and machinery) and lower capital intensity in tradable sectors.

expropriation_risk_investment_horizoninferred

viainstitutional.property_rightsregulatory.trade_opennessinstitutional.rule_of_law

PARTIAL — coef=-3.637, p=0.231 (above α=0.05); direction inconclusive

partial

El Salvador's FDI inflow, real-GDP growth, tourism arrivals, and business-formation rate accelerated under the Bukele era (2019-2024) relative to a Central American peer-country donor pool (Honduras, Guatemala, Nicaragua, Costa Rica, Panama, Dominican Republic).

bukele_fdi_gdp_investment_climate_2019_2024inferred

viainstitutional.rule_of_lawinstitutional.property_rightsregulatory.trade_openness

PARTIAL — mean_gap=-0.697, |gap|/pre_sd=1.2, p_perm=1 (gap below 0.5×pre_sd or placebo p≥0.10)

partial

Hong Kong's long-run income convergence to the productivity frontier without classic industrial policy (sectoral targeting, directed credit, national champions, or SOE promotion) matches or exceeds that of developmentalist East Asian comparators after controlling for initial income, human capital, and trade openness.

hong_kong_no_industrial_policy_frontier_comparisoninferred

viaregulatory.trade_opennessfiscal.sectoral_subsidyinstitutional.property_rightsinstitutional.rule_of_law

REFUTED — coef=-0.06133 (sign opposite claim +), p=7.33e-15

refuted

East Asian high-performing economies (South Korea, Taiwan, Singapore, Hong Kong) achieved superior long-run total factor productivity and manufacturing productivity growth because export-market discipline forced competitive efficiency and technology upgrading, whereas economies that relied on protected domestic industrial policy without rigorous export exposure (Malaysia, Thailand in select sectors) experienced weaker long-run productivity.

east_asia_export_discipline_vs_domestic_protectioninferred

viaregulatory.trade_opennessinstitutional.property_rightsfiscal.sectoral_subsidy

INCONCLUSIVE_DATA_PENDING — interaction term requested but no loadable constructed interaction variable is defined. The generic panel_fe runner would otherwise …

run pending

Similar historical policies

Ranked by axis-fingerprint overlap with this policy. Direction match bolded — those are the closest historical analogues. Shape of the match is what drives policy-outcome comparison, not the country or party label.

Indonesia Balanced Budget Rule 1967 1997

IDN·1966

match

1.6

sectoral subsidytrade opennessrule of lawproperty rights

Indonesia Bimas Green Revolution 1970S

IDN·1966

match

1.6

sectoral subsidytrade opennessrule of lawproperty rights

Indonesia Inpres Rural Development

IDN·1966