CORPORATE SOCIAL RESPONSIBILITY FOR FOREIGN INVESTORS IN INDONESIA: COUNRTY RISK OR INSTRUMENT OF SUSTAINABLE BUSINESS?
Imamulhadi, Bambang Daru Nugroho, and Tarsisius Murwadji
Faculty of Law, Padjadjaran University, Bandung
The regulation and practice of Corporate Social Responsibility (CSR) in Indonesia is increasingly troubling for foreign companies willing to invest. This problem is formed due to the bias between the paradigm that was first published in the United States and European countries, with the already set paradigm in Indonesia. In the beginning of its history, CSR was a development of a companys business ethics initially focused on product reliability, which became a concern for all company stakeholders. Through this CSR, the companys development will be guaranteed because it is supported by all internal and external stakeholders. CSR is one of the 7 pillars of future corporate management. The CSR paradigm bias in Indonesia is triggered by the interpretation bias of the term -social- in “Corporate Social Responsibility”. In the United States, it is broadly defined as a “stake holder”, whereas in Indonesia, it is interpreted in a narrow sense, namely "sosial" or "people who needs to be helped". As a result, CSR is defined as a companys responsibility to assist the community. Capital assistance for micro and small businesses, scholarships, bridges and road development in villages are examples of the CSR implementation that are based on charity and are not related to the sustainability of a companys business. CSR in Indonesia is considered as an opportunity for the government to create a channel to attract finance from companies for the benefit of the wider community. The inaccuracy in interpreting the terminology is not merely an inaccuracy of the paradigm, but can also lead to a regulation rendering it-s requirements from voluntary to obligatory accompanied by sanctions. The hypothesis proposed in this article is: "CSR paradigms and regulations in Indonesia do not guarantee the sustainability of corporate business but rather tend to be a country risk". In the context of globalization in all sectors, particularly international investment in Indonesia, it is necessary to conduct an audit, which the author named Legal Quality Audit, to perform tests both normatively and practically. The Legal Quality Audit applied here is the original legal theory of the author which has been used as a legal theory in several dissertations in Padjadjaran University. The purpose of this Legal Quality Audit is to test the hypothesis raised above. The results of the study proves that the proposed hypothesis is proven to be correct, meaning that the regulation of CSR in Indonesia is indeed burdensome to international (foreign) investors and creates country risk. CSR in Indonesia focuses on community development and not on sustainable business. In this article, we discuss in detail the new paradigm of CSR in Indonesia as one of the pillars of future business management, which ensures the sustainability of the business of foreign investors in Indonesia and satisfies all of its stakeholders.
Keywords: corporate social responsibility, legal quality audit, country risk, sustainable business, international investment
Topic: Trade and Business