Moores Rowland Guides ESG in Indonesia
The firm sets standards and creates awards for ESG practice
Moores Rowland Indonesia, through their outstanding work in the field, have been instrumental in guiding global ESG measures, both in their home territory of Indonesia and across the world. CEO of Moores Rowland Indonesia James Kallman was invited to consult the country’s incoming government; how laws in other jurisdictions impact Indonesia, how the country wishes to meet its own ESG goals, and how the country can work towards its desired role as a top five economy.
James Kallman, Moores Rowland Indonesia CEO speaks at the Indonesia Ministry of Investment focus group discussion in Jakarta.
Implications of Relevant Foreign Laws on Indonesia’s Economic Governance:
A Focus on Foreign Anti-Corruption Regulations and the Global Minimum Tax
Indonesia’s interconnected economic landscape requires robust governance frameworks for international business practices and regulatory compliance. Foreign anti-corruption laws play a crucial role in promoting ethical business practices and safeguarding the integrity of international trade as they establish stringent regulations against bribery and corruption in international transactions.
One of the pillars of Indonesia President Prabowo Subianto’s new administration is to attack corruption and bribery in the government and private sector. Moores Rowland Indonesia fully supports this initiative and has for decades. As such, we are known for our clear guidance on Indonesia’s laws, regulations and policies on everything from tax compliance, corporate sustainability and human rights.
A week before Subianto’s inauguration, a focus group discussion was hosted by the Indonesia Investment Coordinating Board (BKPM) about anti-bribery, the new global minimum tax, and how Indonesia can best navigate, embed and implement international laws and regulations to maintain international competitiveness, enhance compliance, and support sustainable economic growth.
The discussion was attended by high level officials from the Ministry of Investment, Indonesia Central Bank, the Corruption Eradication Commission, the Ministry of Foreign Affairs and administrators from Moores Rowland’s Responsible Business Conduct practice along with the Foundation for International Human Rights Reporting Standards (FIHRRST).
During the discussion I offered some ad hoc comments regarding Indonesia’s responsibilities in looking to be a top five world economy and international trading country.
“This is a great country. But with greatness, comes great responsibilities. When you are small, you fly under the radar. When you are big, you must play by and set even tougher rules.”
At the Indonesia Ministry of Investment focus group discussion in Jakarta, attended by Moores Rowland Indonesia administrators and government finance and taxation officials.
I also noted that there was “a race to the top” and Indonesia therefore needed to keep abreast of laws such as the new proposed Australian legislation that makes even not reporting a request for a bribe a crime. Or the proposed US law that would make proceeds from exploitation of deforested land, or any activity on that land, money laundering. Through responsible business conduct, companies should not only look at compliance with the law and shareholder obligations, but how these laws and obligations live within a framework that includes customers, communities, impacts on the environment and so on. With these considerations, companies can prevent or minimise any negative impact they may have on society.
Attendees at the discussion came away with a better understanding of the key provisions and implications for international trade and investment of the UN and OECD anti-corruption regulatory frameworks, the OECD Global Minimum Tax implications for Indonesia, the scope and application of the U.S. Foreign Corrupt Practices Act (FCPA), and the U.S. Foreign Extortion Prevention Act (FEPA). We identified the challenges for Indonesian companies operating abroad, the risks associated with aligning Indonesian regulations and policies with international frameworks, and their import for cross-border financial transactions and anti-corruption initiatives.
We also developed recommendations for improving inter-ministerial coordination and ensuring compliance with international standards. It is hoped that the initiatives proposed by the focus group will kickstart the process of creating a coordinated approach to managing foreign investment, anti-corruption, and taxation policies in Indonesia, and develop cohesion among government agencies to address compliance, aligning with global best practices.
By aligning with foreign anti-corruption laws and other international economic-based standards, Indonesia, as an important player in the global economy and a potential member of the OECD, will attract foreign investment and foster trust among global investors.
Such commitment to ethical business practices will create a more favorable investment climate, encouraging multinational corporations to establish operations in the country, which will lead to job creation and economic growth.In addition, a comprehensive domestic anti-corruption framework that aligns with foreign anti-corruption laws will not only strengthen Indonesia's domestic governance and rule of law, but also enhance the country’s ability to combat corruption within its own institutions, thereby improving public trust in government and the effectiveness of public services.
In addition to an anti-corruption framework, Indonesia is considering other efforts to promote sustainable, transparent and ethical business conduct. OECD’s Pillar Two Global Minimum Tax is one such initiative. The framework seeks to ensure that multinational enterprises (MNEs) pay a minimum level of tax on profits regardless of where they operate. Proponents of the Global Minimal Tax believe the framework will reduce tax avoidance, enhance tax certainty, and promote fairness.
Participating and contributing to international anti-corruption initiatives facilitates knowledge exchange and capacity building within Indonesia's law enforcement and regulatory agencies. By learning of and integrating the best practices and experiences of other countries, Indonesia will enhance its capabilities to detect, investigate, and prosecute corrupt activities. This will not only bolster the country’s legal framework, but also promote a culture of integrity and ethical behavior, essential for sustainable development and social cohesion.
By working together, nations can create an environment where corruption is less tolerated, thereby enhancing the rule of law and promoting stability in developed and developing economies.