Bilateral investment treaty offers bright hopes for Singapore, Indonesia

13 April 2021

Bilateral investment treaty offers bright hopes for Singapore, Indonesia

Investments between Indonesia and Singapore are projected to climb by 18 to 22 percent in the next five years with the Indonesia-Singapore Bilateral Investment Treaty’s (BIT) entry into force on March 9, 2021.

The BIT replaces a previous treaty signed by Indonesia and Singapore in 2006 and which expired in June 2016.

Among others, the Indonesia-Singapore Bilateral Investment Treaty puts in place a multi-tiered dispute settlement mechanism for investors when disputes arise including suspension of intellectual property protection through compulsory licensing. Said mechanism is composed of mediation, consultation and international arbitration under the International Centre for Settlement of Investment Disputes or any other arbitral institution or rules.

Article 6(6) of the Treaty allows the issuance of compulsory licenses granted in accordance with TRIPS without liability under the same Treaty for expropriation.

Aside from this, the Treaty gives investors the opportunity to request to review the arbitral tribunal’s draft award and give their comments.

Another key feature of the BIT is that it strengthens assistance to investors in both countries by broadening the criteria for the protection of their investments. This is applicable to existing investments as of March 9, 2021 and other investments made after this date. These include stocks, shares, other forms of equity, claims to money in connection with any business and under a contract and others.

Trading between the two countries have been strong in the last several years. In 2020, bilateral trade amounted to US$36.3 billion, with Singapore retaining its position as Indonesia’s number one source of foreign investments despite the pandemic.

In addition, the BIT complements the updated Double Taxation Avoidance Agreement (DTAA) signed by Indonesia and Singapore in February 2020. Among others, the DTAA lowers the tax rate on royalties for copyrighted works of literature, arts and film from 15 percent to 10 percent.

Endra A. Prabawa, an IP partner at Roosdiono & Partners in Jakarta is optimistic about the impact of the Treaty.

“Hopefully, the ratification of the Indonesia – Singapore BIT which regulates and provides protection for investors will encourage the economic recovery of Indonesia and Singapore amidst this pandemic situation. The BIT also may encourage Indonesian investors to invest and develop their business network in Singapore. Specific for IP matters, provisions in the BIT may also encourage the business actors and creators to invest more in the IP sector,” said Prabawa.

Other key features under the Treaty include restricting specific transfers of investments from and into the host country such as securities, futures, options and derivatives, bankruptcies and insolvencies, criminal offenses and the like; elimination of the privileges under the most-favoured nation treatment clause stipulated in previous BITs between Indonesia and Singapore and other investment agreements prior to March 9, 2021; safeguarding of the countries’ balance of payments and strengthening of their currencies, and others.

The Indonesia-Singapore Bilateral Investment Treaty was signed by Singapore’s Minister for Trade and Industry Chan Chun Sing and Indonesia's Foreign Minister Retno Marsudi in 2018. The signing was witnessed by Prime Minister Lee Hsien Loong and President Joko Widodo.


Espie Angelica A. de Leon

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