Economic Sovereignty and Foreign Investment In the Banking Sector of Developing Country

Foreign investment can always pose a challenge to the intrinsic dogma of national ideology. This article seeks to highlight the status of Pancasila Economics as the economic philosophy of the State of Indonesia following the influx of foreign investments into the banking sector. Pancasila is part of the 1945 Constitution of Indonesia. Pancasila Economics is based on Article 33 of the 1945 Constitution of Indonesia in that economic of Indonesia should rely on sources derived from within Indonesia. While foreign loans, investments and workers are supposedly complementary and temporary. The discussion employs doctrinal perspective. This article examines and evaluates the relationship between Pancasila Economics and foreign investments in the banking industry of Indonesia. A historical approach is applied that involves an objective study of the past facts, events and institutions. The article finds that economic sovereignty as aspired by Pancasila Economics has not been fulfilled as foreigners dominate the Indonesian banking sector. Government Regulation No. 29 of 1999 stipulates that foreign investors can own shares in national banking up to 99%. Indonesia has to give in to the foreign investment while intensifying possible avenues to benefit the people albeit not in line with its aspiration of economic sovereignty.