Indonesia at the Intersection of Human Rights and International Investment: the Overlap of Law, Sovereignty and Global Value Chains

Abstract

In the changing dynamics of today’s world, globalisation and sovereignty remain centrally important. Simultaneously, international commerce in the form of global value chains is playing an increasingly significant role in linking and mediating the overlap of globalisation and sovereignty. Nation-state governments use law to manage this overlap. This article takes the example of Indonesia to explain and analyse this phenomenon. By examining the intersection of laws regarding foreign investment and human rights, it becomes possible to gain insight into the constraints that national governments face in regard to protecting local interests while catering to the demands of global commerce. Human rights protections, after all, benefit local welfare but inhibit investment because they impose costs on companies. In the Indonesian case, the government has been successful in implementing local human rights protections in its fishing industry but has largely failed in its mining industry. The reason is quite simple: given their power and the economic value of their investment, international mining companies are able to influence the government, whereas fishing firms, which are primarily smaller and domestic, lack comparable power. As a result, the power of global mining value chains is having a direct effect on decisions that a national government is making, and at the same time, the government’s decisions are reflections of compromises that it itself is willing to make (here, regulating fishing firms) and compromises that it is not willing to make (here, regulating mining companies). These decisions and relationships provide important lessons regarding the role of law in managing the tensions that global value chains pose on globalisation and sovereignty.