Impact MNC towards Nation’s Soverignty: Case Study of Domination of PT Astra towards Indonesia’s Economic Sovereignty

The economic globalization that touches all aspects of the world economy is essentially same as the phenomenon of democracy in terms “democratization is going on”. In this era, the presence of multinational corporations in the level of national and international development has many roles as new actors and decisive, both in the national and international economic stage.[1]

Multinational Corporation (MNC) is a company operates beyond the border between the countries, which are linked to related parties, either for investments in capital stock, management control or use of technology; probably subsidiaries, agents, and so on with various motives. There are three main motives established by MNC, namely: (1) expand the business in looking for of raw materials and selling their products to a foreign country, (2) look for the market and expand the range of product marketing, (3) minimize the cost (cost minimizer) as drought taxes, cheap labor, cheap land prices, the cost of waste treatment with a mild condition, etc. (www.academia.edu).

The presence of multinational corporations can be mutualistic symbiotic (mutually beneficial), meaning it can be beneficial to both parties (the origin country of multinational corporations and countries where multinational corporation operates).[2] However, besides the benefits that can be derived from the presence of MNCs in Indonesia, we should not turn a blind eye to the effects that can be caused, particularly negative effect. If we have come to the discussion of the negative effects they may cause, it is a logical consequence that should receive attention in the framework of the protection of negative effects is to undertake legal arrangements on the activities of MNCs in Indonesia.

In my opinion, I believe that Multinational Corporations give a great impact to the national’s sovereignty, in particular Indonesia countries.  This is because the multinational companies operating in Indonesia is considered to have benefited disproportionate when compared with the amount of royalties to the Government of Indonesia. In addition, the nature of the right to master the state of the natural resources in Indonesia for the greatest welfare of the people be one under which the national movement to reposition the position of Indonesia in various contractual foreign investment in Indonesia. Therefore, practice of natural resource management undertaken by multinational companies began to receive serious attention, even started to question.

There are many influences comes from the presence of multinational corporation which operate in Indonesia. One of the problems caused by MNCs is the national sovereignty that is almost eroded. Helga Hernes stated in one of her writings about these transnational companies as follows: “Multinational corporations are powerful organizations by virtue of their integrated management, their control over large resources, their influence…the market, their role as employer, their role in the transfer of technology and their role as agents of development.”. As a means to build a country, the presence of multinational companies also affects the economy of a country in which it operates.

Astra started the business in Jakarta in 1957 as a general trading company by the name of PT Astra International Inc. which then has changed its name to PT Astra International Tbk. in 1990, along with the release of shares to the public and the listing of the company shares on the Indonesia Stock Exchange listed with the ticker ASII. Along with the development of business scale, Astra currently has more than 222,000 employees in over 190 subsidiaries, associates and jointly controlled entities incorporated in the Astra Group. In general, the field of the Astra Group grouped into six business segments, namely Automotive, Financial Services, Heavy Equipment and Mining, Agribusiness, Infrastructure, Logistics and Other, and Information Technology. The market capitalization value of PT Astra International Tbk closed at the end of 2015 amounted to Rp 300.6 trillion. For 59 years, Astra has witnessed the ups and downs of the Indonesian economy and continues to grow by exploiting synergies based business opportunities are vast with internal and external parties Astra Group. As one of the largest business groups nationwide today, Astra has been able to build a good reputation and become part of our daily lives in various aspects of community life in the homeland. This is realized with the offerings of a range of products and the best services are offered and the contribution of non-business through social responsibility programs are widespread in the field of education, the environment, development of small and medium enterprises (SMEs) and health, as part of a trip Astra to be firm the pride of a nation that played a role in ongoing efforts to improve the welfare of the Indonesian people.[3]

In Act No. 40 of 2007 (hereafter the Company Law) is not recognized term multinational companies, because in the Company Law only knows the term limited liability contained in Article 1 paragraph 1 of the Company Law as follows:[4]Corporate hereinafter called the Company, is a legal entity that a capital alliance, established under the agreement, engage in business with a capital base that is entirely divided into shares and meet the requirements set forth in this law and the implementing regulations.

Indonesian national law it also gives the company the transnational status as a subject of national law with her as one legal entity. This can be seen in the provisions of Article 5 of Law No. 25 of 2007 on Investment, which is set as follows:

  1. Domestic investment can be done in the form of business entity is a legal entity, not a legal entity or individual, in accordance with the provisions of the legislation.
  2. Foreign investment shall be in the form of a limited liability company under the laws of Indonesia and domiciled in the territory of the Republic of Indonesia, unless otherwise stipulated by law.
  3. Investors in a foreign country and making an investment in the form of limited liability company is done by:
  4. taken part in shares at the time of the establishment of a limited liability company;
  5. buy stocks; and
  6. perform other means in accordance with the provisions of the legislation

By the status of legal subjects, then multinational companies have a major role in the development of the national economy, particularly developing countries. Multinational Corporation is much less motivated by the encouragement of national sovereignty, so that they can hold a much closer bond between people and companies from different nationalities. This further demonstrates that in the present state, multinational corporations have become new actors and major in international economic stage. The existence of a multinational company as a major player in the new and developing countries also clearly illustrated in the 30-years journey of PT Astra, which has been playing an important role in the development of the automotive industry in Indonesia as well as create jobs in the industry including the supporters.

The automotive sector has an important role for the Indonesian economy. The industry has a complete chain from component manufacture, production, and vehicle assembly, distribution and sales network to service sales.[5] The numbers of automotive companies are one proof that the automotive industry has attracted a lot of parties. This is based on the fact that the economic power of Indonesia has actually sustained by the domestic side of us that have a high purchasing power to meet increased demand for people to transport, the car manufacturers in Indonesia are competing to increase the production and quality of the goods it produces. Then, by the increasing number of vehicles, it is as evidence of the increasing vehicle sales in Indonesia.

However, PT Astra has played the role dominantly in Indonesia for over 50 years. Astra, as one of the major automotive companies in Indonesia, dominates and driving government policy by means of automotive transportation especially car & motorcycle. Since the 70s automotive manufacturers foreigners (especially Japan) have given the discretion that is so large, to freely control of this nation to be made slaves for their production and do everything they can to make lest the nation be able to make or produce its own their every need.[6] 

In automotive sector, Astra has PT Toyota Astra Motor as a Main Brand Holder Agent (MBHA) for brand car of Toyota and Lexus in Indonesia which is equipped with Auto 2000 as one of the Top Dealer Toyota in Indonesia. In December 1989, Toyota Astra Motor to merge together three companies as a form of efficiency answer the demands of the intense competition in the automotive world. Through acquisition, Astra cmerged with the company’s joint venture with Daihatsu Motor Company automotive, PT Pantja Isuzu Motors or car manufacturers, and PT Astra Nissan Diesel Indonesia. With the merger of the three companies, PT Astra Group further strengthens its role in the Indonesian economy, especially in the automotive sector. [7]  Not only play in the automotive sector, PT Astra also played in various vital sectors that affect perekoomian Indonesia. In the financial sector there are PT Astra Credit Company, commonly known by the ACC. In the segment of information technology there Astragraphia PT Tbk and PT Astra Graphia Information Technologies – agit, whereas in the infrastructure there Astratel PT Nusantara and PT Intertel Nusaperdana. Moreover, in the commodity sector and heavy equipment Astra Group owns PT Astra Agro Lestari Tbk, PT United Tractors Tbk, PT Traktor Nusantara and PT Pamapersada.

The multinational company is not just a purely economic organization, but also a political organization. The reason is, because the multinational companies that operate funds quite large with a network that is wide enough, it is the potential to influence government policy, both in the host country (home country) MNC itself and to the government in a country that is being occupied (host country).[8] There are two fundamental characteristics of the multinational companies, namely their very large size and the fact that their business operations are spread throughout the world it tends to be managed centrally by its leaders at its head office based in the country of origin. Their size is so large would provide economic strength (and sometimes also the political power) is very large, so they are a major force (approximately 40%) which led to the ongoing globalization of trade duniua rapidly. With that much power, they are in fact often dominates trading of various commodities in developing countries.

Governments of developing countries are facing a situation of dilemma; on the one hand, they try to create economic growth by attracting foreign investment. But on the other hand, there is so much opportunity cost that they have to pay as a result of such action. To set the operational activities of MNCs in the supervision of the treatment of its workers, there should be international contracts, codes of conduct, minimum standards and Standard Operating Procedures (SOP) elaborated run private jointly by the parties concerned (stakeholders), and preferably in mediation by the competent government bodies such as the Ministry of Labor / DEPNAKER (O’Higgins, 2003;[9] Fashoyin, 2004;[10] Lozano and Boni, 2002[11]). All rights and obligations of all parties concerned should ideally be clearly mentioned in the contract. However, at least there are five aspects to be considered and respected by the MNCs, namely “1) freedom of association, 2) bargaining and the process of collective negotiation, 3) the transparency of the MNCs, 4) problem resolution by consensus, and 5) all terms and regulations related to health and safety at work “(International Labour Organization, 2000).[12]

Based on the explanation and analysis of the above, the existence of PT Astra which holds various key sectors of the Indonesian economy can not be ignored just like that. The existence of PT Astra indeed have a positive impact on economic growth and development of Indonesia’s resources. But viewed from the legal status of PT Astra as a foreign multinational company that aims to get big profits in a developing country, Indonesia needs to be viewed from a different angle. As stated by Vice President Jusuf Kalla, that PT Astra should not forget its responsibilities to the country despite being almost dominates all sectors of the economy, namely to pay taxes on time and the right amount, because the income tax is one of the countries that support the development of the country.[13]

In regard to the Indonesian government with bargaining position MNC, it is visible from Astra that the role of “capital” is to be one of the factors that also affect the increase in the position of PT Astra in Indonesia. Bargaining position is influenced by the amount of investment PT Astra in terms of capital, labor, export activity, there is dependence Indonesia as a developing country in need of developments in each sector of the economy. a positive synergy of effective tripartite will benefit every stakeholder, be it MNCs, workers, and the state government. There needs to be agreement between the respective rights and obligations to be fulfilled by each party.

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