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The Role of the Legal System in Economic Growth

The protection of property rights and the enforcement of contracts promote savings and investment, while promoting the development of economic relations, which has a positive impact on competition, innovation, the development of financial markets and growth, according to the report. The technical knowledge of lawyers and their ability to apply their legal knowledge in practice to provide an overview of what is legally permissible contributes significantly to the range of skills required to promote the development of business activities. In emerging markets, technological advances are associated with potential regulatory changes, which typically lead to a lot of uncertainty in the business environment. Many theorists believe that a strong legal system is the foundation of a functioning economy. It`s important to understand that every day, lawyers not only help make businesses sustainable, but also succeed. By fulfilling commercial and contractual obligations and commercial transactions, resolving disputes, facilitating the flow of money and investment, fostering innovation by protecting intellectual property rights, and advising entrepreneurs on viable business solutions, lawyers can have a positive impact on economic growth. In a developing economy where businesses are competitive, lawyers also help their clients eliminate and even avoid pockets of market concentration through competition law. A new OECD study provides cross-country comparisons of large differences in the efficiency of justice in 24 jurisdictions around the world, including measures of the length of proceedings, access to justice services and predictability of decisions. What makes civil justice effective? Explains the opportunities to improve the functioning of judicial systems through wider use of information technology, fewer disputes and lower appeal rates. Thus, contractual rights are based on property rights and allow individuals to enter into agreements with others about the use of their property, which provide for recourse through the legal system in the event of non-compliance. An example is the employment contract: an experienced surgeon operates on a sick person and expects to be paid. Non-payment would constitute theft of property by the patient; This feature is the services provided by the surgeon.

In a company with strong ownership and contractual rights, the conditions of the patient-surgeon contract are met, as the surgeon could resort to paying that person through the court system. Without a legal system that enforces contracts, people would likely not contract for current or future services because of the risk of non-payment. This would make it harder to do business and slow economic growth. A generally accepted theory about the economic strength of a nation concerns the influence of law and the legal system. By improving the country`s skills, Indonesia`s legal policy guides legal development to support the achievement of continued economic growth; regulation of economic matters, in particular economic and industrial issues; and also to ensure investment security, particularly in law enforcement and legal development, law renewal is implemented taking into account the plurality of the legal system and the influence of globalization as an effort to increase legal certainty and the protection of human rights, by constantly changing the environment and answering the new question, caused by the changes (Sulistiyono, 2007). A similar problem is explained by Burgs (Theberge, 1980), who says that there are at least two types of legal quality that must be fulfilled for the economic system to work: stability and predictability. But between these two qualities, there is also a factor of justice, such as maintaining similar treatment with government standards of behavior, which are necessary to maintain the market mechanism and avoid too much bureaucracy. One of the government policies in this context is the creation of regional strategic zones such as free and free trade zones (1970), customs zones (1986), industrial zones (1989), integrated economic development zones (KAPET) in 1996 and special economic zones (SEZs) (2009). These strategic areas have the potential to increase investment in a variety of areas. But investment problems such as legal certainty, political stability, bureaucracy, sufficient regional infrastructure and skills persist, leading to setbacks in creating an appropriate investment environment. Nyhart (1964) named the six concepts of the Act that influence economic development.