Indonesia: FDI in the mining sector
Description
Indonesia issued a regulation specifying the scope of the obligation of foreign investors to divest mining concessions. Two implementing regulations under Indonesian law No. 4 of 2009 (the "Mining Law") were issued on 1 February 2010: Government Regulation No. 23/2010 ("GR23") on Mining Business Activities and Government Regulation No. 22/2010 ("GR22") on Mining Areas. We are following these developments closely, and will provide updates focused on their effect on foreign investment activities as new implementing regulations are published — see our previous alert on the Domestic Market Obligation regulations.
Article 112 sets out the divestment obligations. This article generally requires foreign shareholders to divest a proportion of their ownership in Indonesian mining concessions to local parties within five years of commencement of production. GR23 clarifies that only 20% of the 'foreign capital' is required to be divested within this timeframe. The definition of 'foreign capital' in the regulation is weak, according to some analysts, as it does not employ a beneficial owner test and may suggest that an entity that is even minority local owned is exempted from the definition.
Any Evidence-Based Deliberation:
| Question | Result |
|---|---|
| Is there anything in the public record to suggest that evidence of the effectiveness of the proposed measure was considered during official deliberations? | |
| Is there any evidence that alternatives to the proposed measure were considered? | |
| Is there anything in the public record that suggests that empirical evidence informed the comparison across the alternatives available to government? | |
| Was such evidence identified? | |
| Is such evidence publicly available? | |
| Did the official decision-maker in question provide an explanation as to why a chosen measure was favoured over alternatives? | |
| Is there any evidence to suggest that potentially affected trading partners were consulted before the measures were taken? | |
| Is there any evidence that safeguards have been put in place to ensure that implementation of the initiative is transparent and non-discriminatory? | |
| Did the government state its intention to review the measure within one year of implementation? |
Date Discovered:
Implemented: Yes
Date of inception: 1 Feb 2010
GTA Evaluation: Red
Source:
World Investment Report 2010 - http://www.unctad.org/en/docs/wir2010ch3_en.pdf
http://www.omm.com/indonesian-mining-law-new-implementing-regulations-cl...
http://asia.legalbusinessonline.com/industry-updates/indonesia-soemadipr...
Government Response:
- 513 reads
