Global Trade Alert

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.
 
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.