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re: Ann: Tembang Project High Grade Ore Reser... http://au.ibtimes.com/articles/310904/20120307/indonesia-mines-copper-gold-coal-tin.htm

Will foreign direct investment continue to flow into Indonesia after the government announced Thursday it will limit foreign ownership of some mines to 49 per cent?

In a decree signed on Feb. 21 by President Susilo Bambang Yudhoyono, Indonesia directed foreign mining investors to reduce their respective stake ownership from 80 per cent to 49 per cent within 10 years of production kick-off. The directive pertains to new mining contracts between the government and foreign companies, as well as foreign companies that renew current contracts, The Wall Street Journal reported, quoting an unnamed mining official.

But analysts see the new regulation doing more harm than good for Indonesia, a country rich in copper, gold and other minerals, a leading exporter of coal, not to mention the world's largest tin producer.

"The interest in mining is very strong in Indonesia, but the regulations keep changing, which is paralysing investment," Umar Juoro, chairman of the Center for Information and Development Studies, a public-policy think tank in Indonesia, said in The Wall Street Journal. "It is a very expensive business to get into, so foreign investors don't want to be forced to divest."

"Mining is a long-term and capital-intensive investment," Syahrir Abubakar, executive director of the Indonesia Mining Association, said in Bloomberg News. "If they have to divest within 10 years, they are not yet reaching the break-even point of their investment."

Foreign investors previously had been allowed to hold up to 80 per cent of mining companies in Indonesia. But Southeast Asia's largest economy, because of resource nationalisation, wants to ensure that a greater portion of the gains of the resource boom and growth in FDI is maintained inland by hiking domestic ownership to 51 per cent by the 10th year of the mines' production.

Specifically, the decree, posted on the Web site of the Directorate General of Coal and Minerals, wants foreign miners to sell shares to the central and regional governments, state-owned companies or local private companies.

"There's no question that this could increase the regulatory risks for new entrants," an unidentified mining analyst said in The Financial Times.

"This contradicts the government's efforts to attract foreign direct investment into the country," Priyo Pribadi Somarno, former chairman of the Indonesian Mining Association, told The Wall Street Journal.

Indonesia, which recorded a 6.5 per cent economic growth in 2011, attracted a total of $20 billion FDI in the same year.