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Developing a Strong Mining Divestment Rule in Indonesia

24 February 2017
Author
David ManleyEmanuel Bria
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Developing a Strong Mining Divestment Rule in Indonesia Summary (PDF 96.86 KB)
Developing a Strong Mining Divestment Rule in Indonesia (PDF 435.7 KB)
Topics
Beneficial ownershipContract transparency and monitoringCorruptionLegislation and regulationLicensing and negotiationRevenue managementRevenue sharingState-owned enterprisesSubnational governance
Countries
Indonesia
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Civil society actorsGovernment officialsParliaments and political partiesPrivate sector
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P5 P6 P7 P9 What are Natural Resource Charter precepts?
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As in many countries, the Indonesian government wishes to establish greater sovereignty over the country’s mineral resources. However, the government has so far struggled to realize a policy that works for both the country and investors. The key part of government efforts to exert greater sovereignty over the mining sector is the “divestment rule,” which mandates that foreign mining companies divest increasing portions of equity to Indonesian government authorities, state-owned enterprises and companies.

This policy paper evaluates costs and benefits of the divestment rule for Indonesia and provides eight recommendations to the government:

Recommendation 1: Consider eliminating the divestment rule and explore other approaches to a state-led mining sector.

Recommendation 2: Limit government purchases of mining equity and limit how public funds are used to finance state-owned enterprise investments.

Recommendation 3: Reduce the 51 percent requirement.

Recommendation 4: Establish clearer rules for negotiation and auction processes, and designate a third party to administer the processes.

Recommendation 5: Require companies that buy mining equity to publicly disclose their beneficial owners.

Recommendation 6: Allow companies the option to sell via an initial public offering.

Recommendation 7: Reconsider and further define the approach to valuing equity.

Recommendation 8: Develop a policy to manage mining state-owned enterprises.

 

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  • Topics
    Beneficial ownership
    Civic space
    Commodity prices
    Contract transparency and monitoring
    Coronavirus
    Corruption
    Economic diversification
    Energy transition
    Gender
    Global initiatives
    Legislation and regulation
    Licensing and negotiation
    Mandatory payment disclosure
    Measurement of environmental and social impacts
    Measurement of governance
    Open data
    Revenue management
    Revenue sharing
    Sovereign wealth funds
    State-owned enterprises
    Subnational governance
    Tax policy and revenue collection
  • Approach
    • Stakeholders
    • Natural Resource Charter
    • Regional knowledge hubs
  • Priority
    Countries
    • Colombia
    • Dem. Rep. of Congo
    • Ghana
    • Guinea
    • Mexico
    • Mongolia
    • Nigeria
    • Peru
    • Senegal
    • Tanzania
    • Tunisia
    • Uganda
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