Survey: Indonesia's Mining Sector Not Conducive for Foreign Investment
Indonesia has been named one of the world's least attractive places regarding foreign investment in the mining sector according to a survey conducted by Canadian think-tank the Fraser Institute. Major concerns include legal uncertainty and red tape (bureacracy). Moreover, the country has been showing a worsening trend in recent years as its rank declined from 72th in 2009 to 97th in 2013.
Indonesia's decentralization policy, which started after Suharto's authoritarian New Order regime ended in 1998, has had a severe negative impact as regional governments lacked the quality and skills to structure their mining administration properly. Mining permits were granted on a large scale and without much oversight, resulting in chaos.
In order to develop Indonesia's downstream industries, the country is planning to introduce restrictions in the mining sector from 2014 onwards. This includes the banning of the export of raw mineral ores and the limitation of foreign ownership in Indonesian mining businesses. The latter, in particular, is not well received by foreign investors as a mining business implies large investments in the developping stages As such, these investors would prefer to have a bigger slice of the mining cake regarding future returns.