Officials can arrange sales to private companies or state-owned companies whose beneficiaries are themselves, their families or close associates.
The new regulation, which requires mining companies to divest 51 percent of their shares to the government, has the potential to open up opportunities for corruption by officials. The reason is that the divestment process could trigger bribery and even conflicts of interest.
Natural Resources Governance Institute Senior Economic Analyst David Manley said this risk could occur when government officials arrange sales to private companies or state-owned companies whose beneficiaries are themselves, their families or their close associates.
"They can obtain assets at low prices," he said in a mining divestment policy discussion in Jakarta, Thursday (23/2).
Apart from that, David sees that the divestment policy is not necessarily beneficial for the country. The reason is that the state will need quite a lot of funds. If the State Revenue and Expenditure Budget (APBN) is not sufficient, the government is forced to seek loans. As a result, foreign debt could increase.
Not only that, funding to buy divestment shares could drain the state budget. This condition could have an impact on funding for other projects. "Buying equity in the mining sector means giving up lost opportunities to invest in other sectors of the Indonesian economy," said David.
He suggested using the APBN for the productive sector rather than just buying mining shares. Because Indonesia needs to create 42 million jobs and build other supporting infrastructure. The need for infrastructure development in 2016 is IDR 320 trillion, and will reach IDR 1,800 trillion by 2025.
Ownership by Indonesians also provides fewer jobs for the community. The reason is that the majority of mining project costs are incurred during the project development phase and the first 10 years of production, namely when a foreign company holds a controlling stake.
On this basis, it is considered that changes in company ownership will not increase local employment in the mining sector. The reason is that the majority of jobs have fallen to the Indonesian people.
From an investor perspective, the regulations of the Minister of Energy and Mineral Resources (ESDM) Number 9/2017 could hinder investment. Moreover, in Article 14, determining shares based on fair market value cannot include reserve value. This approach severely limits the returns investors can expect from their investments in Indonesia.
David made several recommendations to the government regarding mining company divestment.
First, it is better for the government to change divestment patterns by focusing on providing high, stable taxes and attracting investment in the mining sector.
Second, limiting the purchase of mining shares by the government and limiting the sources of public funds that can be used to finance BUMN investments.
Third, reducing the divestment obligation of 51 percent of shares.
Fourth, establish clearer rules for the negotiation and auction process, and appoint a third party to manage the process.
Fifth, requires companies that buy mining shares to publicly disclose their owners.
Sixth, giving mining companies the option to sell their shares through an initial public offering (IPO).
Seventh, reconsidering and further defining the approach to valuing shares.
Eighth, develop policies to manage mining BUMN.
In the same place, an Indonesian non-governmental organization, Article 33, believes that the practice of divesting shares in the mining sector is a false form of state sovereignty. One of the divestment policy research teams from Article 33 Indonesia, Iqbal Damanik, conducted research on the impact of the divestment policy made by the government;
From the results of his research with the Article 33 team, there are five recommendations for the government in implementing divestment policies.
First, the central government makes regulations on funding schemes or distribution of divestment amounts at each level of government.
Second, strengthening the institutions of BUMN and BUMD to be able to buy these shares.
Third, involvement of state-owned banks in investment funding.
Fourth, there is a scheme so that regions can get shares for free without buying them from the company.
Fifth, there are strict regulations that require companies involved in divestment management to report financial reports periodically. "If you want to purchase divestment, don't take funds from abroad, but from within the country," he said.
Anggita Rezki Amelia
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