In a discussion about mining divestment practices last week in Jakarta, researchers from Article 33 Indonesia, a research institute for social change, came up with an interesting paper title: The False Sovereignty of Mining Divestment Practices.
Government Regulation Number 1 of 2017, which is the fourth amendment to PP No. 23/2010 concerning the Implementation of Mineral and Coal Mining Business Activities, regulates the divestment of shares in foreign-owned mining companies. Companies holding mining business permits (IUP) and Special IUP (IUPK) are required to sell at least 51 percent of their shares until the 10th year after production.
However, is this policy really profitable? That's about the lawsuit from Article 33 Indonesia. The title of the presentation, namely the False Sovereignty of Mining Divestment Practices, is a form of lawsuit against this policy.
According to Iqbal Damanik, researcher from Article 33 Indonesia, one of the backgrounds to the divestment policy is increasing Indonesia's control over the mining sector, especially those owned by foreigners (foreign investment). However, the realization is not necessarily in line with what was expected, namely large profits with dominant share ownership.
According to calculations, divestment costs are sometimes not cheap. The problem is, the central government, regional governments, BUMN and BUMD do not have enough funds to buy shares. If the funds are obtained from debt, the dividends obtained (if any) are sometimes used up to pay the debt installments.
Another researcher, David Manley from the Natural Resources Governance Institute, in his personal opinion firmly stated that the divestment figure of at least 51 percent makes investors nervous. This figure is considered large and investors are worried that dominant shares will fall into the hands of less competent parties. In fact, stated bluntly, the benefits from divestment may be difficult to achieve.
Apart from the problem of funds for the cost of buying shares, the factor of mismanagement in divestment also needs to be taken into account. According to David, in the divestment process there is a big chance that corrupt practices will occur. For example, government officials might arrange the sale of shares to private companies or state-owned enterprises, with the beneficiaries themselves or their families or colleagues.
The solution to avoid false sovereignty through divestment includes implementing high but stable taxes. This article is not to oppose the 51 percent divestment in the mining sector, but as a comparison that divestment must truly be in accordance with the constitutional mandate, namely natural resources for the greatest prosperity of the people. Not prosperity for individuals and/or cronies. (Aris Prasetyo)
Pages: 17
https://kompas.id/baca/ekonomi/2017/03/04/jebakan-divestasi/
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