Recent Developments In Divestment Rules For Mining Companies In Indonesia

Companies engaging in mining business activities in Indonesia can be established with 100% foreign investment, but they are subject to a divestment requirement, as set out under Law No. 4 of 2009 regarding Mineral and Coal Mining (the Mining Law) and Government Regulation No. 23 of 2010 regarding the Implementation of Mineral and Coal Mining Business Activities (as amended, GR 23/2010).

Essentially, companies that hold operation production mining business licenses (IUP-OP) are obliged to gradually divest the shares owned by foreign shareholders beginning five years after production, so that by the tenth year of production 51% of the shares are held by Indonesian Participants. The Mining Law defines Indonesian Participants as the Government of Indonesia (GOI), local government (i.e., provincial or municipal/regency governments), Indonesian state-owned enterprises (SOE), Indonesian regional government-owned enterprises (ROE), and Indonesian private business entities.