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'Protectionist' Indonesian Export Curbs, Taxes to Stifle FDI
CNBC.com | April 12, 2012 | 01:20 AM EDT

Plans by Indonesia to ban exports of some raw minerals from 2014 and impose a 25 percent export tax on coal and base metals this year will stifle foreign direct investment, hurting growth prospects in Southeast Asia's largest economy.

"FDI has become an important component" of Indonesia's balance of payments over the last few of years, Prakriti Sofat, Regional Economist at Barclays Capital told CNBC on Thursday.

"But if we have news like this then potentially investment within the mining sector - which has been coming in very strongly from China and India - can take a breather which would not be very positive for the long-term story of the country."

Latest policy developments in the country's mining sector - which accounts for about 11 percent of growth domestic product - were also "definitely concerning especially for the equity market," Sofat said.

Foreign direct investment into Indonesia surged 20 percent to a record 175 trillion rupiah ($19.1 billion) last year, the country's Investment Coordinating Board said on January 19.

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