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

In a research note earlier this month titled 'The Intent Is Clear - The Mechanism Is Not', Deutsche Bank analysts highlighted separate mining policy mandates announced by the Indonesian government in the past year, including the decision in February to limit foreign ownership in domestic mines to 49 percent within the tenth year of the start of commercial operations, and plans revealed early April to impose a 25 percent export tax on coal and base metals in 2012, with an increase to 50 percent in 2013.

"It appears likely that the government will claim a larger share of domestic resource earnings going forward, through either higher taxes or increased ownership," Deutsche analysts Daniel Brebner, Xiao Fu and Cherie Khoeng wrote. "This could adversely impact production in the longer term if investment from foreign companies declines as a consequence."

"We view the government's rhetoric on banning metal ore exports as a signal that it is serious in its desire to force miners to invest in processing facilities within the country,” they added in the report. “Nevertheless, we don't believe that it is realistically in a position to halt exports in the near term."

'Uncertainty and Confusion'

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