Malaysian regulatory changes are a challenge for local, foreign investors
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The ongoing changes in the regulatory landscape of the various sectors of the Indonesian economy will be challenging for foreign investors, including Malaysians, who have poured money into the country over the past 15 years.
In recent years, foreign investors, including Malaysians, have been fidgeting over fresh proposals demanding policy reforms in the mining, plantation and banking sectors in Indonesia.
While the changes are mainly in the form of tighter business regulations and conditions closely related to resource nationalism, environmental sustainability and
socio-political factors, industry players opine that the main thrust is basically to limit foreign investors’ ownership and the sheer size of their ventures in the republic.
There is a precedence of such action by Indonesia. Malaysia Smelting Corp (MSC) is exiting the tin mining scene on Bangka and Belitung Islands after stringent business conditions were imposed on foreign mining companies.
The world’s second-largest refined tin producer, which owns a 75 per cent stake in Koba Tin, Indonesia’s second-biggest tin miner, is divesting its tin mining and smelting assets after more than 10 years operating in the republic.
MSC CEO Chua Cheong Yong tells StarBizWeek that “when we first went into Indonesia [after taking over PT Koba from the Australian operators] in 2002, it was a good investment until the last few years”.
“However, a series of events had overtaken us. PT Koba was facing a lot of unwarranted and unforeseen issues in Indonesia, thus making it difficult for us to continue operating in Indonesia,” he said, adding that MSC hopes to exit Indonesia by the end of this year.
He says that one lesson learnt is that the phrase “doing business as usual” is no longer acceptable in today’s global resource industries, given the growing need for corporate social responsibility and international concerns and pressures over political, armed conflict, social and environmental issues in the industry.
While MSC may be just one foreign corporate casualty under Indonesia’s new policy reforms, market analysts say that Malaysian-based plantation companies with large-scale oil palm plantations in the republic should also brace themselves for the impact from the new regulations and conditions to be imposed on oil palm planters in the republic.
