Frustrated with Mining and Energy Management in Indonesia, Chinese Investors Send ...
JAKARTA – A consortium of Chinese companies investing in Indonesia, known as Kadin China, has sent an open letter to President of the Republic of Indonesia Prabowo Subianto, requesting improvements to the business climate in the country, particularly in the mining and energy sectors. The investors assess that various government policies are beginning to pressure company operations and disrupt long-term investment confidence.
One of the main highlights in the letter is the increase in taxes and levies, including mineral and coal royalties, which are said to be continuously rising. They also mention aggressive tax examinations that threaten fines of tens of millions of US dollars.
In addition, Chinese investors are protesting the foreign exchange retention policy for natural resource export proceeds, which requires exporters to place 50% of their foreign exchange in state-owned banks for at least one year. This policy is considered to disrupt company liquidity.
In the nickel sector, the investors state that the nickel ore production quota has been drastically cut throughout this year, already having a significant impact. Even, the production quota reduction reaches more than 70%, or equivalent to 30 million tonnes. According to business players, this condition disrupts the supply chain for downstream industries such as electric vehicles, new energy, and stainless steel, which have been the focus of Indonesia’s downstreamisation efforts.
Not only that, Chinese companies also highlight the tightening of forestry law enforcement. The letter mentions fines of up to US$180 million against a Chinese investment company related to forest area use permits.
They also refer to the halt of several hydroelectric power plant (PLTA) projects, which are accused of damaging forest areas and exacerbating flooding.
Sharp criticism is also directed at the Ministry of Energy and Mineral Resources’ policy regarding the increase in the Nickel Mineral Benchmark Price (HPM). Investors assess that the change in the pricing formula, which now includes associated minerals such as cobalt and iron, has caused production costs to surge sharply.
Chinese investors view the sharp rise in production costs as the root cause of increasingly large operational losses, as well as imbalances in the industrial chain. This will not only harm ongoing projects but also affect future investments, exports, and jobs for more than 400,000 people in the industrial chain, while weakening global investor confidence in Indonesia’s nickel sector.
The latest policies issued by relevant authorities in Indonesia are considered to lack stability and continuity. Standards for law enforcement in taxation, environmental, forestry, and other fields are deemed non-transparent and grant excessive discretionary powers.
Meanwhile, when companies face issues, normal complaint channels are obstructed, relevant agencies pass the buck, respond slowly, and some problems can only be resolved through third parties that charge very high fees.
This situation not only increases company operational risks but also damages Indonesia’s image as a fair, transparent, rules-based business environment with a good international reputation.
“Chinese investment companies in Indonesia remain optimistic about Indonesia’s development potential and are ready to continue supporting economic cooperation between the two countries,” the letter states.
Nevertheless, they request that President Prabowo’s administration improve policy stability, create legal certainty, open more effective communication channels with the business world, and stop law enforcement practices that are deemed non-transparent and excessive.