The Energy and Mineral Resources Ministerial Decree No. 42/2017 on the supervision of business activities in the energy and mineral resources sector stipulates that companies must seek approval from the minister and related institutions prior to a change in their top management as well as a partial or full transfer of its shares or participating interests in a project.

Indonesian Chamber of Commerce and Industry (Kadin) head of energy, oil and gas regulations, Firlie Ganinduto, acknowledged that despite the necessity to supervise the industries, the government had gone too far by requiring such approval for charges to the board of directors and commissioners or the composition of shares.

“Such rigid regulations will definitely affect a company’s decision to invest. Companies must be given reasonable freedom to operate,” he told The Jakarta Post on Monday.

Separately, Institute for Essential Services Reform (IESR) executive director Fabby Tumiwa also agreed that the new regulation enforced unnecessary control over business proceedings. Instead of attracting investment, the new regulation would likely make companies more hesitant as it would stretch the already drawn out red tape in the sector, he added.

Under Article 20, which Fabby cited as an example, to make a change to the structure of their top management, electricity firms must also secure additional approval from buyers, in this case state-owned electricity firm PLN as the sole off-taker in the country. He questioned the greater authority given to PLN, which was not a regulator.

“It seems like the government is just extending the chain of bureaucracy and including itself in corporate decision-making. What’s the point? This contradicts the president’s efforts to improve the investment climate and the ease of investment,” Fabby said.

The new arrangement is just the latest case in which investors and experts have been left dumbfounded by regulations issued by the Energy and Mineral Resources Ministry.

Since the beginning of this year, the ministry has passed 44 ministerial decrees, including several revised decrees rolled out following complaints from various industries.

These include a ministerial decree on a gross-split scheme for future upstream oil and gas contracts, in which the government will no longer be required to reimburse exploration and exploitation activities and a cap on electricity tariffs in the renewable energy sector based on regional and national electricity supply costs (BPP).

In addition to the ministerial decrees, the government has also issued a government regulation that eases an export ban on copper concentrate, low-grade nickel and washed bauxite to the dismay of many smelter investors.

The hesitation of investors in the energy and mining sectors may hinder its target to boost this year’s investments to US$43 billion from $27 billion achieved last year.

However, the government claimed that the Ministerial Decree No. 42/2017 would not change the status quo and would not interfere with any investment in the sector.

Energy and Mineral Resources Ministry spokesman Sujatmiko said the new rule aimed to step up supervision of companies in the sector and ensure their activities would be beneficial to the general public.

“This [reporting] has been practised for a while and is nothing new as they have always needed the minister’s approval […]. All this time, each director general or the head of SKKMigas [the Upstream Oil and Gas Regulatory Special Task Force] has always evaluated it based on existing guidelines before handing it over to the minister,” he said, citing oil and gas giant Medco Energi Internasional’s move to takeover the local arm of United States-based Newmont Mining Corp.

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