Foreign mining investment regime in Indonesia: regulatory risk under the revival of resource nationalism policy

Abstract

The resource nationalism policy over natural resources is the existing policy affecting resource rich states nowadays. This policy has greatly affected mining regulation and foreign mining investment in developing states. Indonesia as one of the resource rich states is not sterile from the influence of resource nationalism policy by basing this policy on the Article 33 of the 1945 Constitution (fourth amendments). The revival of resource nationalism policy has substantial impact upon the foreign investment regulatory regime in Indonesia. There has been a tendency that new mining law and its implementing regulation have shifted to the adoption of the resource nationalism policy. This study will firstly analyse the extent to which the policy of resource nationalism has affected mining regulatory regime in Indonesia. This study also demonstrates that the resource nationalism policy has resulted in the increase of state control over mining resources and the limitation of foreign ownership over natural resources in mining industry. The adoption of resource nationalism policy which is coupled with the lack of regulatory governance has increased regulatory risk in foreign mining investment in Indonesia. Accordingly, this will also have a significant implication on the bilateral investment treaty (BIT) that has been established between Indonesia and other jurisdictions globally. Therefore, this study proposes policy recommendations for resolving this issue.