The recently signed Agreement on Reciprocal Trade between Indonesia and the United States of America includes numerous provisions that have very significant implications for the local energy and mining industries (in addition to numerous other industries) as well as for foreign investors in those industries.
The preferential treatment, which the Agreement on Reciprocal Trade purports to offer U.S. investors in the local energy and mining industries, is inevitably going to create multiple dilemmas for the Government. These dilemmas include (i) possibly diluting/overturning long standing Indonesian industrial policies versus risking the imposition of punitive tariffs on Indonesian exports by the U.S. government and (ii) generating U.S. government goodwill towards Indonesia and increased U.S. investor interest in Indonesia versus alienating other foreign investors and their governments.
The Government now finds itself “caught between a rock and a hard place” when it comes to implementing or not implementing the Agreement on Reciprocal Trade. There are really no good or risk-free options here as far as the Government is concerned.
In this article, the writer will first review those particular provisions of the Agreement on Reciprocal Trade which are likely to have a material impact on the local energy and mining industries as well as on foreign investors in those industries. The writer will then turn to the subsidiary issues of (i) how foreign investors from countries other than the United States can be expected to react to these provisions and (ii) why the full implementation of these provisions would require a major rethink on the part of the Government as to a number of key industrial policies impacting the local energy and mining industries.
Authors:
Bill Sullivan
E: bsullivan@cteolaw.com
Christian Teo
E: cteo@cteolaw.com
Claudius Novabianto
E: cnbianto@cteolaw.com