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Indonesia Trade Minister Rejects Protectionist Label

Indonesia's Trade Minister Gita Wirjawan told CNBC on Tuesday that Southeast Asia's largest economy was not adopting protectionist policies and was only following in the footsteps of other developed countries.

Mining
Jonty Wilde | Iconica | Getty Images
Mining

In a statement emailed to CNBC the minister said, "We disagree with the opinion that getting closer to standards and best practices already set by developed economies to protect local consumers from possible dangers posed on to their health, safety, comfort and the environment is protectionist."

The minister's comment comes less than a week after Indonesia unveiled a new mining law, limiting foreign ownership in the industry to 49 percent from 80 percent previously. The decree was signed into law by Indonesian President Susilo Bambang Yudhoyono on February 21 and made public on the mining ministry's website last week.

Wirjawan added that, "Indonesia is fully committed to transform the raw (materials) -based economy to climb up the value chain with strategic investments from domestic and international partners."

But Robert Prior-Wandesforde, Director of Asia Economics at Credit Suisse, says the new mining regulation is not good news for foreign investors.

"The Indonesian government was always unlikely to give foreign companies unlimited access especially in the commodities market. Recent events have supported that view and is bad news for those who have invested on the basis that the situation was fundamentally different," he told CNBC.

Official statistics show that foreign direct investment in Indonesia hit a record $20 billion last year, with $3.6 billion coming from the mining sector.

Another policy decision that limits foreigners from holding certain senior management positions at local companies was announced by the Ministry of Manpower and Transmigration over the weekend.

Following the announcement there were media reports suggesting that foreigners would not be allowed to become CEOs of wholly owned local firms. But some reports also suggested that there could have been some misinterpretation when the announcement was translated to English from Bahasa Indonesian.

CNBC called the ministry for a clarification on Tuesday, but was unable to get through to its spokesperson.

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