MEMR Regulation No. 43/2018 - Divestment Procedures for Foreign Mining Companies in Indonesia

MEMR Regulation No. 43 of 2018 updates and streamlines Indonesia’s approach to foreign share divestment in mineral and coal mining companies. It builds on the foundation laid by MEMR Regulation No. 9 of 2017, which established the original divestment schedule and valuation principles. Together, these regulations aim to increase domestic ownership in mining operations and ensure strategic control over natural resources.

The regulation applies to companies holding IUP and IUPK licenses (production operation mining business licenses or IUP and special mining business licenses IUPK) and requires 51% domestic ownership by year 10.

Key provisions under MEMR 43/2018: 

• Allows divestment to be fulfilled through new share issuance, not just transfer of existing shares.
• Simplifies the process by removing the requirement for a tender mechanism, enabling direct offers to eligible Indonesian parties.
• Introduces a 90-day response window for MEMR and permits the appointment of an independent appraiser.
• Enables MEMR or regional governors to allocate shares among interested SOEs or ROEs.
• Adds a due diligence process for Indonesian buyers, covering technical, financial, and legal aspects.
• Permits the use of a special purpose vehicle (SPV) to facilitate divestment among multiple domestic entities.

Key provisions under MEMR 9/2017:

• Establishes a gradual divestment schedule based on the number of years since the company entered the production stage:
  • Year 6: max 20% foreign ownership
  • Year 7: max 30%
  • Year 8: max 37%
  • Year 9: max 44%
  • Year 10: max 51%
• Requires that the divestment share price be based on fair market value, excluding the valuation of mineral or coal reserves.
• Sets a priority sequence for divestment offers: central government, then regional governments, state-owned enterprises (SOEs), and finally Indonesian private entities.

Want to know more about this policy ? Learn more (Indonesian)