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Martowardojo said that the stake purchase has been carried out according to a contract of works and it was within the government's authority to mandate a state-owned entity to make the purchase.
The government May 6 mandated state-owned investment firm Pusat Investasi Pemerintah to buy the 7% in PTNNT for $246.8 million. The company had to divest the stake to comply with a foreign ownership cap.
Lawmakers of the finance commission late Wednesday grilled the minister regarding the stake purchase. Some members of parliament went as far as saying the minister has broken a law which could carry jail sentence.
“This kind of a deal has to be agreed by the parliament. Failing to secure parliamentary approval means an abuse of power. We can bring this to the State Audit Agency or the Supreme Court,“ said Nusron Wahid of Golkar party. He also said that central government should cancel the deal and let the provincial government of West Nusa Tenggara buy the stake instead.
“On why we don't give the 7% to the provincial government, is that because they already has a stake...the central government also wants to be more active and knows more about extractive business like mining,“ Martowardojo said.
The West Nusa Tenggara provincial government in March threatened to stop PTNNT from mining operations if it were denied the 7% stake and in April hundreds of people blocked roads in protest. This is the latest public spat between the executive and the legislative authorities in one of the brightest emerging economies in the world.
A most notable recent spat was in March last year, when lawmakers called for a criminal investigation over the role of then finance minister Sri Mulyani Indrawati regarding her role in the bailout of small lender Bank Century on the heels of the global financial crisis in late 2008.
Economists and political analysts describe the move as a counter attack from the politicians and politically-connected businesses who viewed her reform drive as a threat. Indrawati eventually resigned her post in May 2010 amid increasing political pressures and became a World Bank Managing Director.
Indonesia has been a darling for financial markets investors over the past year: local shares ended at record high Thursday, while foreigners held one-third of the rupiah-denominated government bonds, representing the highest portion in the region. Analysts expect the trend to continue as the country is expected to receive an investment grade status soon.
The country's vast natural resources, big domestic market and sound financial system have also attracted foreign direct investments. Earlier this week Indonesia's investment agency said that India's Reliance ADA Group plans to invest $5 billion-$10 billion. Yet, recent events surrounding PTNNT's divestment were reminder of the darker side of the country: unclear regulations and how politics can meddle with business.
“While Indonesia is endowed with resources and people, it has been short on governance...it has taken vocal reformers, a free press putting pressure on the government and the KPK--but more is needed. Indonesia needs more vocal reformers to champion changes from the top-down,“ CLSA said in a note to clients Thursday
