Thai firms vigilant of new restraints

Thai firms seem to make light of the possible effects of Indonesia's new regulation that limits foreign ownership of mines to 49 percent, while analysts perceive the action as a risk for Thai investors targeting the resource-rich countries, Bangkok Post reported today.

In a move that is likely to scare off overseas investment in Southeast Asia's largest economy, Indonesia will require foreign mining licence holders to sell down their stake within 10 years of production so that domestic ownership will be at least 51 percent.

But Banpu Plc, Thailand's largest coal miner, says the regulation is unlikely to affect its business operated by Indo Tambangraya Megah (ITM), a holding company 65 percent owned by Banpu.

"ITM is a listed company in Indonesia and is considered an Indonesian company. An initial assessment found that there is no impact on our operation there but we will have to study further," said Banpu's chief financial officer Somruedee Chaimongkol.

It remains unclear how soon the rule will apply to existing investors. Banpu, which has operated in Indonesia for 20 years, is the largest Thai investor in the country with market capitalization through ITM reaching US$5 billion.

Chitrapongse Kwangsukstith, chairman of PTT International, said investment in Indonesia has become more restricted but is still manageable.

PTT International, Thailand's giant oil and gas conglomerate, controls 45.4 percent of Australia-based Straits Resources, which operates two mines in Indonesia.

"I think this new rule will take time to implement and Indonesia will have to take care of existing investors. For PTT, I think we have to adjust ourself by possibly holding a minority stake for our investments there," he said.

Sutthichai Kumworachai, an analyst at Maybank Kim Eng Securities (Thailand), expects Banpu to feel a "limited impact" based on the uncertainty over whether or not the new rule will be forced upon old concessions.

"In our opinion, in the worst case, if Banpu is forced to reduce its stake in order to comply with the law, there will be a short-term impact on core operations," the analyst said, adding that the company might employ the sale proceeds for reinvestment in other strategic locations over the longer term. (*)