Introduction
The need to adjust to a particular political model is the factor that can hinder business development and significantly complicate the work process. If it is about the mining industry, there are limitations and established spheres of influence. Their violation can entail a rather serious responsibility. The country of Indonesia can be taken as an example since here. There are quite strict orders regarding the work of foreign companies. Therefore, it is essential to consider the basic rules imposed by local authorities on industrialists and determine the nature of trade relations typical for this state.
Rules to Foreign Investors in Indonesia’s Mining Sector
Foreign firms operating in Indonesia have quite a few restrictions, and it is possible to trace these difficulties on the example of the Bre-X company. First, as Spar et al. remark, for work in this country, any foreign corporation must make a partnership with a local firm; otherwise, access will not be allowed (4). After signing a certain agreement, the activity can be started, which significantly complicates the work process. Another condition that the representatives of foreign mining concerns operating in Indonesia are forced to adhere to is a rather long implementation of all necessary procedures. Thus, according to Spar et al., preparatory work takes quite a long time (4). The entire regulatory system of the country is built in such a way to protect the environment as much as possible, which, in turn, complicates the work of industrialists. Employees are guaranteed compliance with the terms of the contract; however, the whole process is quite lengthy and tedious. The supreme authorities approve all these rules, and it is impossible to challenge them.
Possibilities for Bre-X to Leverage Its Indonesian Relationship
For the relationship between Bre-X and the Indonesian government not to deteriorate, it is crucial to achieving a mutual understanding of the matters of principles and nuances that this country establishes. For example, Spar et al. note that the country claims ownership of local minerals, and the company led by Mr. Walsh should take this fact into account and not try to seize all the resources (23). Also, if Bre-X can prove that their investments will comply with local laws (no less than 1.25 million dollars), the company will be able to work confidently on the territory of local gold deposits (Spar et al. 23). Therefore, appropriate measures can be taken to leverage this relationship.
Walsh’s Possible Respond to Minister Sudjana’s Announcement
Despite Minister Sudjan’s statement that Bre-X’s share should be reduced to 22.5%, as Spar et al. note, Mr. Walsh could come forward with negotiations to review such a decision (12). The head of the mining company could contact the minister to mention that their corporation has already brought quite many profits to their country, and additional restrictions could further worsen the state of Bre-X’s affairs. Perhaps, if the company had more than eight days to resolve this important issue, success would be more obvious. If Mr. Walsh took active measures to challenge the decision, for example, to recall local laws, the company would not be recognized as an outsider.
Conclusion
Thus, the peculiarities of foreign companies’ work in Indonesia are, in many ways, complicated by the provisions of local laws. A certain authoritarian type of management makes the business system not as open and free as in many other countries. Active measures to preserve national wealth and earn money do not allow many foreign corporations to work successfully in the mining industry.
Work Cited
Spar, Debora L., et al. Busang (A): River of Gold. Harvard Business School, 1998.