Faisal Maliki Baskoro & Ririn Radiawati Kusuma – President Susilo Bambang Yudhoyono's call to renegotiate contracts with foreign companies received mixed reaction on Friday, with some industry players calling it an empty threat.

The president said in a speech on Wednesday that the government would review and rework contracts with foreign companies, claiming the country's robust economy should give it more bargaining power. Finance Minister Agus Martowardoyo later gave more specifics, saying the government would review energy contracts.

While some lawmakers lauded the speech, saying it was high time for the government to get tough with foreign firms, analysts and business players warned that the move could discourage foreign investment.

Fauzi Ichsan, an economist at Standard Chartered Bank, said Indonesia should rework its contracts in line with the agreements' existing renegotiation framework.

"If there is a clause about renegotiation, then we should go about it. If there is not, we would only lose in the arbitration," Fauzi said. "Forcibly terminating the contract would hurt the investment climate here."

Kurtubi, an economist at University of Indonesia and director of the Center for Petroleum and Energy Economic Studies, said he supported the plan to overhaul energy deals.

"I appreciate what the president said about contract renegotiation, but it's too late. He should have said that a few years ago. We have already suffered many losses, but renegotiation could offset the losses," he said.

Yudhoyono said the renegotiations should provide a "win-win solution" and benefit the country's Master Plan for the Acceleration and Expansion of Indonesia's Economic Development (MP3EI).

The government, which already has two major deals in its sights, is looking at several energy contracts in a bid to increase state revenues, create more jobs and give added value to the country's natural resources, Agus said.

One high-profile contract the government would like to wrap up is with gold miner Newmont Nusa Tenggara, which paid Rp 5.8 trillion ($678.6 million) in taxes and royalties last year. Under its 1986 working contract, US mining giant Newmont must divest 51 percent of its stake in NNT to Indonesian entities. The government and lawmakers are at odds over the fate of the final 7 percent, with the House of Representatives blocking government attempts to buy the shares earlier this week.

Another contract under scrutiny is with Indonesia Asahan Aluminum, which is majority-owned by Japan's Nippon Asahan Aluminum. The government wants to nationalize the company, but NAA wants to retain part of its stake.

Anis Matta, a deputy House speaker from the Prosperous Justice Party (PKS), welcomed the president's call to review the contracts, saying the government should have done so long ago.

"We need to start renegotiating contracts with foreign companies, especially in the energy sector. We should put up our own offers that are aimed at improving the people's welfare instead of just luring investors," he said.

Former Vice President Jusuf Kalla has also consistently voiced his concerns over bad contracts.

He has called for a renegotiation of the 2002 natural gas contract with China, which was made during President Megawati Sukarnoputri's tenure. It says Indonesia will sell gas to China for $2.40 per million British thermal units for 25 years.