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Friday, 09 March 12
MINING IN INDONESIA: RESTRICTION ON FOREIGN INVESTMENT - SUNIL K KUMBHAT
 COALspot.com - Recently Govt has passed regulation instructing foreign mining companies to reduce their ownership stake.
The regulation known as GR 24 of 2012 ( Amendment of GR 23 of 2010 ), signed by President of Indonesia on Feb. 21,2012 stipulates that foreign shareholders/ Companies must gradually divest 51 percent of their shares in local mining companies to local investors after the fifth year of commercial production and complete the divestment by the 10th year of production. The divestment regulation resulted from a revision to a earlier GR 23 of 2010 that required foreign shareholders in local mineral and coal mining companies to divest 20 percent of their holdings.
The Director general for minerals and coals, said the regulation would not directly apply to contracts made prior to the issuance of the regulation , but so far no clarification in writing.
Local investors were defined by the regulation as the:
1.Central government,
2.Provincial , regency or municipal governments,
3.State-owned enterprises,
4.Regional enterprises and
5.National private companies.
The disinvestment shares are to be offered to entities in the order of priority listed above by way of auction.
Under the new requirement, mining companies must divest a total of 20 percent of their foreign shares from 6th year of starting production, 30 percent by the seventh year, 37 percent by the eighth year, 44 percent by the ninth year and 51 percent by the 10th year.
Prior to the issueance of GR 24/2012 , Mining Licences (IUP's) could not be transferred or assigned from one entity to another but GR 24/2012 provides that an Mining Licence may be transferred to another entity on the basis that the transferor holds a minimum of 51% of the shares in the assignee.
It effectively means foreigners are going to lose control after 10 years. Mining Sector is a capital intensive, risky , Complicated and time consuming business to invest in. By passing regulation and forcing foreign companies to divest within a fixed time frame and drastically changing the mining regulations is likely to discourage the interest of potential foreign investors to invest in the Mining Sector.
Historically, major foreign backed mining projects in Indonesia have been developed under contract based concessions - Contracts of Work (CoW) and Coal Contracts of work( CCoW )- entered into directly with the Government. These contracts covered the life of the project and larger areas than the new licence regime and were seen as a more secure regime , having economic and fiscal terms agreed in a contract that formed a "special law" between the Government and the mining company. In broad perspective such major changes in Govt regulations and increasing uncertainty and shift in foreign investment policy in the mining sector may consequently impact investment interest in other sector also.
The government is currently renegotiating all its contracts with CoW / CCoW mining companies across the nation in compliance with provisions of the 2009 Minerals and Coal Law.
The regulation would act as a disincentive for mining companies as five years is too short period to begin divestment, given that firms typically had 8 to 10 years to repay bank loans. If they have to divest 51% within 10 years, they are not yet reaching the break-even point of their investment.
Indonesia ,southeast Asia’s largest economy contains some of the world’s richest mineral deposits, such as the Freeport-run Grasberg, the world’s largest gold mine, and its fast-growing mining sector accounts for about 10-11 percent of GDP. The new regulation is the latest government move to extract higher domestic profit from the vast mineral wealth in the world’s top exporter of thermal coal and other minerals like tin , nickel, copper , Bauxite etc. But the change in regulation may deter foreign investment in mining sector.
The 2009 mining law was aimed at boosting investment in mining and metals processing, but its supporting regulations have not gone down well with the industry, and new investors still face risks such as policy reversals, local community demands, a tortuous permit process and poor infrastructure.
The latest regulation stipulating foreign ownership in Indonesia’s mining industry is bound to upset foreign investors and cheer local companies. The ruling will limit foreign companies from owning more than 49 percent of some mines, potentially limiting investments in a fast-growing sector.
Under the new regulation, foreign holders/ Companies of mining licenses in Indonesia , will have to cut their stakes to 49 percent at most within 10 years of starting production. Many foreign investors have already expressed grave concerns over this new ruling, arguing that mining is a capital-intensive industry and requires a long payback period.
Under the new ruling, foreign owners’ coal and minerals assets would required to sell the shares to the central and regional governments, state-owned companies or local private companies. This is itself not new, but the new time frame means that investors will not have enough time to recoup their investments, let alone make a profit.
Any country and Indonesia in this particular issue has every right to dictate the terms and conditions for foreign investors who wish to invest in the country. Many other countries also protect their local businesses, and it is the government’s duty to ensure that its own citizens benefit from the nation’s natural wealth.
Foreign investors often take huge risks and invest billions of dollars before they see returns. Their risk-taking allows the mining sector to grow and develop; without them, the country will be worse off. They have a right to expect a reasonable return on their investment, too.
The regulation had been promulgated with good intentions to empower local companies and boost their involvement in the mining industry.
But a balance must be struck between the two goals: attracting foreign investments and ensuring local communities also benefit. By requiring foreign shareholders to sell their stakes in mining assets to local entities, the government is attempting to strike this balance. The key issue is proper calibration of risk and reward ,considering the law of the land.
In spite of the fact that Mining sector in Indonesia is overregulated and lot of uncertainties ,the mining sector will remain most hot sector and cannot be ignored. There is always cost of doing business in Indonesia.
By : Sunil K Kumbhat , Jodhpur( Rajasthan ) India
Views expressed herein are personal views of the author and not that of COALspot.com.
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Tuesday, 27 March 12
DRY BULK MARKET KEEP RISING FOLLOWING THE SAME TREND OF LAST WEEK - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market kept its upward momentum this week, on the same reasons of those last week. That is, the smaller ship types are still on the ris ...
Monday, 26 March 12
WEEKLY DRY MARKET OVERVIEW - MARIA BERTZELETOU, HELLENIC SHIPPING
The Baltic Dry Index follows its upward incline for fourth consecutive week by rising to more than 900 points, up by 37% from the bottom low in the ...
Monday, 26 March 12
GOLDEN MINES FY11 REVENUE JUMPS 209% - INSIDER STORIES
Insider Stories reported that, coal miner PT Golden Energy Mines Tbk (GEMS), that is controlled by Sinar Mas Group, recorded a 209% jump in revenue ...
Saturday, 24 March 12
AUSTRALIA'S MINERAL TAX : BENCHMARK FOR OTHER COUNTRIES - SUNIL K KUMBHAT
COALspot.com - Natural resources rich counties like Australia , Indonesia , South Africa , Brazil etc are going through a spectacular resources boom ...
Saturday, 24 March 12
THE AVERAGE CHARTER RATES WAS AT CAPESIZE $ 4,546 PER DAY VS SUPRAMAX / $ 10,819 PER DAY - VISTAAR
COALspot.com - The BDI crossed 900 points this week closing at 908 points up by 3.89 pct. All other sectors were up except for cape index whic ...
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- Jorong Barutama Greston.PT - Indonesia
- Formosa Plastics Group - Taiwan
- Miang Besar Coal Terminal - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Videocon Industries ltd - India
- Siam City Cement PLC, Thailand
- Wood Mackenzie - Singapore
- TeaM Sual Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Global Coal Blending Company Limited - Australia
- Karbindo Abesyapradhi - Indoneisa
- Jaiprakash Power Ventures ltd
- Standard Chartered Bank - UAE
- Straits Asia Resources Limited - Singapore
- Orica Mining Services - Indonesia
- Chamber of Mines of South Africa
- Bhoruka Overseas - Indonesia
- Therma Luzon, Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Latin American Coal - Colombia
- Kideco Jaya Agung - Indonesia
- Ministry of Finance - Indonesia
- International Coal Ventures Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- Bhushan Steel Limited - India
- Indo Tambangraya Megah - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Leighton Contractors Pty Ltd - Australia
- Parry Sugars Refinery, India
- SMG Consultants - Indonesia
- Madhucon Powers Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Altura Mining Limited, Indonesia
- Eastern Coal Council - USA
- Globalindo Alam Lestari - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- OPG Power Generation Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- MS Steel International - UAE
- Edison Trading Spa - Italy
- Energy Link Ltd, New Zealand
- Vedanta Resources Plc - India
- GN Power Mariveles Coal Plant, Philippines
- Energy Development Corp, Philippines
- Port Waratah Coal Services - Australia
- Coal and Oil Company - UAE
- Indika Energy - Indonesia
- Siam City Cement - Thailand
- Romanian Commodities Exchange
- Bukit Makmur.PT - Indonesia
- Bayan Resources Tbk. - Indonesia
- Coastal Gujarat Power Limited - India
- The Treasury - Australian Government
- Xindia Steels Limited - India
- Sakthi Sugars Limited - India
- LBH Netherlands Bv - Netherlands
- Intertek Mineral Services - Indonesia
- Toyota Tsusho Corporation, Japan
- Rio Tinto Coal - Australia
- Asmin Koalindo Tuhup - Indonesia
- Central Java Power - Indonesia
- GAC Shipping (India) Pvt Ltd
- Directorate General of MIneral and Coal - Indonesia
- Directorate Of Revenue Intelligence - India
- CIMB Investment Bank - Malaysia
- Sojitz Corporation - Japan
- Georgia Ports Authority, United States
- Vizag Seaport Private Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Africa Commodities Group - South Africa
- Power Finance Corporation Ltd., India
- Posco Energy - South Korea
- McConnell Dowell - Australia
- Merrill Lynch Commodities Europe
- Larsen & Toubro Limited - India
- Mjunction Services Limited - India
- Alfred C Toepfer International GmbH - Germany
- Vijayanagar Sugar Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Salva Resources Pvt Ltd - India
- Tamil Nadu electricity Board
- Economic Council, Georgia
- The State Trading Corporation of India Ltd
- Semirara Mining Corp, Philippines
- Singapore Mercantile Exchange
- Iligan Light & Power Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Indian Oil Corporation Limited
- Cigading International Bulk Terminal - Indonesia
- Kepco SPC Power Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- PowerSource Philippines DevCo
- Minerals Council of Australia
- Goldman Sachs - Singapore
- Grasim Industreis Ltd - India
- Electricity Generating Authority of Thailand
- Timah Investasi Mineral - Indoneisa
- Simpson Spence & Young - Indonesia
- IEA Clean Coal Centre - UK
- ASAPP Information Group - India
- India Bulls Power Limited - India
- Ministry of Transport, Egypt
- Trasteel International SA, Italy
- Maharashtra Electricity Regulatory Commission - India
- Star Paper Mills Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Anglo American - United Kingdom
- Maheswari Brothers Coal Limited - India
- Australian Commodity Traders Exchange
- Meenaskhi Energy Private Limited - India
- Manunggal Multi Energi - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Eastern Energy - Thailand
- Sree Jayajothi Cements Limited - India
- SMC Global Power, Philippines
- Kobexindo Tractors - Indoneisa
- Essar Steel Hazira Ltd - India
- Heidelberg Cement - Germany
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Mines - Canada
- Metalloyd Limited - United Kingdom
- Chettinad Cement Corporation Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Kaltim Prima Coal - Indonesia
- Aditya Birla Group - India
- ICICI Bank Limited - India
- Bharathi Cement Corporation - India
- Planning Commission, India
- Sindya Power Generating Company Private Ltd
- Parliament of New Zealand
- The University of Queensland
- Bangladesh Power Developement Board
- Electricity Authority, New Zealand
- Binh Thuan Hamico - Vietnam
- Makarim & Taira - Indonesia
- Renaissance Capital - South Africa
- Baramulti Group, Indonesia
- Bukit Baiduri Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Attock Cement Pakistan Limited
- Savvy Resources Ltd - HongKong
- GMR Energy Limited - India
- Sarangani Energy Corporation, Philippines
- Petron Corporation, Philippines
- VISA Power Limited - India
- Malabar Cements Ltd - India
- South Luzon Thermal Energy Corporation
- Pipit Mutiara Jaya. PT, Indonesia
- Central Electricity Authority - India
- Thiess Contractors Indonesia
- Australian Coal Association
- Interocean Group of Companies - India
- Agrawal Coal Company - India
- Coalindo Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Tata Chemicals Ltd - India
- Ambuja Cements Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Dalmia Cement Bharat India
- Bulk Trading Sa - Switzerland
- Lanco Infratech Ltd - India
- Bhatia International Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Gujarat Electricity Regulatory Commission - India
- Samtan Co., Ltd - South Korea
- Deloitte Consulting - India
- New Zealand Coal & Carbon
- Thai Mozambique Logistica
- GVK Power & Infra Limited - India
- Mercuria Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Gujarat Sidhee Cement - India
- Orica Australia Pty. Ltd.
- Riau Bara Harum - Indonesia
- San Jose City I Power Corp, Philippines
- Global Business Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mintek Dendrill Indonesia
- Banpu Public Company Limited - Thailand
- Ind-Barath Power Infra Limited - India
- Carbofer General Trading SA - India
- Price Waterhouse Coopers - Russia
- Meralco Power Generation, Philippines
- Marubeni Corporation - India
- Kumho Petrochemical, South Korea
- Indogreen Group - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Uttam Galva Steels Limited - India
- Krishnapatnam Port Company Ltd. - India
- Pendopo Energi Batubara - Indonesia
- London Commodity Brokers - England
- Mercator Lines Limited - India
- Indonesian Coal Mining Association
- Medco Energi Mining Internasional
- Commonwealth Bank - Australia
- CNBM International Corporation - China
- Antam Resourcindo - Indonesia
- SN Aboitiz Power Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- Oldendorff Carriers - Singapore
- Cement Manufacturers Association - India
- Jindal Steel & Power Ltd - India
- AsiaOL BioFuels Corp., Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Borneo Indobara - Indonesia
- PTC India Limited - India
- Barasentosa Lestari - Indonesia
- White Energy Company Limited
- Wilmar Investment Holdings
- Karaikal Port Pvt Ltd - India
- Indian Energy Exchange, India
- IHS Mccloskey Coal Group - USA
- Independent Power Producers Association of India
- Sical Logistics Limited - India
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