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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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Monday, 12 March 12
DELTA DUNIA 1M OVERBURDEN DROPS 3.1% - INSIDER STORIES
Insider Stories reported that, Indonesia's second largest coal mining contractor PT Delta Dunia Makmur Tbk (DOID) reported a 25 million bank ...
Monday, 12 March 12
DRY BULK RATES WILL REMAIN LOW IN 2012 SAYS DANISH SHIP FINANCE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
In its annual shipping survey Danish Ship Finance said that the current outlook for the Dry Bulk market seems unlikely to foster higher rates in any ...
Monday, 12 March 12
WEEKLY DRY MARKET OVERVIEW - MARIA BERTZELETOU, HELLENIC SHIPPING
The first days of March appear to be more encouraging for dry bulk operators, but the outlook is still gloomy for the rest of year with earnings for ...
Sunday, 11 March 12
FREIGHT RATES FOR INDONESIA TO INDIA WILL CONTINUE TO REMAIN FIRM- VISTAAR
COALspot.com - This week saw another upward trend with all indices up except for the Cape index.
The BDI was up by 6.87 pct closing at 824 points ...
Friday, 09 March 12
SHIP OWNERS LOOKING TO CHINA FOR REVIVAL, WHILE THEY KEEP SELLING OLD SHIPS FOR SCRAP - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
With China’s economic policy plan for the future on every ship owner’s mind, at least those involved in the dry bulk industry, the lates ...
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Showing 4811 to 4815 news of total 6871 |
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- Therma Luzon, Inc, Philippines
- Binh Thuan Hamico - Vietnam
- Gujarat Electricity Regulatory Commission - India
- Vijayanagar Sugar Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- PNOC Exploration Corporation - Philippines
- Salva Resources Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Bahari Cakrawala Sebuku - Indonesia
- SMC Global Power, Philippines
- Aboitiz Power Corporation - Philippines
- Grasim Industreis Ltd - India
- Straits Asia Resources Limited - Singapore
- Rashtriya Ispat Nigam Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Africa Commodities Group - South Africa
- Global Green Power PLC Corporation, Philippines
- Larsen & Toubro Limited - India
- Kideco Jaya Agung - Indonesia
- ICICI Bank Limited - India
- Parliament of New Zealand
- Power Finance Corporation Ltd., India
- Anglo American - United Kingdom
- Intertek Mineral Services - Indonesia
- Sical Logistics Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Electricity Authority, New Zealand
- Bhoruka Overseas - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Meenaskhi Energy Private Limited - India
- Bulk Trading Sa - Switzerland
- Mintek Dendrill Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mercator Lines Limited - India
- Carbofer General Trading SA - India
- IEA Clean Coal Centre - UK
- New Zealand Coal & Carbon
- Trasteel International SA, Italy
- Bukit Baiduri Energy - Indonesia
- Altura Mining Limited, Indonesia
- TeaM Sual Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Ministry of Finance - Indonesia
- GAC Shipping (India) Pvt Ltd
- Maharashtra Electricity Regulatory Commission - India
- Eastern Energy - Thailand
- Indian Energy Exchange, India
- McConnell Dowell - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Aditya Birla Group - India
- South Luzon Thermal Energy Corporation
- Ceylon Electricity Board - Sri Lanka
- SN Aboitiz Power Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- Bangladesh Power Developement Board
- Riau Bara Harum - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sakthi Sugars Limited - India
- Bukit Makmur.PT - Indonesia
- Xindia Steels Limited - India
- India Bulls Power Limited - India
- Bhatia International Limited - India
- Central Java Power - Indonesia
- Dalmia Cement Bharat India
- Sojitz Corporation - Japan
- Wood Mackenzie - Singapore
- Indian Oil Corporation Limited
- Rio Tinto Coal - Australia
- Tamil Nadu electricity Board
- IHS Mccloskey Coal Group - USA
- Sinarmas Energy and Mining - Indonesia
- Independent Power Producers Association of India
- San Jose City I Power Corp, Philippines
- Minerals Council of Australia
- Neyveli Lignite Corporation Ltd, - India
- Medco Energi Mining Internasional
- Global Coal Blending Company Limited - Australia
- Georgia Ports Authority, United States
- Banpu Public Company Limited - Thailand
- Tata Chemicals Ltd - India
- Sree Jayajothi Cements Limited - India
- Gujarat Sidhee Cement - India
- Uttam Galva Steels Limited - India
- Alfred C Toepfer International GmbH - Germany
- Karaikal Port Pvt Ltd - India
- Eastern Coal Council - USA
- Pendopo Energi Batubara - Indonesia
- Cement Manufacturers Association - India
- Bharathi Cement Corporation - India
- CNBM International Corporation - China
- Indo Tambangraya Megah - Indonesia
- Timah Investasi Mineral - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- Sarangani Energy Corporation, Philippines
- Heidelberg Cement - Germany
- Ind-Barath Power Infra Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indogreen Group - Indonesia
- Makarim & Taira - Indonesia
- Wilmar Investment Holdings
- Karbindo Abesyapradhi - Indoneisa
- Indika Energy - Indonesia
- ASAPP Information Group - India
- Thiess Contractors Indonesia
- Kapuas Tunggal Persada - Indonesia
- Goldman Sachs - Singapore
- Electricity Generating Authority of Thailand
- SMG Consultants - Indonesia
- The Treasury - Australian Government
- Ministry of Transport, Egypt
- Kalimantan Lumbung Energi - Indonesia
- VISA Power Limited - India
- Star Paper Mills Limited - India
- Siam City Cement PLC, Thailand
- Jindal Steel & Power Ltd - India
- Parry Sugars Refinery, India
- Iligan Light & Power Inc, Philippines
- Vedanta Resources Plc - India
- Metalloyd Limited - United Kingdom
- Bayan Resources Tbk. - Indonesia
- Coalindo Energy - Indonesia
- Indonesian Coal Mining Association
- Lanco Infratech Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Jaiprakash Power Ventures ltd
- Australian Commodity Traders Exchange
- European Bulk Services B.V. - Netherlands
- Semirara Mining Corp, Philippines
- Central Electricity Authority - India
- Agrawal Coal Company - India
- Mercuria Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- PowerSource Philippines DevCo
- Price Waterhouse Coopers - Russia
- Economic Council, Georgia
- Essar Steel Hazira Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Interocean Group of Companies - India
- Deloitte Consulting - India
- Global Business Power Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- CIMB Investment Bank - Malaysia
- Latin American Coal - Colombia
- Videocon Industries ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- MS Steel International - UAE
- Baramulti Group, Indonesia
- Singapore Mercantile Exchange
- Oldendorff Carriers - Singapore
- Orica Australia Pty. Ltd.
- Energy Development Corp, Philippines
- Merrill Lynch Commodities Europe
- Posco Energy - South Korea
- Mjunction Services Limited - India
- Gujarat Mineral Development Corp Ltd - India
- White Energy Company Limited
- Kobexindo Tractors - Indoneisa
- Bhushan Steel Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Orica Mining Services - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Barasentosa Lestari - Indonesia
- Thai Mozambique Logistica
- Port Waratah Coal Services - Australia
- GMR Energy Limited - India
- Edison Trading Spa - Italy
- Vizag Seaport Private Limited - India
- Petron Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- TNB Fuel Sdn Bhd - Malaysia
- Simpson Spence & Young - Indonesia
- Borneo Indobara - Indonesia
- Formosa Plastics Group - Taiwan
- Ministry of Mines - Canada
- Energy Link Ltd, New Zealand
- Coal and Oil Company - UAE
- Planning Commission, India
- GVK Power & Infra Limited - India
- Coastal Gujarat Power Limited - India
- The University of Queensland
- Kepco SPC Power Corporation, Philippines
- Samtan Co., Ltd - South Korea
- AsiaOL BioFuels Corp., Philippines
- Savvy Resources Ltd - HongKong
- Kohat Cement Company Ltd. - Pakistan
- London Commodity Brokers - England
- Malabar Cements Ltd - India
- Kumho Petrochemical, South Korea
- International Coal Ventures Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Antam Resourcindo - Indonesia
- Chettinad Cement Corporation Ltd - India
- Maheswari Brothers Coal Limited - India
- Globalindo Alam Lestari - Indonesia
- Commonwealth Bank - Australia
- PTC India Limited - India
- Standard Chartered Bank - UAE
- Madhucon Powers Ltd - India
- Ambuja Cements Ltd - India
- Australian Coal Association
- Chamber of Mines of South Africa
- Semirara Mining and Power Corporation, Philippines
- Siam City Cement - Thailand
- Marubeni Corporation - India
- OPG Power Generation Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Leighton Contractors Pty Ltd - Australia
- Directorate General of MIneral and Coal - Indonesia
- Renaissance Capital - South Africa
- Billiton Holdings Pty Ltd - Australia
- Attock Cement Pakistan Limited
- Meralco Power Generation, Philippines
- Romanian Commodities Exchange
- The State Trading Corporation of India Ltd
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