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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, 05 March 12
SOME RESOURCE TITANS NOT THRILLED WITH INDONESIAN EXPORT BAN - THE JAKARTA GLOBE
The Jakarta Globe reported that, local representatives of major business associations in East Kalimantan have protested a government regulation that ...
Monday, 05 March 12
WEEKLY DRY MARKET OVERVIEW - MARIA BERTZELETOU, HELLENIC SHIPPING
An air of optimism poured in the market this week for dry bulk shippers with the Baltic Dry Index recording daily gains during the end of February b ...
Sunday, 04 March 12
SE ASIA WAS FIRM FOR TRIPS TO INDIA AND CHINA - VISTAAR
COALspot.com - This week saw another upward trend with all indices up and generally market was firm.
The BDI was up by 7.38 pct closing at 771 po ...
Friday, 02 March 12
DJMBP HAS ANNOUNCED SECOND BATCH OF CLEAR N CLEAN CERTIFIED MINERS
COALspot.com - The Directorate general of mineral & coal of Indonesia has announced second batch of companies who have passed IUP Clear and Clea ...
Thursday, 01 March 12
BUKIT ASAM TARGETS EUROPEAN INVESTORS
COALspot.com - PT. Bukit Asam (persero) Tbk, Indonesian state owned coal miner is planning to conduct road show in Europe next week to target at Eur ...
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Showing 4826 to 4830 news of total 6871 |
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- Krishnapatnam Port Company Ltd. - India
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- Goldman Sachs - Singapore
- Wilmar Investment Holdings
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- Gujarat Mineral Development Corp Ltd - India
- Australian Coal Association
- Latin American Coal - Colombia
- Gujarat Electricity Regulatory Commission - India
- Banpu Public Company Limited - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Wood Mackenzie - Singapore
- Billiton Holdings Pty Ltd - Australia
- SN Aboitiz Power Inc, Philippines
- Aditya Birla Group - India
- Global Business Power Corporation, Philippines
- Barasentosa Lestari - Indonesia
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- Indonesian Coal Mining Association
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- Aboitiz Power Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- PTC India Limited - India
- Commonwealth Bank - Australia
- White Energy Company Limited
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- Kapuas Tunggal Persada - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Heidelberg Cement - Germany
- Deloitte Consulting - India
- GMR Energy Limited - India
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- Maharashtra Electricity Regulatory Commission - India
- Electricity Generating Authority of Thailand
- Cement Manufacturers Association - India
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- Coalindo Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
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- Grasim Industreis Ltd - India
- Bulk Trading Sa - Switzerland
- Oldendorff Carriers - Singapore
- ICICI Bank Limited - India
- Medco Energi Mining Internasional
- Mercuria Energy - Indonesia
- Metalloyd Limited - United Kingdom
- Ministry of Mines - Canada
- Energy Link Ltd, New Zealand
- Rashtriya Ispat Nigam Limited - India
- Thai Mozambique Logistica
- Eastern Energy - Thailand
- Vizag Seaport Private Limited - India
- Vedanta Resources Plc - India
- Savvy Resources Ltd - HongKong
- Anglo American - United Kingdom
- Altura Mining Limited, Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Straits Asia Resources Limited - Singapore
- Global Coal Blending Company Limited - Australia
- Siam City Cement - Thailand
- Bayan Resources Tbk. - Indonesia
- Kumho Petrochemical, South Korea
- Attock Cement Pakistan Limited
- Directorate Of Revenue Intelligence - India
- PowerSource Philippines DevCo
- Neyveli Lignite Corporation Ltd, - India
- Planning Commission, India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Larsen & Toubro Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- International Coal Ventures Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Pipit Mutiara Jaya. PT, Indonesia
- TeaM Sual Corporation - Philippines
- Sojitz Corporation - Japan
- Meenaskhi Energy Private Limited - India
- Semirara Mining Corp, Philippines
- Chettinad Cement Corporation Ltd - India
- Rio Tinto Coal - Australia
- CNBM International Corporation - China
- London Commodity Brokers - England
- Central Electricity Authority - India
- LBH Netherlands Bv - Netherlands
- Bhushan Steel Limited - India
- Mintek Dendrill Indonesia
- Parry Sugars Refinery, India
- Jindal Steel & Power Ltd - India
- Singapore Mercantile Exchange
- Sakthi Sugars Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Chamber of Mines of South Africa
- Therma Luzon, Inc, Philippines
- OPG Power Generation Pvt Ltd - India
- ASAPP Information Group - India
- The Treasury - Australian Government
- Bukit Asam (Persero) Tbk - Indonesia
- Makarim & Taira - Indonesia
- European Bulk Services B.V. - Netherlands
- Miang Besar Coal Terminal - Indonesia
- Samtan Co., Ltd - South Korea
- Ministry of Transport, Egypt
- Kepco SPC Power Corporation, Philippines
- Borneo Indobara - Indonesia
- Indian Energy Exchange, India
- Kideco Jaya Agung - Indonesia
- Petron Corporation, Philippines
- Electricity Authority, New Zealand
- Orica Australia Pty. Ltd.
- Renaissance Capital - South Africa
- Bangladesh Power Developement Board
- Kaltim Prima Coal - Indonesia
- Australian Commodity Traders Exchange
- Port Waratah Coal Services - Australia
- Malabar Cements Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Energy Development Corp, Philippines
- Price Waterhouse Coopers - Russia
- Siam City Cement PLC, Thailand
- GVK Power & Infra Limited - India
- Gujarat Sidhee Cement - India
- CIMB Investment Bank - Malaysia
- Formosa Plastics Group - Taiwan
- Marubeni Corporation - India
- Indika Energy - Indonesia
- Maheswari Brothers Coal Limited - India
- Riau Bara Harum - Indonesia
- Binh Thuan Hamico - Vietnam
- Pendopo Energi Batubara - Indonesia
- Georgia Ports Authority, United States
- Kartika Selabumi Mining - Indonesia
- Xindia Steels Limited - India
- The State Trading Corporation of India Ltd
- Trasteel International SA, Italy
- Parliament of New Zealand
- Alfred C Toepfer International GmbH - Germany
- Star Paper Mills Limited - India
- Indian Oil Corporation Limited
- New Zealand Coal & Carbon
- Africa Commodities Group - South Africa
- Sinarmas Energy and Mining - Indonesia
- Mjunction Services Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Ministry of Finance - Indonesia
- The University of Queensland
- VISA Power Limited - India
- GAC Shipping (India) Pvt Ltd
- Intertek Mineral Services - Indonesia
- Meralco Power Generation, Philippines
- Baramulti Group, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Minerals Council of Australia
- Kobexindo Tractors - Indoneisa
- Videocon Industries ltd - India
- PNOC Exploration Corporation - Philippines
- Ceylon Electricity Board - Sri Lanka
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Edison Trading Spa - Italy
- Sree Jayajothi Cements Limited - India
- Toyota Tsusho Corporation, Japan
- Bahari Cakrawala Sebuku - Indonesia
- Indogreen Group - Indonesia
- Coastal Gujarat Power Limited - India
- Romanian Commodities Exchange
- Antam Resourcindo - Indonesia
- Essar Steel Hazira Ltd - India
- Lanco Infratech Ltd - India
- Independent Power Producers Association of India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Mercator Lines Limited - India
- SMC Global Power, Philippines
- Madhucon Powers Ltd - India
- Carbofer General Trading SA - India
- McConnell Dowell - Australia
- Jorong Barutama Greston.PT - Indonesia
- Coal and Oil Company - UAE
- Power Finance Corporation Ltd., India
- AsiaOL BioFuels Corp., Philippines
- Iligan Light & Power Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- Sarangani Energy Corporation, Philippines
- Merrill Lynch Commodities Europe
- Orica Mining Services - Indonesia
- Tamil Nadu electricity Board
- Globalindo Alam Lestari - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Coal Council - USA
- Ambuja Cements Ltd - India
- Posco Energy - South Korea
- Uttam Galva Steels Limited - India
- Bukit Makmur.PT - Indonesia
- San Jose City I Power Corp, Philippines
- Interocean Group of Companies - India
- Leighton Contractors Pty Ltd - Australia
- Bhatia International Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Dalmia Cement Bharat India
- MS Steel International - UAE
- Standard Chartered Bank - UAE
- Cigading International Bulk Terminal - Indonesia
- SMG Consultants - Indonesia
- Sindya Power Generating Company Private Ltd
- Economic Council, Georgia
- IHS Mccloskey Coal Group - USA
- Tata Chemicals Ltd - India
- Thiess Contractors Indonesia
- Agrawal Coal Company - India
- Semirara Mining and Power Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Manunggal Multi Energi - Indonesia
- South Luzon Thermal Energy Corporation
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Timah Investasi Mineral - Indoneisa
- PetroVietnam Power Coal Import and Supply Company
- India Bulls Power Limited - India
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