We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
Friday, 23 December 11
CONTENTIOUS ISSUES IN CONTRACT RENEGOTIATION - THE JAKARTA POST
 The government has been renegotiating mining contracts, especially those 30-40 years old, with almost all mining companies, including PT Freeport Indonesia, which has been operating since 1967. This is a major step the government is taking and of course will affect the climate of mining investment in the future. If not carefully planned and executed, renegotiation might severely harm the prospects of the national mining industry.
That is why it is important for the government to choose the most important points to be brought to the negotiating table and to ensure that the results are beneficial to both sides, i.e., the mining enterprises and the government.
The basis for renegotiation is Law No. 4 /2009 on mining, which has changed the mining-concession regime by introducing a new licensing system. The law replaces mining authorizations (Kuasa Pertambangan or KP) as well as contracts of work (CoWs) and contracts of coal mining work (CCoW or PKP2B). The government acknowledges all CoWs/CCoWs that have been awarded before the law was promulgated; however all CoWs/CCoWs still need to be renegotiated.
The fundamental difference between the concession and licensing regimes lies in a number of points. Most important is the difference in the legal nature. While concession is based on civil law and the source of law is the agreement itself, licensing is public and legislation is the source of law. The application of a “concession” is the agreement between the two parties, the mining enterprises and the government, while a “license” is based on permission from the government.
In terms of rights and obligations, a licensing regime puts the government in a more dominant position. Settlement of disputes is through international arbitration for concession agreements but is via a state administrative court for licensing regimes.
These differences, of course, will be perceived differently by different mining enterprises. Large-scale mining companies and international enterprises prefer arbitration as a legal option, because arbitration is considered to be more fair and free from political intervention. Given that perception, the new regime is seen to generate potentially larger political risks.
Moreover, the bilateral nature of the contract system is believed to provide more protection against future changes in the law than a unilateral licensing system.
For small or national mining companies, however, licensing regimes might be seen to be friendlier as they provide equal opportunities to both domestic and foreign investors in applying for licenses.
Renegotiation is needed to adjust the content of contracts, which have been running since before the Mining Law came into being. These contracts need to be adapted to be in accordance with the new law. Renegotiation began in the fourth quarter of 2009 for CoWs and early 2010 for CCoWs.
Philosophically, however, renegotiation aims at restoring the country’s sovereignty over its natural resources as well as providing a better use of the resources for the people. This is reflected in a number of articles to adjust CoWs and CCoWs, to increase the added value for minerals and coal by imposing an obligation on contractors to establish downstream industrial facilities, to enhance state revenue through rate adjustments for royalties and production fees and to prioritize the use of local and national services.
Based on the notion of providing a better use of resources, a number of strategic issues are being brought to the negotiation table, such as the limitation of mining areas, contract extension, state revenue, divestment obligations for foreign investors that hold full-ownership in local mining firms, the obligation of processing and refining in the country’s smelters, as well as the obligations of the use of domestic goods and services.
As expected, the most prominent issue during the renegotiation is about the augmented state revenue — the first contentious issue. State revenue refers to mining taxes and profit-sharing schemes. The government is tightening tax regulations to enhance national revenue. This is the reason why the tax authority is involved in the renegotiation and assesses whether or not an enterprise is losing money.
Renegotiation on profit-sharing might not be necessary with those enterprises that are losing money. But the key point here is transparency — the enterprises must reveal their income — as the fundamental purpose of the renegotiation is for the results to be fair and transparent.
The limitation of mining areas is the second contentious issue. According to the law, all areas of work that exceed the maximum limit of 100,000 hectares (ha) for minerals and 50,000 ha for coal should be returned to the state. This has proven to be difficult, since most of the large mining enterprises have been working areas beyond this threshold. Freeport has a working area of up to 1.8 million ha, and Arutmin about 70,000 ha, and Inco about 180,000 ha.
The third contentious issue is extension of concession contracts. A concession contract is terminated when it expires. After that, the management must submit to the state, represented by state or local enterprises, a proposal to obtain a new mining license. Contract extension with the old contractor can be achieved only if the contractor is a minority shareholder.
These three issues are problems for both the government and the enterprises to resolve. Currently, there are about 113 plans to renegotiate mining contracts, of which 37 CoWs are in the mining of metals and minerals and 76 are contracts of coal mining work (CCoWs). The majority of the mining enterprises seem to be in the “Partially Agree” mode for CoWs and in the “Agree to All Amendment Articles” mode for CCoWS.
The results must be beneficial to both sides, promoting transparency and fairness. Mining has been contributing greatly to the country’s economy, as well as wealth to a number of mining enterprises. In 2010, mining accounted for about 11.15 percent of GDP for Indonesia overall, and a much higher percentage for provinces such as Papua, Bangka-Belitung, West Nusa Tenggara and East Kalimantan. Mining also accounted for 16.91 percent of Indonesian exports, providing Rp 9.7 trillion of government revenue.
But annual average mining investment is not growing as expected. Only in the coal sector has any large-scale new production capacity been developed in recent years. The vast majority of the investment is for the replacement of mining infrastructure to sustain capacity.
Given the long lead times to find and develop new mines, production declines will be inevitable unless the renegotiation can enhance transparency and the mining policy environment is improved.
We have to remember that the country has some of the most prospective geological areas and according to one international survey, only some areas of Canada and Australia have better mineral prospects. Thus, it is possible for mining to make a much larger economic contribution at the local, provincial and national levels.
The renegotiation process cannot be allowed to hinder this contribution. We have to avoid losing our competitiveness at a time when other countries are seeking new mining investment.
By: Montty Girianna
Source: The Jakarta Post
The writer is director for energy, mineral resources and mining at the National Development Planning Agency (BAPPENAS).
If you believe an article violates your rights or the rights of others, please contact us.
|
|
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
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 ...
|
|
|
Showing 4811 to 4815 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Vizag Seaport Private Limited - India
- Attock Cement Pakistan Limited
- Latin American Coal - Colombia
- Rashtriya Ispat Nigam Limited - India
- Thai Mozambique Logistica
- Jaiprakash Power Ventures ltd
- Xindia Steels Limited - India
- Gujarat Sidhee Cement - India
- Indonesian Coal Mining Association
- Australian Commodity Traders Exchange
- SMC Global Power, Philippines
- Aditya Birla Group - India
- Mercator Lines Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Energy Link Ltd, New Zealand
- Eastern Coal Council - USA
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Malabar Cements Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indo Tambangraya Megah - Indonesia
- Orica Mining Services - Indonesia
- Grasim Industreis Ltd - India
- Indika Energy - Indonesia
- Singapore Mercantile Exchange
- Binh Thuan Hamico - Vietnam
- Bharathi Cement Corporation - India
- ASAPP Information Group - India
- Indian Oil Corporation Limited
- Kohat Cement Company Ltd. - Pakistan
- Kobexindo Tractors - Indoneisa
- Coal and Oil Company - UAE
- Sakthi Sugars Limited - India
- Oldendorff Carriers - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Simpson Spence & Young - Indonesia
- Minerals Council of Australia
- Interocean Group of Companies - India
- Directorate General of MIneral and Coal - Indonesia
- Siam City Cement PLC, Thailand
- Kartika Selabumi Mining - Indonesia
- Globalindo Alam Lestari - Indonesia
- Goldman Sachs - Singapore
- Star Paper Mills Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Madhucon Powers Ltd - India
- The Treasury - Australian Government
- Bukit Makmur.PT - Indonesia
- Chamber of Mines of South Africa
- Directorate Of Revenue Intelligence - India
- London Commodity Brokers - England
- Metalloyd Limited - United Kingdom
- VISA Power Limited - India
- Riau Bara Harum - Indonesia
- Banpu Public Company Limited - Thailand
- Ministry of Transport, Egypt
- Bahari Cakrawala Sebuku - Indonesia
- Central Electricity Authority - India
- Ind-Barath Power Infra Limited - India
- Parry Sugars Refinery, India
- Carbofer General Trading SA - India
- Sree Jayajothi Cements Limited - India
- Karaikal Port Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- SN Aboitiz Power Inc, Philippines
- Straits Asia Resources Limited - Singapore
- Lanco Infratech Ltd - India
- Semirara Mining Corp, Philippines
- Leighton Contractors Pty Ltd - Australia
- Global Coal Blending Company Limited - Australia
- Price Waterhouse Coopers - Russia
- Sarangani Energy Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Orica Australia Pty. Ltd.
- Bhoruka Overseas - Indonesia
- Georgia Ports Authority, United States
- Power Finance Corporation Ltd., India
- Manunggal Multi Energi - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Chettinad Cement Corporation Ltd - India
- Antam Resourcindo - Indonesia
- Australian Coal Association
- Sical Logistics Limited - India
- Toyota Tsusho Corporation, Japan
- White Energy Company Limited
- IEA Clean Coal Centre - UK
- McConnell Dowell - Australia
- Global Business Power Corporation, Philippines
- Heidelberg Cement - Germany
- India Bulls Power Limited - India
- Tamil Nadu electricity Board
- Neyveli Lignite Corporation Ltd, - India
- Trasteel International SA, Italy
- CNBM International Corporation - China
- Mjunction Services Limited - India
- Energy Development Corp, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Jorong Barutama Greston.PT - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Videocon Industries ltd - India
- Bangladesh Power Developement Board
- Timah Investasi Mineral - Indoneisa
- LBH Netherlands Bv - Netherlands
- Salva Resources Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Commonwealth Bank - Australia
- Renaissance Capital - South Africa
- Savvy Resources Ltd - HongKong
- Petron Corporation, Philippines
- ICICI Bank Limited - India
- Global Green Power PLC Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Meralco Power Generation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bhushan Steel Limited - India
- GAC Shipping (India) Pvt Ltd
- Barasentosa Lestari - Indonesia
- Mercuria Energy - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Cement Manufacturers Association - India
- The University of Queensland
- Makarim & Taira - Indonesia
- Ambuja Cements Ltd - India
- Medco Energi Mining Internasional
- AsiaOL BioFuels Corp., Philippines
- Wood Mackenzie - Singapore
- Merrill Lynch Commodities Europe
- Standard Chartered Bank - UAE
- New Zealand Coal & Carbon
- Ceylon Electricity Board - Sri Lanka
- Karbindo Abesyapradhi - Indoneisa
- Coastal Gujarat Power Limited - India
- Eastern Energy - Thailand
- Borneo Indobara - Indonesia
- Samtan Co., Ltd - South Korea
- Therma Luzon, Inc, Philippines
- Iligan Light & Power Inc, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Mintek Dendrill Indonesia
- Aboitiz Power Corporation - Philippines
- CIMB Investment Bank - Malaysia
- Meenaskhi Energy Private Limited - India
- Independent Power Producers Association of India
- Vedanta Resources Plc - India
- IHS Mccloskey Coal Group - USA
- Larsen & Toubro Limited - India
- SMG Consultants - Indonesia
- Agrawal Coal Company - India
- Baramulti Group, Indonesia
- Marubeni Corporation - India
- Jindal Steel & Power Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Kideco Jaya Agung - Indonesia
- Essar Steel Hazira Ltd - India
- Intertek Mineral Services - Indonesia
- Central Java Power - Indonesia
- Altura Mining Limited, Indonesia
- Sindya Power Generating Company Private Ltd
- Dalmia Cement Bharat India
- Posco Energy - South Korea
- Sinarmas Energy and Mining - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Bulk Trading Sa - Switzerland
- Bhatia International Limited - India
- PTC India Limited - India
- OPG Power Generation Pvt Ltd - India
- Parliament of New Zealand
- MS Steel International - UAE
- Kalimantan Lumbung Energi - Indonesia
- Wilmar Investment Holdings
- Thiess Contractors Indonesia
- Kumho Petrochemical, South Korea
- Pendopo Energi Batubara - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Deloitte Consulting - India
- Anglo American - United Kingdom
- TeaM Sual Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- Coalindo Energy - Indonesia
- Tata Chemicals Ltd - India
- European Bulk Services B.V. - Netherlands
- Formosa Plastics Group - Taiwan
- Kepco SPC Power Corporation, Philippines
- Ministry of Mines - Canada
- The State Trading Corporation of India Ltd
- Electricity Authority, New Zealand
- Gujarat Mineral Development Corp Ltd - India
- Kaltim Prima Coal - Indonesia
- PNOC Exploration Corporation - Philippines
- Planning Commission, India
- Rio Tinto Coal - Australia
- Maheswari Brothers Coal Limited - India
- GMR Energy Limited - India
- Electricity Generating Authority of Thailand
- Bayan Resources Tbk. - Indonesia
- International Coal Ventures Pvt Ltd - India
- GVK Power & Infra Limited - India
- Alfred C Toepfer International GmbH - Germany
- PetroVietnam Power Coal Import and Supply Company
- Sojitz Corporation - Japan
- Romanian Commodities Exchange
- Siam City Cement - Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- TNB Fuel Sdn Bhd - Malaysia
- Indian Energy Exchange, India
- Edison Trading Spa - Italy
- Indogreen Group - Indonesia
- Africa Commodities Group - South Africa
- Kapuas Tunggal Persada - Indonesia
- Uttam Galva Steels Limited - India
- Economic Council, Georgia
- Ministry of Finance - Indonesia
- Port Waratah Coal Services - Australia
- PowerSource Philippines DevCo
|
| |
| |
|
