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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).
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Saturday, 17 December 11
THE FREIGHT MARKET SEEMS TO HAVE ALMOST BOTTOMED OUT AND MAY REMAIN STEADY AT THESE LEVELS CAPT REDDY
COALspot.com - The BDI and Cape index closed lower this week with BDI closing at 1,888 points (down by 1.76 pct) and Cape index at 3,572 points (dow ...
Friday, 16 December 11
DRY BULK MARKET LOSES TRACK ON CAPESIZE LOSSES, SHIP FINANCING REMAINS TROUBLESOME - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market didn’t manage to sustain earlier gains, losing track yesterday, on reduced Capesize demand and persisting troubles in smal ...
Thursday, 15 December 11
BERAU SEES INDIA AS POTENTIAL MARKET FOR LOW-CALORIE COAL - THE JAKARTA POST
The Jakarta Post reported that, Publicly listed coal mining company PT Berau Coal Energy (BRAU), the fifth largest coal producer in Indonesia, sees ...
Thursday, 15 December 11
PANAMAX HARDLY AFFECTED BY THE RECENT FIRMER TENDENCY FOR THE BIG SISTERS - FEARNBULK
Handy
The rates are more or less the same as last week. Continent/US Gulf fixing at tick below USD 10k and Gulf/Continent levels at USD 25k. Trips ...
Thursday, 15 December 11
DRY BULK RATES TO REMAIN AT CURRENT LEVELS FOR THE MOST PART IN THE COMING MONTHS SAYS BIMCO - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
In its latest research note, BIMCO said that the Capesize Time Charter Average will remain at USD 20,000-30,000 per day but the tonnage oversupply w ...
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Showing 4926 to 4930 news of total 6871 |
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- Siam City Cement - Thailand
- Kalimantan Lumbung Energi - Indonesia
- ASAPP Information Group - India
- Electricity Generating Authority of Thailand
- GN Power Mariveles Coal Plant, Philippines
- SN Aboitiz Power Inc, Philippines
- PNOC Exploration Corporation - Philippines
- Directorate General of MIneral and Coal - Indonesia
- Standard Chartered Bank - UAE
- Romanian Commodities Exchange
- London Commodity Brokers - England
- South Luzon Thermal Energy Corporation
- Bukit Makmur.PT - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Meenaskhi Energy Private Limited - India
- Indian Oil Corporation Limited
- MS Steel International - UAE
- Pipit Mutiara Jaya. PT, Indonesia
- Samtan Co., Ltd - South Korea
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Heidelberg Cement - Germany
- Thiess Contractors Indonesia
- Sindya Power Generating Company Private Ltd
- Binh Thuan Hamico - Vietnam
- GMR Energy Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Singapore Mercantile Exchange
- Tamil Nadu electricity Board
- Maharashtra Electricity Regulatory Commission - India
- The Treasury - Australian Government
- LBH Netherlands Bv - Netherlands
- Kaltim Prima Coal - Indonesia
- Ministry of Finance - Indonesia
- Lanco Infratech Ltd - India
- Formosa Plastics Group - Taiwan
- Meralco Power Generation, Philippines
- Bhushan Steel Limited - India
- TeaM Sual Corporation - Philippines
- European Bulk Services B.V. - Netherlands
- Videocon Industries ltd - India
- Alfred C Toepfer International GmbH - Germany
- Bank of Tokyo Mitsubishi UFJ Ltd
- Commonwealth Bank - Australia
- Ind-Barath Power Infra Limited - India
- Sakthi Sugars Limited - India
- International Coal Ventures Pvt Ltd - India
- Georgia Ports Authority, United States
- Billiton Holdings Pty Ltd - Australia
- India Bulls Power Limited - India
- Dalmia Cement Bharat India
- Holcim Trading Pte Ltd - Singapore
- Ministry of Mines - Canada
- Gujarat Sidhee Cement - India
- Oldendorff Carriers - Singapore
- Coal and Oil Company - UAE
- GVK Power & Infra Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Siam City Cement PLC, Thailand
- Simpson Spence & Young - Indonesia
- Coalindo Energy - Indonesia
- Mintek Dendrill Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Uttam Galva Steels Limited - India
- SMG Consultants - Indonesia
- Orica Australia Pty. Ltd.
- Energy Link Ltd, New Zealand
- Indian Energy Exchange, India
- Aboitiz Power Corporation - Philippines
- Ceylon Electricity Board - Sri Lanka
- Antam Resourcindo - Indonesia
- Chamber of Mines of South Africa
- Krishnapatnam Port Company Ltd. - India
- Essar Steel Hazira Ltd - India
- Jindal Steel & Power Ltd - India
- Posco Energy - South Korea
- Edison Trading Spa - Italy
- Neyveli Lignite Corporation Ltd, - India
- CNBM International Corporation - China
- Xindia Steels Limited - India
- Semirara Mining and Power Corporation, Philippines
- Indogreen Group - Indonesia
- Bukit Baiduri Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- Malabar Cements Ltd - India
- Timah Investasi Mineral - Indoneisa
- Gujarat Electricity Regulatory Commission - India
- Mercuria Energy - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- OPG Power Generation Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Borneo Indobara - Indonesia
- Eastern Coal Council - USA
- Indika Energy - Indonesia
- Port Waratah Coal Services - Australia
- Indonesian Coal Mining Association
- Jaiprakash Power Ventures ltd
- GAC Shipping (India) Pvt Ltd
- Salva Resources Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Altura Mining Limited, Indonesia
- Straits Asia Resources Limited - Singapore
- CIMB Investment Bank - Malaysia
- Intertek Mineral Services - Indonesia
- Kumho Petrochemical, South Korea
- Riau Bara Harum - Indonesia
- White Energy Company Limited
- Karbindo Abesyapradhi - Indoneisa
- Thai Mozambique Logistica
- Ministry of Transport, Egypt
- Deloitte Consulting - India
- Semirara Mining Corp, Philippines
- Tata Chemicals Ltd - India
- Bhatia International Limited - India
- Star Paper Mills Limited - India
- Rashtriya Ispat Nigam Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Wilmar Investment Holdings
- Energy Development Corp, Philippines
- Kobexindo Tractors - Indoneisa
- PTC India Limited - India
- Sojitz Corporation - Japan
- Cement Manufacturers Association - India
- Kohat Cement Company Ltd. - Pakistan
- McConnell Dowell - Australia
- TNB Fuel Sdn Bhd - Malaysia
- The University of Queensland
- Baramulti Group, Indonesia
- IHS Mccloskey Coal Group - USA
- Independent Power Producers Association of India
- Toyota Tsusho Corporation, Japan
- Sarangani Energy Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- Bharathi Cement Corporation - India
- Merrill Lynch Commodities Europe
- Global Coal Blending Company Limited - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Central Java Power - Indonesia
- Planning Commission, India
- Trasteel International SA, Italy
- Sical Logistics Limited - India
- Orica Mining Services - Indonesia
- Karaikal Port Pvt Ltd - India
- Anglo American - United Kingdom
- Central Electricity Authority - India
- Bahari Cakrawala Sebuku - Indonesia
- Manunggal Multi Energi - Indonesia
- Grasim Industreis Ltd - India
- New Zealand Coal & Carbon
- Chettinad Cement Corporation Ltd - India
- Marubeni Corporation - India
- Eastern Energy - Thailand
- Cigading International Bulk Terminal - Indonesia
- Global Business Power Corporation, Philippines
- The State Trading Corporation of India Ltd
- Maheswari Brothers Coal Limited - India
- Iligan Light & Power Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Parry Sugars Refinery, India
- PowerSource Philippines DevCo
- Australian Coal Association
- Bhoruka Overseas - Indonesia
- Petron Corporation, Philippines
- Economic Council, Georgia
- AsiaOL BioFuels Corp., Philippines
- Power Finance Corporation Ltd., India
- Ambuja Cements Ltd - India
- Wood Mackenzie - Singapore
- Mercator Lines Limited - India
- Banpu Public Company Limited - Thailand
- Minerals Council of Australia
- Bangladesh Power Developement Board
- Goldman Sachs - Singapore
- Interocean Group of Companies - India
- Indo Tambangraya Megah - Indonesia
- San Jose City I Power Corp, Philippines
- Rio Tinto Coal - Australia
- Carbofer General Trading SA - India
- Vijayanagar Sugar Pvt Ltd - India
- Medco Energi Mining Internasional
- Latin American Coal - Colombia
- Renaissance Capital - South Africa
- Sinarmas Energy and Mining - Indonesia
- Barasentosa Lestari - Indonesia
- Sree Jayajothi Cements Limited - India
- Parliament of New Zealand
- Australian Commodity Traders Exchange
- Bayan Resources Tbk. - Indonesia
- Leighton Contractors Pty Ltd - Australia
- ICICI Bank Limited - India
- Electricity Authority, New Zealand
- Attock Cement Pakistan Limited
- Mjunction Services Limited - India
- Savvy Resources Ltd - HongKong
- VISA Power Limited - India
- Agrawal Coal Company - India
- Aditya Birla Group - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Makarim & Taira - Indonesia
- Larsen & Toubro Limited - India
- Therma Luzon, Inc, Philippines
- Madhucon Powers Ltd - India
- Africa Commodities Group - South Africa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Global Green Power PLC Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Bulk Trading Sa - Switzerland
- Pendopo Energi Batubara - Indonesia
- Kideco Jaya Agung - Indonesia
- Directorate Of Revenue Intelligence - India
- Petrochimia International Co. Ltd.- Taiwan
- IEA Clean Coal Centre - UK
- Miang Besar Coal Terminal - Indonesia
- Vedanta Resources Plc - India
- Kepco SPC Power Corporation, Philippines
- SMC Global Power, Philippines
- Vizag Seaport Private Limited - India
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