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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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- Jindal Steel & Power Ltd - India
- Borneo Indobara - Indonesia
- SMC Global Power, Philippines
- Thai Mozambique Logistica
- Salva Resources Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Gujarat Sidhee Cement - India
- Wilmar Investment Holdings
- Tata Chemicals Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- SN Aboitiz Power Inc, Philippines
- Baramulti Group, Indonesia
- South Luzon Thermal Energy Corporation
- Bangladesh Power Developement Board
- IHS Mccloskey Coal Group - USA
- Cement Manufacturers Association - India
- Carbofer General Trading SA - India
- Madhucon Powers Ltd - India
- Intertek Mineral Services - Indonesia
- Standard Chartered Bank - UAE
- Latin American Coal - Colombia
- Indika Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- The State Trading Corporation of India Ltd
- Indogreen Group - Indonesia
- GMR Energy Limited - India
- Coal and Oil Company - UAE
- VISA Power Limited - India
- Star Paper Mills Limited - India
- Sinarmas Energy and Mining - Indonesia
- Global Business Power Corporation, Philippines
- Tamil Nadu electricity Board
- Posco Energy - South Korea
- Heidelberg Cement - Germany
- Directorate General of MIneral and Coal - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Medco Energi Mining Internasional
- Asmin Koalindo Tuhup - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- SMG Consultants - Indonesia
- Electricity Authority, New Zealand
- Agrawal Coal Company - India
- San Jose City I Power Corp, Philippines
- Meenaskhi Energy Private Limited - India
- Makarim & Taira - Indonesia
- Merrill Lynch Commodities Europe
- Maheswari Brothers Coal Limited - India
- Ambuja Cements Ltd - India
- Timah Investasi Mineral - Indoneisa
- Bharathi Cement Corporation - India
- Metalloyd Limited - United Kingdom
- Bukit Baiduri Energy - Indonesia
- Semirara Mining Corp, Philippines
- Manunggal Multi Energi - Indonesia
- Siam City Cement PLC, Thailand
- Videocon Industries ltd - India
- Larsen & Toubro Limited - India
- Global Green Power PLC Corporation, Philippines
- Petron Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Sakthi Sugars Limited - India
- CNBM International Corporation - China
- TeaM Sual Corporation - Philippines
- Kohat Cement Company Ltd. - Pakistan
- Miang Besar Coal Terminal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Edison Trading Spa - Italy
- LBH Netherlands Bv - Netherlands
- Energy Link Ltd, New Zealand
- Power Finance Corporation Ltd., India
- AsiaOL BioFuels Corp., Philippines
- London Commodity Brokers - England
- The University of Queensland
- Alfred C Toepfer International GmbH - Germany
- Sindya Power Generating Company Private Ltd
- Directorate Of Revenue Intelligence - India
- India Bulls Power Limited - India
- Binh Thuan Hamico - Vietnam
- Parliament of New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Iligan Light & Power Inc, Philippines
- Bulk Trading Sa - Switzerland
- Global Coal Blending Company Limited - Australia
- Meralco Power Generation, Philippines
- Kideco Jaya Agung - Indonesia
- Malabar Cements Ltd - India
- Aboitiz Power Corporation - Philippines
- Eastern Coal Council - USA
- MS Steel International - UAE
- Simpson Spence & Young - Indonesia
- Trasteel International SA, Italy
- Sree Jayajothi Cements Limited - India
- Siam City Cement - Thailand
- Holcim Trading Pte Ltd - Singapore
- Marubeni Corporation - India
- CIMB Investment Bank - Malaysia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Anglo American - United Kingdom
- Maharashtra Electricity Regulatory Commission - India
- Bhatia International Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Chettinad Cement Corporation Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Deloitte Consulting - India
- Sarangani Energy Corporation, Philippines
- Mintek Dendrill Indonesia
- Indonesian Coal Mining Association
- OPG Power Generation Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- New Zealand Coal & Carbon
- Straits Asia Resources Limited - Singapore
- Mercator Lines Limited - India
- Essar Steel Hazira Ltd - India
- ICICI Bank Limited - India
- Kartika Selabumi Mining - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Mjunction Services Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Rashtriya Ispat Nigam Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Economic Council, Georgia
- Oldendorff Carriers - Singapore
- Port Waratah Coal Services - Australia
- Commonwealth Bank - Australia
- Aditya Birla Group - India
- Kapuas Tunggal Persada - Indonesia
- Barasentosa Lestari - Indonesia
- International Coal Ventures Pvt Ltd - India
- Africa Commodities Group - South Africa
- Indian Energy Exchange, India
- Karaikal Port Pvt Ltd - India
- Central Electricity Authority - India
- Interocean Group of Companies - India
- Leighton Contractors Pty Ltd - Australia
- Kalimantan Lumbung Energi - Indonesia
- IEA Clean Coal Centre - UK
- Attock Cement Pakistan Limited
- Bhoruka Overseas - Indonesia
- Kepco SPC Power Corporation, Philippines
- Australian Commodity Traders Exchange
- Romanian Commodities Exchange
- Riau Bara Harum - Indonesia
- Ministry of Transport, Egypt
- Minerals Council of Australia
- Singapore Mercantile Exchange
- Chamber of Mines of South Africa
- Orica Australia Pty. Ltd.
- Energy Development Corp, Philippines
- PNOC Exploration Corporation - Philippines
- Pendopo Energi Batubara - Indonesia
- Ind-Barath Power Infra Limited - India
- Rio Tinto Coal - Australia
- Thiess Contractors Indonesia
- Wood Mackenzie - Singapore
- Samtan Co., Ltd - South Korea
- Indo Tambangraya Megah - Indonesia
- Banpu Public Company Limited - Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bayan Resources Tbk. - Indonesia
- Price Waterhouse Coopers - Russia
- GAC Shipping (India) Pvt Ltd
- Sojitz Corporation - Japan
- Grasim Industreis Ltd - India
- Bukit Makmur.PT - Indonesia
- Georgia Ports Authority, United States
- Petrochimia International Co. Ltd.- Taiwan
- Antam Resourcindo - Indonesia
- Savvy Resources Ltd - HongKong
- Kobexindo Tractors - Indoneisa
- Electricity Generating Authority of Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Xindia Steels Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- Coalindo Energy - Indonesia
- Indian Oil Corporation Limited
- Bhushan Steel Limited - India
- McConnell Dowell - Australia
- Goldman Sachs - Singapore
- Therma Luzon, Inc, Philippines
- Ministry of Mines - Canada
- Central Java Power - Indonesia
- White Energy Company Limited
- Neyveli Lignite Corporation Ltd, - India
- Dalmia Cement Bharat India
- The Treasury - Australian Government
- Orica Mining Services - Indonesia
- Independent Power Producers Association of India
- Toyota Tsusho Corporation, Japan
- ASAPP Information Group - India
- Renaissance Capital - South Africa
- Vijayanagar Sugar Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Coastal Gujarat Power Limited - India
- Kumho Petrochemical, South Korea
- Eastern Energy - Thailand
- Planning Commission, India
- PowerSource Philippines DevCo
- Bukit Asam (Persero) Tbk - Indonesia
- Uttam Galva Steels Limited - India
- Ministry of Finance - Indonesia
- GVK Power & Infra Limited - India
- Mercuria Energy - Indonesia
- Sical Logistics Limited - India
- PTC India Limited - India
- Formosa Plastics Group - Taiwan
- Jaiprakash Power Ventures ltd
- Vizag Seaport Private Limited - India
- Lanco Infratech Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Australian Coal Association
- Parry Sugars Refinery, India
- Altura Mining Limited, Indonesia
- Gujarat Electricity Regulatory Commission - India
- Vedanta Resources Plc - India
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