simon sembiring, senior adviser, pt indika energy - navigating indonesia’s mining divestment rules...
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Simon Sembiring, Senior Adviser, PT Indika Energy delivered the presentation at IMM’s 2014 Kalimantan Coal Conference. The IMM’s Kalimantan Coal Conference brings together 120+ senior executives, decision makers from government, mining, infrastructure, shipping and supply sectors to discuss new policies and strategies for tackling the current and emerging issues within the burgeoning Kalimantan coal sector. For more information about the event, please visit: http://www.immevents.com/kalicoalconference13TRANSCRIPT
Presented by : Simon F. Sembiring
Kalimantan Coal Conference 2 – 5 September 2013
Balikpapan, Indonesia
DIVESMENT RULES & OBLIGATIONS
A. Basic Foreign Investment (FI) Doing Business & Mining in Indonesia: § Foreign investment law No. 11/1967. § Mining law No. 11/1967 § Investment law No. 25 /2007 § Mineral & coal mining law No. 4/2009.
B. Rules For Divestment : 1. Decree of Head of “Investment CoordinaLng Board” (1967-‐1991).
§ Decree No. 5/1987; Jo : Decree No. 17/1987. § Decree No. 16/1989; Jo : Decree No. 17/1991.
2. Government RegulaLon No. 50/1993 Government RegulaLon No. 20/1994 3. Mineral & coal mining law No. 4/2009 ArLcle 112. 4. Government RegulaLon No. 23/2012 Jo No. 24/2012 (arLcle 97-‐98)
C. ObjecLve : § To enhance the naLonal capability to doing “good mining business” § To increase the benefit of mining operaLon for the state as well as for the naLonal welfare.
NEW SCHEME OF DIVESTMENT
1. The IUP & IUPK Holder (in terms of foreign investment in mining) a_er 5 year in “producLon operaLon” at least the share of naLonal party(s) will be. § 6th years anniversary 20 % § 7th years anniversary 30 % (+10%) § 8th years anniversary 37 % (+7%) § 9th years anniversary 44 % (+7%) § 10th years anniversary 51 % (+7%)
2. Divestment will be offer to : government, provincial & district government
state own company (SOC); regional own company (ROC), privet company. 4. The offer to SOC & ROC or private company with “tendering process”
4. Time table of share offer :
0 Days 60 90 0 -‐ Gov, Prov & Dist Gov, SOC & ROC Private
NaLonal
Payment 90 days a_er acceptance
Note : O = Offering
5. In terms of increasing the company share, Indonesia share well not be deluted.
DIVESMENT IMPLEMENTATION BAFORE LAW NO. 4/2009
1. COW PT INCO signed 27 July 1968 : § To offer 2% annually since 1 year commercial producLon. § Already done to the amount of 20% at capital market in Indonesia.
2. COW PT NEWMOUNT Nusa Tenggara : § 44 % own by naLonal § 24% by divestment process § the rest 7% on going process.
3. CCOW : All the companies of 1st generaLon : § Divestment already done : 51% to Indonesia parLes.
THE EARLY RESPOND OF INVESTOR(S) WITH NEW REGULATIONS :
1. For COW & CCOW no negaLve respond, due to stated in their own contract as “obligaLon” for the Indonesian NaLonal Interest.
3. For IUP ( for KP) specially in coal :
§ Complaining the new regulaLon. § Not very clear the process, the price of divestment share. § It is not apply to KP holder before, and why changes the rules dramaLcally to IUP holder???
§ Mostly the foreign investment “bought” the share from naLonal Party who have IUP and rise the quesLon : why should divested???
§ In terms of IUP, mostly are not own the “huge” or big amount of reserves or huge area (25.000 Ha).
§ It create the worst investment climate 3. Conclusion : Government (central & local) are not providing the good and beker
explanaLon concerning the new regulaLon for “divestment obligaLon for foreign investor(s)”
CLARIFICATIONS
1. Divestment already implemented to foreign share holder since 1967 in mining business.
2. The involvement of “foreign investor” in doing business mining in Indonesia before new mining law No. 4/2009 should be “directly agreement with government: COW, CCOW.
3. In terms of KP (mining authority) only “naLonal party” allowed to operated. 4. Based on new mining law No. 4/2009, all the mining operaLon based on
“license”. 5. In terms of IUP OR IUPK holding, whose share are owned by foreigners a_er 5
years producLon is obligated to undertake a divestment of share to the Indonesia … (arLcle 112, law No.4/2009).
6. The scheme as menLoned before is regulated on government regulaLon No. 22/2002.
7. The price of share should be the “market price”, and already implemented to COW and CCOW. No rejecLon at all.
WHAT IS THE IMPACT OF DIVESTMENT???
1. In terms of side effect to “mining infrastructure” very limited. 2. To the investor (s) possibly, but insignificant due to “miss percepLon and lack of
clear & clean informaLon from the government; 3. To the naLonal party gives the very posiLve impact in term of.
§ Enhance their capability doing business globally. § Enhance the business environment to the level of professional mining
execuLon. § To reduce the “dirty business” in mining for both naLonal and foreigners.
CONCLUSION
1. Divestment obligaLon for foreign share holder in Indonesia is not “a new terms”, already exist since law No. 1/1967 and law No. 11/1967 and its implementaLons.
3. The implementaLon of divestment for both COW and CCOW were doing well. 5. The mining operaLon a_er law No. 4/2009, will based on licensee system. Where the
exisLng COW & CCOW will be honored unLl the and of contract. The substances of the COW & CCOW sLll on the “renegoLate” process.
7. If IUP and IUPK issued in terms of foreign company, a_er 5 years commercial the
producLon, should be divest/annually. Then the total Indonesia share will be 51%.
8. The price of the divestment share based on “market price”.