SIGNIFICANT PRINCIPALS TO BE NOTED BY MINING INVESTORS IN INDONESIA

Relating to the development of the Mineral and Coal Regulations in Indonesia, there appears to be different  of perceptions, expectations between the Indonesian Investors, Foreign Investors, the Government of Indonesia, the People's House of Representative and  the People of Indonesia as a whole who are the real significant stakeholder  of the Natural Resources extracted  through the General Mining Activities within the General Mining Territory in Indonesia who wishes to increase their social welfare and quality of life;

• As we are all aware in every country in this World there are Visions, Wishes, Wants, Goals, Targets, Dreams and Plans made by the people, who had decided  in the first place  to establish a country where they could live together to increase their social life, quality of life as an independent nation. 

 For Indonesia  the Basic Principal Concept relating to  Natural Resources is  that the Natural Resources found within the Indonesian Mining Territory in the Republic of Indonesia  has to be developed for the Utmost Welfare of  all the People of the Republic of Indonesia  as embodied in Article 33 paragraph 3 of the Indonesian Constitution  so called Undang-undang Dasar 1945 or the Basic Constitution Law 1945, as the Highest Law that must  be used as the Basis in establishing  the other lower laws including the Oil  and Gas Laws as well as the Mineral Law  ; 

• When Indonesia declared its independent in the Year 17 Agustus 1945, the Basic Concept and the Visions of the Founders of this Young Developing Country Indonesia was to make sure that the Natural Resources founded and located in Indonesia based on the Indonesian Constitution Basic Constitution Law 1945 Article 33 paragraph 3 is to be "developed and managed"   for the utmost benefit and welfare of the Indonesian People within the Territory  of the Republic of Indonesia. Thus, this is the actual "National Interest" of Indonesia as a Nation.

We all are fully aware that in the progress and journey of  every Nation, the most significant element of every country  to increase the quality of life to achieve social welfare  is by "Making Priorities" on  the Primary Needs of its people which  in general are  :

• (i) Free Education until the University for each and every single people, 
• (ii) Free Health Care for each and every single People covering Hospitalization, Doctors, Medicare, 
• (iii) Housing afforded by the People
• (iii)  Easy, Smooth and Safe, Clean  and afforded Public Transportation,   

• The sources of  funds and monies to achieve such Goals and Targets of each and every  Nation and Country  has to be from the Nations Wealth and Assets which for Indonesia among others are from the Natural Resources that must be explored, exploited, extracted and produced from the Indonesian Mining Territory. 

It is the task of the the Government as the Executive Level together with the People House of Representatives  as the Legislative Institution to establish  Laws which must be in favor to the Social Welfare, benefit and interest of the  People of Indonesia. Thus they have to ensure and secure  that such primary needs  of the people are well protected under the established Mineral and Coal Mining Laws.  

• In light of the above "Basic Concept and Principal",  the Government of Indonesia in the Central and Local Level as well as the People House Of Representative  must ensure and secure to implement the above Primary Needs of  all (each and every People)  of Indonesia which amounts around 250 Million scattered within the Indonesian Archipelago Territory consisting of  Big  Islands and small Islands from Sabang to Merauke;      

 Indonesia had experienced  its journey as a free and new Independent Republic Country  from a Non-Democracy Country to become  a Democracy Nation, which in fact is really not easy to achieve such above Goals and Targets,  due to the reasons that  there are always "Many Vested Interest Parties and elements" either from within Indonesia itself  which consists of various ethnics, background cultures, belief system, traditions, religion background, different level of educations, military history views and interest, political parties,  as well as from outside of Indonesia, which may be Foreign Nation, Country as well as Multi National Companies, Foreign Financial Players such as IMF, World Bank, ADB, World Trade Organization  who had  their own Agenda,  National  Interests, which has affect and  influence the journey of this New Developing Nation.            

During the First Indonesian Financial Crisis in the end of Year 1997 {not long after the World Bank issued the annual report which praised the Indonesian Economic GDP growth  averaging 7,7 % (1991-1994), 8,2% (1995) and 7,8% (1996)}, which was resulted starting from the depreciation of Thailand Bath, which spread to Indonesia and hits Indonesia's fundamental national economy,  IMF had forwarded several Points  (around 51 points) to be followed by  Indonesian as a "Pre- Conditionilities"  for IMF to assist  granting Loan / Funds to Indonesia to cope with the Financial Crisis  suffered by Indonesia during the 1998 Financial Crisis; The Banking was nearly bancrupt and rupiah falls to become Rp.14.800 per USD Dollars.

• This Financial Economic Crisis had put Indonesia as a "patient" of the International Creditor Institutions such as International Monetary Funds (IMF), World Bank, and Asian Development Bank (ADB) which are participating in the Consultative Groups on Indonesia ( CGI).  

In the implementation of these Points  IMF and World Bank's, World Trade Organization (WTO) representatives were involved in drafting several Laws to ensure that Globalization, Liberalization, de-regulations in the financial sectors,  Free Open Trading,privatizing of State Assets  and non Discrimination rules are implemented in the Laws particularly involving Investments, Trading, as well as in the Oil and gas sectors including in the Mining Sectors including the establishment of the Bancruptcy Law to anticipate in the Loan Restructuring of the several Debtors which experienced troubles in repaying the Loan since the currency effects resulted from the Financial Crisis in the Year 1998;

For Indonesia itself in the General Mining laws, as of the Year 1965, during the President Soeharto Era, Foreign Investments are Invited to Indonesia where COW (Contract Of Work) was signed among others between Foreign Investors such as  PT Freeport Indonesia ( PT FI) and the Government of Indonesia; 

• Whereas  for smaller mining area where local Companies are given the right to Mine by the Bupati was  covered under the KP (Mining Right) License;

In the COW of PT FI, simillar to the other COWs, which were signed by Foreign Investors and the Government of Indonesia,  there  exist a "Divestment Clause",  which stipulates that after 10 or 15 years,  51% of the Equity or Shares of the PT signing the COW,  has to be divested to Indonesian Shareholder;

• Thus, these Divestment rulings are already agreed by Foreign Investors including PT FI Contract Of Work by the Parties, and therefore is actually not a "New Issue" and understandings between Foreign Investors and the Government of Indonesia in the General Mining Contracts; We can observe that this Divestment Clause which of course is the wants and desires of the Government of Indonesia as well as the People's House Representative as the Political Instruments in Indonesia to gain and increase its Local Business Players and contents; On the other hand Foreign Investors of course has their own Agenda to increase their share as Investors which they generally used the IMF, World Bank, World Trade Organization and other International Vehicle to assist their wants and business interests in securing their Business and National Interest.

• We now observed that there is a changing maps of Economics strenghts, where China, India, Russia and Brazil as well as South Africa are emerging; We also view that Financial Crisis also are being experienced  by USA in the Year 2008 and Japan and Europe where  Spain, Portugal  and Greece are bailed out by the Central Bank of Europe to safe its financial problems; In the United States of America  where non intervention from the Government was made, had been applied the other way around, where the American Government had bailled out the Big Companies that suffered financial problems and crisis. Even though China, India, Brasil and Russia are developing, these countries are also be affected by the European Crisis;

Well, as the world are always moving into a Democracy and Transparency and Open Society , there may also be different of expectations from every Nation, Country, People, Investors in every country, in order to survive and maintain their respective interests, targets, goals and their respective National Interest including in the oil and gas as well as the General Mining Sectors;

Jakarta, 12 September 2011

Agung S.Suleiman