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 

  

        

ENERGY POLICY DMO COAL IN INDONESIA

Yes, we have to be fully aware that a strong Country must be backed up by its Energy, where as an alternative besides Hydrycarbon Oil and Gas and Geothermal, we have to make sure that the Policy made by the Indonesian Government as well as the Rulings from the Legislator  have to support  increasing Coal Products to support the Energy in Indonesia;

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• As already practiced in the Oil and Gas Policy applied by the Government of Indonesia as reflected in the rulings,  DMO (or Domestic Market Obligation)  is obligated to Oil and Gas Companies operating in Indonesia to market and sell its 25% (twenty five percent)  of its Annual Oil Production in the Indonesian Territory to secure the Energy supply and need in Indonesia; 

This similar Policy shall and have to be ensured and secured by the Government of Indonesia as well as the Legislator in the People House Of Representative in the Coal Sector, where the Coal Producers are obligated by the DMO (Domestic Market Obligation) Policy to market portion of its Coal Production to be sold within the Indonesian Territory; This Policy is really significant for a Developing Country like Indonesia who has around 250 million of People who needs energy supply to support its standard of living; 

• As we are aware  implementation of this DMO is  applied in the Mineral and Mining Law No. 40 of 2009 and the Ministerial of Energy and Mineral Resources No. 34 of 2009 which applied the prioritizing of the the domestic mineral and coal supplies, and the Directive of the Directorate General Of Mineral, Coal and Geothermal on the technical supervision on supervision on providing the minimum precentage of sales for domestic purposes; 

This Policy is aimed to at least secure the domestic coal supply to back up the Energy in Indonesia especially which is needed for the Power Plant operated by PLN (The State Electricry Enteprise) to support the Electricity need for the Industry as well as the people of Indonesia;  Accordingly, we have to be sure and certain that this Policy must  improve the Indonesian Country's capability  to compete in the National and International level.  Thus the  national interest must be put up front.

• Since Indonesia is still considered a Developing Country, we have to manage our abundant natural resources to our Nations best interest,  especially to support the quality of life of the 250 million people living in Indonesia; We must prioritize our goal and target for the Indonesian Nation which is free education, and hospital for its people so that we can increase the educated and healthy person in Indonesia;

In order to achieve such target we have to think as Indonesian Inc. and must learn from other neighboring countries like India and China who has also huge numbers of population that have to be taken care by this Country, and have succeeded to seriously made a good Road Map Planning in their Energy Policy system which could back-up the needs of the Energy needed by their Power Plant to support the Industry and human household ;

• Based on the above, we have to make sure the Policy and the Rulings made by the Indonesian Government as well as the People House of Representative,  must be geared to develop the Policy and Rulings which must support such goals and target;       

Jakarta, 21 August 2012
Agung  S.Suleiman

   

New Government Regulation No. 24 Year 2012

Recently, the Government of the Republic of Indonesia had issued Government Regulation No.24 Year 2012, which regulates amendment to the Government Regulation No. 23 Year 2010. 

• In essence, this Government Regulation was issued to encourage and boost the Indonesian Participant to  participate in the Mining of Mineral and Coal within the Indonesian Territory;  The IUP or Mining Permit may not be transferred,  except if the Party receiving such IUP owns more than 51% shares of the PT holding such IUP; 
• Pak Sony as the Legal Officer from the Ditjen Mineral and Coal in a Seminar  explained that the intention by the Government is that The Government can monitor the Party who controls such IUP holder who is responsible upon the performances of the Mining Operations in the given Mining Area under such IUP;

Furthermore under Article 7A of the Government Regulation No. 24 Year 2012, it is stipulated that if the applicant of the IUP is foreign capital company or foreign capital Investor, the Minister of ESDM approval is required; Thus, since the IUP is granted by the Bupati, than an IUP cannot be granted by the Bupati to a foreign Capital Investor;

• We can see that in every country now a days, the Government in the Region of the Development Countries based on the development of China, India, Brazil, Russia,  South Africa are gaining confidence in encouraging the Local Participant or Local Investors including Indonesia to play a significant role to actively participate  in the business operations including in the Mineral and Coal business which could be shown by KPC in Kalimantan which is owned by Bumi Resources as the Indonesian Owned National Participant in the Coal Mining Project in Indonesia; 

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• This trend is also stimulated by the Growing Awareness of the Indonesian Democracy, which had encourage the Indonesian Investors to actively participate not only as broker, but as a real player in the Mining Minerals and Coal Industry in Indonesia; Time will demonstrate whether the Indonesian Player can really use this momentum in the Mining of Hard Mineral and Coal business operations, which is inspired by the Indonesian Investors in the Oil and Gas, such as Medco, who are  really growing and playing an important role in the development of the Indonesian Oil and Gas Sectors; 

Technology, Financial engineering and Knowledge is not only owned, controlled and managed by the Former players, but is beginning to be tapped by the Local Investors from the fast Growing Development Countries, which can be seen by the planning of establishment of  Alternate Banks by BRICSA (Brazil, Russia, India China and South Africa);

Jakarta, 2 April 2012

Agung S.Suleiman

                             
    

Enjoying Being Independent Business Lawyer

• I can set up my own definition as to becoming success which is really unconventional and non-traditional  by setting up my own definition of being success, among others by gaining more flexible time depending on my own set of rules as to where and at what time I wanted to do my work.This concept of paradigm is pursuant to the Book which I am now reading called Career Success without a Real Job written by Ernie J.Zelenski

I managed to be more independent by having my own Special Purpose Vehicle (SPV) which is an Independent Law Firm now called  Suleiman Agung & Co ( SACO LAW FIRM); 

• After having been for more than 13 & a half  Years experiencing running this Law Firm, I realize that it really depends on our-self willingness and choice as to what do you want and prefer to be concentrating and focusing on your Career Success, which definition  of Success is being freely  set- up and design by you your self and no other person. 
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• You are the only person who really knows what type of career path that you wanted to establish and venture in this life; Besides working you must also have "time" to  enjoy your life and being alive in this world; You have to venture and sometimes make certain experimental moves in your life;

• In order to optimize your professional ideas in your field of professional you must really enjoy what you are doing and not because of being forced by others  perception in electing the life style that you really like;

The important and significant element that you have to do is that You must establish your hours of experience and track records  in serving your Clients which will certain be the Valuable Assets that you like to focus and sell as your expertise to your Clients;

• You must seek the ways as how you can grab the  opportunities  to demonstrate your expertise which you master and are in  confidence with, which will  benefit and be an  advantage as an Added Value to your Client's business goals and objectives;

From my self experience in developing my so called Professional Career, I noticed that this can be achieved by each and everyone  of  us,  if you are having the freedom to set up your own established  flexible time and place which you allocate,  to learn  the merits and core of your Clients business transactions;

• You have to focus with your best effort for example to make certain Brief Executive summary through a Scheme and a systematic bullet points at the right time and moment  which could help Giving Snapshots and Quick Glance of the Important Issues that your Client has to be aware of, because time is of the essence to make the right and proper business decision;

Well the above are some of the tips that I would like to share with you in the beginning of this Year of 2012, and I wish you a very Happy New Year 2012, New Hope, New Venture, New Spirit, New Venture

Jakarta 2 January 2012
Agung S.Suleiman 

EXITING EXPERIENCED INDONESIAN OIL LAWYER

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Being experienced as Business Lawyer  in the Oil Ventures in Indonesia is really quite an exiting experience. The difference being experienced as lawyer for Indonesian Local Oil Companies who is surviving and struggling to survive and being  lawyer serving legal services for Big Oil Foreign Companies is relating to the funding capability  in their Oil Business Venture.

•   Even though we are in Indonesia, Indonesian Oil Companies who are operating in Indonesia starting from Exploration can be counted. Usually Indonesian Oil Companies who started venturing in the Oil Business in Indonesia started by acquiring ex-Oil Blogs, which had been sold by the Foreign Oil Companies which are already in the Exploitation and Producing stage.  By doing this the Indonesian Oil Companies can manage to show to the bankers that they have cash-in from the selling of the Crude oil for a certain period of time . 

There is also an Indonesian Oil Company who started in the Oil Ventures in Indonesia, after they had   experience running a Drilling Company, where they have already owned certain numbers of Rigs as well as cash in revenues which can be used as collateral for the repayment of their  loans to their Banks. This Oil Company was also formerly at the early stage Managed and Chaired by an Indonesian Expert Oil Top Leader namely John S Karamoy  who had experienced in running big Foreign Oil Company such as Stanvac  and Vico Indonesia,  who is now the founder of JME which my SACO Law Firm is presently in association with.

• I am lucky enough to be experienced as an Indonesian Oil Lawyer who had assisted and were also being involved in reviewing the Sales Purchase Contracts of this ex Foreign Oil Blog acquired by said Indonesia Oil Company, when I founded and set up my Suleiman Agung & CO ( SACO Law Firm).  

Several contracts and transaction were prepared, which includes reviewing the Sale Purchase Stocks, Farm in and Farm Out, Joint Operating Agreement ( JOA), Legal Due Diligence, providing Legal Opinion. There are also Indonesian Oil Companies who are selling out certain percentage part their of their Participant Interests to other Oil Investors in order to remedy and balance their cash flows.      

• In the oil business practices, if the Oil are still in below the ground however located already in the proven and exploitation stage, 1 (one) barrel  is usually valued to be USD1 dollar. If such oil is still located in the exploration stage however is located near by the structure of the exploitation stage shall be valued 30 cents United States Dollars. 

For the purpose of calculating the expected oil reserved,  a study is usually conducted by several expertise consultant to predict the volume of Crude Oil Reserves or Deposits  in a certain Oil Contract Area. This is usually detected by the Oil Reservoir Engineers and Geologist team. Accordingly, the Investors in the Oil Business have to be supported by these expertise engineers and chaired and Lead by the Expert Leader Management of such Oil Company. 

• Such team have to be solid and having real experience in their fields combined with the operation team members as well as the Finance and Legal Expertise to team up such Solid Working Team. One of the significant element is that somebody has to be recognized by the Bankers or Financial Institutions who financed such Oil Ventures which is usually performed through the Holding Companies, but the Oil Company has to be headed by a Certain Expert Management Leader who is already recognized by said Bankers through his track records of his capability and ability to manage and make the Oil Business Operations succeed  in generating Cash-In,  through sustainable production and selling such Crude Oil to the Buyers in a commercial and bankable cash in for a certain period of time. 

In practice, members of the Participant  Interest Holder,  is usually more than one Company, which one of the member of the Investors must also have some self funding sources to back up the financing of the Oil Ventures in addition to the Funding from the Bankers, because in the early stage of the exploitation and producing, several new exploration wells within the Oil Block under the Contract Area of such PSC Contracts with BPMIGAS,  must also still be  founded  and drilled to be further developed for producing to maintain the sustain producing,  lifting and selling of the Crude Oil for the cash in.....      

Jakarta 29 October 2011 - Agung S.Suleiman Partner of  SACO LAW FIRM  
                                                                          in association with   JME

   

Professional Business Lawyer

There are many challenges faced by a Professional Business Lawyers; Before you can advise your Clients you have to be sure that you know what you are talking; Your integrity and professional  reputation is on stack;  As an Indonesian Business Lawyer who had practiced more than 30 Years since 1979 - 1980, you realized that you firstly have to trust your self before you make any legal advise; It is not a matter of pride but more of a professional, where quality is more important than quantity;    

Having been in the real practice as Business Lawyer for more than 30 Years, you tend to love your professional work;   It is really exiting in handling legal aspects in a business community; The art of being independent in providing your legal advice needs some experience of real practice and down to earth matters;   

You have to master and increase your legal knowledge and broaden your mind; You have to research all the legal aspects from various angles of the matter surrounding the business matters of your Client; You must also be aware on the sensitivity of the business goals of your Client; At the same time Good Corporate Governance must be the basis of your target to achieve your integrity and professional character;

You have to be ready to be challenged by your Client, to the legal opinion that you provide and must really digest  the wishes and desires that your Client want to achieve;

You are the master of your mind in providing  your legal opinion;  You have to lead your Client  in your legal professional guide,  after you have really studied the rules,  policies, and master the nature of the contracts and  transactions to guard the business goals desired to be achieved by  your Client; 

Those are some of the tips to be considered and observed by a Business Professional Lawyer in dealing with matters face by your Clients;

Jakarta, August 27, 2011

Agung S.Suleiman 

Quite a While

Yes, it has been quite a while that I was not on the air in writing article in this Blog;  Apparently, I was really busy with the legal works in facing the implementation of the Commercial Production of an oil Area in Indonesia, where we have to strive hard in completing all the facilities production which includes the Gathering Storage Tank of the Crude oil from the Commercial Field  to be transported either by Pipeline, or trucks to the Gathering or Storage Tank at the Terminal Port  to be further shipped to the Tanker or Barge;  

    It is really interesting and quite challenging because under the Indonesian system, there are instances where the Idle Oil Production Facilities can be shared by other Oil Companies, where no profit basis is applied, and sharing costs of the Capital Expenses and Operation Expenses, shall be shared, through the oil throughput arrangements, relating to the sharing usage of such Production Facilities;

As a Business Lawyer you are involved in the legal aspects of this arrangements, where we have to be part of the team in drafting and finalizing this Oil Production Facilities Sharing Agreements.      

Well the operations and commercial professionals staffs must also be involved in completing these production sharing facilities arrangements;    

The target goal of the Oil Production Stream to enable in selling the Crude Oil is most challenging and the Financial aspects are really critical and plays an important role;   

Jakarta, 18 August 2011
Ags