GOVT TO ISSUE REGULATION ON MINING COMPANIES' DIVESTMENT
Posted on October 05, 2015 on 11:51:15 WIB
The government will soon issue a ministerial regulation that will provide details of divestment to be performed by mining companies as part of deregulation policies to spur economic growth.
The Energy and Mineral Resources Ministry's secretary-general, Teguh Pamudji, said the ministerial regulation would provide a broad explanation of a new government regulation that would replace existing Government Regulation No. 77 issued in 2014.
Teguh added that details of the divestment requirement should be explained in a ministerial regulation, which usually covers more technical aspects than a government regulation.
Also, he said, by issuing a regulation under a ministerial regulation, any changes in the future could be made easier.
"The new government regulation will be issued as early as next week and will be followed by a ministerial regulation," he said.
Teguh revealed there would be a revision to the percentage of share a mining company must divest. However, he declined to mention the exact change.
He added that the classification of mining activities, such as underground and integrated mining activities, would be maintained.
Under the existing Government Regulation No. 77, which was the third revision of regulation No. 23 issued in 2010, mining firms that are a foreign investment company holding permits or special permits, known as IUP or IUPK, are required to divest their shares to Indonesian shareholders at a range of between 20 to 51 percent of total shares in certain periods as regulated by the government.
The range of divestment percentage is divided by the scale of the mining firms' activities. For mining firms that only performing general mining activities, the percentage of divestment starts at 20 percent of total shares and has to be performed by the sixth year of operations.
The maximum share to be offered is 51 percent, the divestment of which has to be performed by the tenth year of production.
For mining firms that perform not only mining activities but also integrated processing or refining activities to produce higher-added-value products, the divestment ranges from 20 percent by the sixth year of operation to 40 percent after 15 years of operation.
For mining firms performing underground mining activities, the divestment is 20 percent after five years of operation, 25 percent after 10 years and 30 percent after the 15th year.
Meanwhile, mining firms holding mineral contract of works or coal contract of works that have been operating in the country for more than five years must start divesting their shares within one year after the government regulation is passed. Therefore, mining firms such as PT Freeport Indonesia, a subsidiary of US-based Freeport-McMoRan Inc., are scheduled to release as many as 20 percent of its share to be owned by Indonesian shareholders starting October.
The government currently owns 9.36 percent of Freeport Indonesia. The company has to divest another 10.6 percent to meet the regulation by this October.
Earlier, State-Owned Enterprise (SOE) Minister Rini Soemarno said that SOEs would be endorsed to absorb stake divested by Freeport Indonesia. Under the current regulation, divestment of the mining firms can be absorbed by the central government, the provincial and regency administration, state-owned enterprises and local administration-owned enterprises as well as national private firms.