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Jakarta, April 17, 2012
NOKE KIROYAN
ozmine2012 IA – CEPA: Is there room for the Mining Industry?
2
Milestones in development of IA-CEPA
29/09/2005
Bilateral Trade and Investment Framework
(TIF) signed by both Trade Ministers.
VIENTIA
NE
CA
NB
ERR
A
JAK
AR
TA
SYDN
EY
JAK
AR
TA
JAK
AR
TA
LEGIA
N
10/05/2007
25/06/2007
19/02/2009
02/11/2010
20/04/2011
19/11/2011
Meeting of the
bilateral TIF Expert Groups.
TIF Expert Groups reported
back to the Trade
Ministers, joint
feasibility study to follow.
Final report of TIF Expert Groups
submitted to the Trade
Ministers.
Indonesian President
and Australian
PM announce commence-
ment of nego-
tiations.
Initial IA-CEPA
three-year beef
project launched, KADIN –
ACCI MOU signed.
Joint study Indonesian- Australian business (KADIN – ACCI) an-nounced.
IA-CEPA initial work will focus on four areas
Agriculture
Minerals
Services
Green economy
3
Indonesia is basically an
inward-looking country,
preoccupied with itself.
Australia is an outward-looking country, on the
lookout for opportunities
outside its borders.
While there are a lot of complementarities, the biggest difference between the two is that …
4
Article 33 of Indonesian Constitution
1. The economy shall be organized as a common
endeavor based upon the principles of the family
system
2. Sectors of production that are important for the country and affect the life
of the People shall be controlled by the State
3. The land, the waters and the natural riches
contained therein shall be controlled by the State and
exploited to the greatest benefit of the people
5
National Policy-Making Process
Perception of Good of Community
Public Opinion
Ideology
Economic, Social and Political
Circumstances
Governments
Political Attitude
POLITICAL WILL
GOAL: GOOD OF
COMMUNITY
Policies and Strategies
6“Negotiating Mining Agreements: Past, Present and Future Trends,” Danièle Barberis, 1998
Main Domestic Factors Influencing Political Will
7“Negotiating Mining Agreements: Past, Present and Future Trends,” Danièle Barberis, 1998
The economic system and general state of the national economy
Domestic political factors, such as the position of different political parties with regard to foreign investments in general and foreign mining investments in particular
Government priorities and objectives
Internal pressure originating from public opinion and expectations
National ideology and/or philosophy
The personality of those in power
The history of previous dealings with transnational mining companies (TMCs)
The political system
Current Indonesian government policies on mining
Prioritize utilization of coal and minerals for domestic needs
Provide certainty and transparency
in mining activities
Improve supervision and
sustenance
Encourage investment and state revenues
Pursue added value from commodities (processing, local
content, employment, CSR)
Preserve environment
through management and
monitoring
(Workshop on Mining and Reporting of Mineral and Coal Resources, Directorate General of Minerals and Coal, Jakarta, 1 March 2012)
Latest possible disincentives for Australian mining companies
9
Government Regulation No. 24/2012 increased
divestment obligation to
51% from previously
20%
MEMR Regulation
No. 7/2012 on Increase of
Added Value
Revision to Government Regulation No. 23/2010
The suddenness of its implementation date (May 2012) caught many by surprise
What may be done to mitigate
10
Government Regulation No. 24/2012 increased
divestment obligation to
51% from previously
20%
MEMR Regulation
No. 7/2012 on Increase of
Added Value
• Enable mining companies to divest in stock market
• Find suitable strategic partners in the longer term
• Negotiate with MEMR deferral of submission date of plan
• Coal and gold mines largely unaffected anyway
Suppliers of products and services to the mining industry ……………..
1111
…remain unaffected by ownership issues and may even benefit from increased valued added in Indonesia
12
The way forward for IA-CEPA: find common ground for mining in both countries
Both governments
need to be involved actively
A viable agreement
cannot be one-sided what can Australia give in
return
Institutions on both sides must
be involved (ACCI/AusIMM
and KADIN/ PERHAPI/ IMA,
ICMA, IAGI)
Capacity building may facilitate in finding common
ground
Summing up …….
Multi-stakeholder involvement and reciprocity absolute prerequisites
There is room for the minerals sector in IA – CEPA but work needs to be done
IA – CEPA still has a long way to go
THANK YOU
PT KOMUNIKASI KINERJA
Menara Karya, 10th Floor Suite HJl. HR Rasuna Said Blok X-5 Kav.
1-2Jakarta 12950 – INDONESIA
T: +6221 5794 4694F: +6221 5794 4696
