GOVERNANCE IN MINERAL AND COAL MINING
IN INDONESIA
Panelist on Launching of Regional Framework on Extractive Industries Government
Dr. R. Sukhyar
(Director General of Mineral and Coal)
Ritz Carlton Hotel, November 28th, 2014
DIRECTORATE GENERAL MINERAL AND COAL
MINISTRY OF ENERGY AND MINERAL RESOURCES
OUTLINE
I.
BACKGROUND
II.
GOVERNANCE CONCEPT IN MINERAL RESOURCES DEVELOPMENT
III. CURRENT CONDITION
IV. INDONESIAN MINING POLICY
V.
INVESTMENT OPPORTUNITY
VI. CLOSING REMARKS
2
I. BACKGROUND
3
CONSTITUTION OF THE REPUBLIC OF INDONESIA IN1945
ARTICLE 33 PARAGRAPH (3):
Land and water and the natural riches
contained therein controlled by the state
and used for the people's welfare.
GOVERNMENT FUNCTION
In the context with the execution of mineral right of the State, the Government has
functions as follows
• Policy setting
• Regulating
• Licensing
• Supervising
• Overseeing and monitoring
Shifting of Paradigm
Development of Natural Resources
Old Paradigm
New Paradigm
Exploitative,
Resources for
Revenue
Resources for
Sustainable
Development: pro
growth, pro job, pro
poor , pro
environtment
Demand Driven
Resource Management
6
I. BACKGROUND (2)
MINERAL ISSUES, EVOLUTION PRECESS AND CONCERN ON SUSTAINABLE DEVELOPMENT
Sumber : Suslick & Machado, 2001; Shields & Solar, 2006)
“Mining activity must be in line with sustainable
development principle”
7
II. GOVERNANCE CONCEPT AND STAKEHOLDERS IN MINING
8
II. CONCEPT OF GOVERNANCE (1)
CONCEPT OF GOVERNANCE
Governance in mineral resources development is
defined as a system operating in accordance to the
effective and efficient policy, law and regulation
which inter-connects stakeholders with different
functions for the benefit of people’s prosperity at large.
Every stakeholder must act and perform its function in
accordance to
the principles of transparency,
responsibility, accountability and fairness.
9
MINING STAKEHOLDER IN INDONESIA
MForest
Regent
Police
Governor
MTransport
MWorker
Nuclear
Agency
MEMR AS PRINCIPAL
OF MINING LICENSE
Ministry of
Communication
MJustice
and Law
MPublic
Worker
MFinance
MTrade
Oil and Gas
Company
MDefence
MSpetial
Planning
10
Investment
Board
Continuous Improvement if MEMR as
Principle of Mining License:
1. Streamlining approvals
2. Strong coordination among
agencies, government up hold the
MEMR as the principal
3. Simplification of procedures in
Bureaucracy.
4. Government effort for
simplification of the mining
license
5. Increase entrepreneur’s
awareness through a variety of
regulations
II. CONCEPT OF GOVERNANCE (2)
Resource development is designed to empowering local community
and providing a fair return to community based on principle:
 Equitable
 Efficient
 Sustainable
 Predictable
 Tranparent
11
III.CURRENT CONDITIONS
12
3.1 INDONESIAN OUTLOOK
Demand for energy, materials, water and other key resources
demand is likely to increase rapidly
Indonesia today…
13
Source: McKinsey Global Institute, 2012
…and in 2030
3.2 MINERAL RESOURCES AND RESERVE
NO
RESERVES
(MILLION TON)
ORE
ORE
METAL
0.007 3,225
0.003
METAL
Primary
Gold
7,670
2 Bauxite
1,265
529.3
583
238
3 Nickel
3,565
52.2
1,168
22
4 Copper
17,526
106.2
3,126
28
5 Iron
712
401.8
66
40
6 Iron Sand
2,117
425.4
174
25
7 Manganese
15
6.3
4
3
625
449
13,755
7.3
2.1
0.8
6
801
3,253
1
Ferro and Associates : Fe, Nickel, Cobalt, Chromit , Mangan, Molibdenum,
Titanium
Precious Metal
: Gold, Silver, Platinum
Base Metal
: Zinc, Cupper, Tin, Lead, Mercury
Light and Rare metal : Bauxite, Monasit
Type
RESOURCES
(MILLION TON)
8 Zinc
9 Tin
10 Silver
0.8
0.4
0.0
Source : Geology Agency, MEMR, 2013
14
3.3 COAL RESOURCES AND RESERVE
Very High (> 7.100 kal/gr)
High
(6.100 - 7.100 kal/gr)
Medium (5.100 - 6.100 kal/gr)
Low
15
(< 5.100 kal/gr)
Source : Geology Agency, MEMR, 2013
RESOURCES : 120.5 Billion Ton
RESERVES : 31.4 Billion Ton
3.4 INDONESIAN COAL AND PRODUCTION RANK
NO
COMMODITY
RESERVE
PRODUCTION
LOCATION
WORLD RANK
(PRODUCTION)
1
Coal
31,4 Billion Ton
421 Million Ton
Sumatera, Kalimantan
6th
2
Tin
801 Million Ton
88 Thousand Ton
Sumatera
2nd
3
Nickel
1,168 Million Ton
60 Million Ton
Sulawesi, Maluku,Sumatera,
Papua
2nd
4
Copper (Metal)
28 Million Ton
450 Thousand Ton
Papua, Maluku, Nusa Tenggara
5th
5
Bauxite
583 Million Ton
56 Million Ton
Kalimantan
5th
6
Gold (Metal)
0.003 Million Ton
59 Metric Ton
Kalimantan, Sumatera, Maluku,
Papua
7th
Indonesia has a world rank mineral and energy
resources, that can be used to create benefit in the form
of investment opportunity, job, education, welfare, etc
16
3.5 COAL AND MINERAL PRODUCTION (2009-2014)
No.
Commodity
1.
Copper (Metal)
2.
Gold
3.
Tin
4.
Unit
2009
2010
Plan For
2011
2012
2013
2014
2014*)
Plan For
2015
Thousand Ton
999
878
543
448
450
640
166
311,8
Ton
104
104
76
75
59
87
26
75
Thousand Ton
60
48
42
95
88
88
10,8
70
Nickel Ore
Million Ton
6
7
32
41
60
3,5
3,8
4,2
5.
Bauxite
Million Ton
5
16
39
30
56
1
2,8
4,3
6.
Iron Ore
Million Ton
5
4
12
10
19
7
1,1
6,4
7.
Coal Production
Million Ton
254
275
353
407
421
397
346
425
a. Coal Export
Million Ton
198
210
287
340
349
302
263,5
301,75
b. Coal For DMO
Million Ton
56
65
66
67
72
95
82,5
123,25
Note:
*) : - Realization up to Semester 1st, 2014
- Realization for Nickel Ore and Bauxite on January 2014
- Mineral production Plan for 2015 already include metals as refining and processing results
**) : Realization of Coal Production until the end of October 2014
17
3.6 TYPE OF STATE REVENUE
TAX/NON TAX OBLIGATION TARIFF
TYPE
IUP
CoW
CCoW
Landrent/Deadrent
1, 2, or 4 USD/ha based on phase
operation
2 – 4 USD/Ha (prevailing)
2 - 4 USD/Ha (prevailing)
Royalty
Open pit : 3,5, or 7% based on calorie
Underground :2, 4, 6% based on calorie
Metals vary from 1-4%
3- 5 % (prevailing)
13,5 % (naildown)
Corporate Tax
25%
25-45% (naildown)
25-45% (naildown)
Note :
•Prevailing based on Government Regulation No. 9/2012
•Naildown based on Contract
•CoW : Contract of Work (KK)
•CCoW : Coal Contract of Work (PKP2B)
18
3.7 CONTRIBUTION OF MINING SUB SECTOR TO NATIONAL DEVELOPMENT
STATE REVENUE
MINING STILL
AS ECONOMIC
PRIMEMOVER
LOCAL
EMPLOYMENT
19
MINING
SUB
SECTOR
INVESTMENT
COMMUNITY DEVELOPMENT
V. INDONESIAN MINING POLICY
20
5.1 GOVERNMENT AUTHORITIES OF MINERAL AND COAL MINING
MINERAL
RIGHT
REPUBLIC OF INDONESIA
POWER FROM PEOPLE
GOVERNMENT
DECONCENTRATION
PROVINCE
- To provide on supporting development and and utilization of
mineral resources
- To manage mineral resources across regency, 4 to 12 nautical
miles, and that is not implemented by the County / City.
- To conduct training and research on mining
REGENCY/CITY
• Regulating, Licensing, Supervising, controlling of Mining Activity
• To manage mineral resources in regency/city
ECONOMIC
RIGHT
21
ECONOMY ACTORS
Related Law and
regulations:
Law No 32/2004;
Law 4/2009, etc.
REGIONAL REGULATION
DECENTRALIZATION
- To determine policies, guidelines, standards,
MINING RIGHT
procedures and
criteria
- To supervise implementation of autonomy policy
- To manage Mineral Resources
- To develop and arrange internasional cooperation/aggrement
Preamble and
Article 33 of the
Indonesia’s 1945
Constitution
5.2 LEGAL STANDING
1. Article 33 Indonesia Constitution 1945:
Verse (1) The economy shall be organized as a common endeavour based upon the principle of the family
system.
Verse (2) Branches of production which are important for the State and which affect the life of most people
shall be controlled by the State.\
Ayat (3) Land and water and the natural riches contained therein shall be controlled by the State and shall
be made use of for the people welfare.
2. Article 169 Law No 4 Year 2009:
a.
CoW and CCoW thhat already exist prior to the effectiveness of this Law shall remain valid until the
contracts/agreements expire.
b.
The terms that are stated by articles of CoW adn CCoW as intended by point (a) shall be adjusted at
the latest 1 (one) year of the promulgation of this Law, with the exception of state revenue.
c.
Exception of state revenues as intended by point (b) shall be an effort to increase state revenue.
Elucidation of Article 169 (b) : All articles that are contained in CoW and CCoW must be adjusted to the
Law.
22
5.4 MINING ENTERPRISE REGULATION
SUBSTANCE
TERM
1. Government
Position
Mining permission given through tender by
local government after area designated by
Minister
2. Business Actor
Position
Business entities is under the control of the
government, omitting mining contract system.
SUBSTANCE
3. Enterprise (cont)):
• Area
For production stage:
•IUP Metallic Mineral max 25.000 ha,
(Foreign Enterprise, min. Auction
5.000 ha)
•IUP Non-Metallic Mineral max. 5.000
ha
•IUP Coal max 15.000 ha, (Foreign
Enterprise, min. Auction 5.000 ha)
•IUP Rocks max 1.000 ha
• Processing & Refining
Required
3. Enterprise:
• Form
Mining License (IUP, IPR & IUPK)
(Contract of Work and CCoW- Coall contract
to be Licence after contract ends).
• Tenure:
operation
period
20 years (can be extended 2 x 10 years)
• Divestment
obligation
After 5 years of production, Minimum required
to divest 51% (integrated smelter 40% and
undergroung mining 30%)
• Area
For pre-production stage :
23
4. Resource Management
•IUP Metallic Mineral max 100.000 ha, (Foreign
Enterprise, min. Auction 5.000 ha) cat: PP
28/2013 minimal lelang PMA 5.000 ha
•IUP Non-Metallic Mineral Max 25.000 ha
•IUP Coal max 50.000 ha (Foreign Enterprise,
min. Auction 5.000 ha),
•IUP Rocks max 5.000 ha
TERM
•
•
•
Must manage properly
Increased value added in the
country
Prioritization of Domestic Needs
5. Sanction to the licensor
Sanction available
6. Regional authority
Reduced, the Minister set working
area
7. Environment Protection
8. CSR, Right of
community
GOVERNANCE IN MINING (LAW NO 4/20009)
1. GOOD GOVERNMENT GOVERNANCE
- Clarity in power and authority division between the national government and regional government either
province and regency/mayor
- Open system of cadastre and tenament
- Transparant resource management and open mining and geology data
- Fair and transparent licensing system
- Put sanction to the authorities who do not comply the the law and regulation
- Supervise, oversee and monitoring performance of local government in mining
- Supervise, oversee and minitor mining companies
- Provide guidance to people’s mining
2. GOOD CORPORATE GOVERNANCE
- Comply to law and regulation, and good mining practices
- CSR and community development
- Apply the use of local content
- Regular reporting
- Protect environment, environment assessment, land reclamation and post mining
- Provide public, employee and installation safety and health
- Conservation
- Value added
5.5 GOVERNMENT REFORM (NAWA CITA) OF JOKOWI-JK
SINKRONIZATION
OF CENTRAL AND
LOCAL
GOVERNMENT
25
MINING LICENSE
SIMPLIFICATION
VALUE ADDED/
DOWN STREAM
PROCESSING
RENEGOTIATING OF
CONTRACT (CoW,
CCoW)
OPTIMALIZATION
OF STATE
REVENUE
5.6 MINING POLICY DIRECTION
Implement fulfillment priority of coal for domestic needs
1
Provide certainty and transparency in the activities of
mining (Mining Law supporting regulations, sanctions
violations, etc.)
2
3
POLICY
DIRECTION
4
5
6
26
To implement supervision and guidance
To encourage the increase of investment and revenue
To encourage the development of value added products of
mining commodity (eg processing, refining, local content,
local expenditure, labor and CSR)
To maintain environmental sustainability through
environmental management and monitoring (including
reclamation and post-mining)
5.7 MINERAL POLICY AFTER GOVERNMENT REGULATION 1/2014
1. Ore / raw material can not be exported
2. Holders of IUP Operation Production of mineral (metal, non-metal, and rocks) may export
a certain amount of processing product that have met the minimum limit processing.
3. Holders of Contract of Works who have been doing refining works can sell abroad a
number of its processing products.
4. Processing products of metallic mineral that can still be sold abroad, namely copper
concentrates, iron concentrates, iron sand concentrate / pellets, manganese concentrate,
lead concentrate and zinc concentrate. However, these kind of commoditities can only be
sold abroad until refining facility is completed - no later than three (3) years from the
promulgation of this Regulation.
5. Minimum quality of processing and refining has been actively consulted with universities,
research institutions, and business associations, as well as relevant ministries and agencies.
The minimum quality has been written in the Minister of Energy and Mineral Resources No.
1 of 2014 on Added Value Through Mineral Processing and Refining Mineral in the
country .
6. Other mineral commodities, such as: tin, nickel, bauxite, gold and silver can only be sold
abroad after the refining. It should be born in mind that those minerals have been refined
well before the Law. 4 of 2009 issuance.
27
5.8 MINISTER of EMR DECREE NO.1 YEAR 2014
1. Products resulting from PROCESSING METALLIC MINERAL that can be
exported are: copper concentrate, iron concentrate, iron sand
concentrate/pellet, manganese concentrate,lead concentarte and zinc
concentrate.
2. Metallic mineral commodity such as tin, nickel, bauxite, gold, silver, and
chromium ONLY can be exported after HAS BEEN REFINED.
3. Regulate minimum quality of processing and refining (Attachment 1 :
Metallic Mineral Commodity, Attachment 2 : Non-metallic Mineral
Commodity, Attachment 3 : Aggregate/Stone Commodity).
4. Contract of Work Holders, Metallic Mining Licence Holders which are
in the production stage, after 3 (three) year period since issuance of
this Minister Decree, can only export products that have been refined
in accordance with minimum quality of refining as stated in this Minister
Decree.
28
5.9 MINERAL AND COAL DOWNSTREAM
Beneficiation policy:
without more downstream activities, Indonesia will miss the opportunity to increase employment and profit
margins on the value chain because of the absence of downstream processing industries.
Copper
Concentrate
Anodes
Cathodes
Various
Coal
Nickel
Nickel ore
Nickel matte , Ferronickel
High grade nickel products
Iron steel
Smelting
Iron ore
• Ore dressing
• Agglomeration
• Iron making
• Steelmaking casting
non-existing industry
29
Year
2014
Upgrading
Conversion
Downstream
• Hot
forming
• Cold
forming
Finished product
Applications
Due date for adjustment to minimum
beneficiation requirement
High-rank coal
•Active carbon
•Coking coal
•Gasification
•Liquefaction
VI. ON GOING ACTIONS FOR IMPROVING MINING GOVERNANCE
30
6.1 ON GOING ACTIONS MANDATED BY MINING LAW No 4/2009
1.
2.
3.
4.
5.
31
Renegotiation of Mining Contract
Restructurisation of IUP
Encouraging downstream processing and refinery
Optimazing state revenue
Establishment of Mining Area
6.2 DEVELOPMENT OF MINERBA ONE MAP INDONESIA (MOMI)
MINERBA ONE MAP INDONESIA
PEMILIK
IUP/KK/P
KP2B
PEMDA
M
E
T
O
KEMENHUT
& LH
D
E
DITJEN
PAJAK
P
E
N
DITJEN
ANGGARAN
DITJEN
BEA CUKAI
C
R
A
I
DITJEN
HUBLA
A
DITJEN
DAGLU
N
S I N G L E I D *)
INFORMASI UTAMA:
NAMA PERUSAHAAN, KABUPATEN/KOTA/PROVINSI, NOMOR DAN TAHUN SK, LUAS WILAYAH, TAHAPAN KEGIATAN, KOMODITAS,
TANGGAL SK, STATUS C&C, NOMOR SERTIFIKAT C&C, SINGLE ID
I N F O R M A S I
1. NPWP
2. DATA PRODUKSI DAN PENJUALAN
3. PNBP
4. DATA JAMREK DAN PASCATAMBANG
5. REKOM ET/SPE
NPWP
T A M B A H A N
1. NPWP
2. DATA
PRODUKSI
DAN
PENJUALAN
1. NPWP
2. DATA
PRODUKSI
DAN
PENJUALAN
3. PNBP
1. NPWP
2. REKOM
ET
1.TERMINAL
KHUSUS
2.NPWP
3.REKOM ET
4.PENJUALAN
REKOMENDASI
ET/SPE
*) IDENTITAS TUNGGAL UNTUK SUATU WILAYAH IUP (WIUP) TERDIRI DARI 16 DIGIT YANG DIGUNAKAN SEBAGAI KODE ACUAN SUATU WIUP DALAM INTEGRASI DATA LINTAS SEKTORAL ANTAR K/L
32
6.3 LICENSING REFORM
Mining License and Approval Simplification
Mining License
No
Instansi
Recomendation/
Certification
Mandatory
Optional
Mandatory
Optional
Mandatory
Optional
Total of Mining License
based on level of
Authority
License
Approval
1
MEMR Authority
4
12
24
13
2
1
56
2
MEMR Outhority +
Others Ministry
0
2
0
9
0
9
20
3
Other Ministry +
Local Goverment
11
9
1
1
3
0
25
TOTAL
15
23
25
23
5
10
101
EXISTING
Mining License
No
33
Instansi
Recomendation/
Certification
Mandatory
Optional
Mandatory
Optional
Mandatory
Optional
Total of Mining License
based on level of
Authority
License
Approval
1
MEMR Authority
3
6
8
7
2
0
26
2
MEMR Outhority +
Others Ministry
0
2
0
9
0
9
20
3
Other Ministry +
Local Goverment
11
9
1
1
3
0
25
TOTAL
14
17
9
17
5
9
71
MEMR Authority
MEMR Outhority + Others Ministry
PROPOSED
Other Ministry + Local Goverment
6.4 OPTIMALISATION OF STATE REVENUE (1)
6.4.1 Effort to Increase Royalty
1. Increasing royalty tariff on mineral and coal:
a. For Contract of Work (mineral) in according to Government Regulation No 9 Year 2012 from Copper
3,75%; Gold 1%; and Silver 1% increase become Copper 4%; Gold 3,75%; and Silver perak 3,25%.
b. Royalty of nickel matte from 0,9% become 2% and nickel metal from 0,7% become 1,5%. Royalty tarrif
will be increased according to increasing of metal price.
c. Planning to increase Coal rolaty from Mining Licence Holder based on quality of products and type of
operation:
− Under ground minng: calory below 5.100 k.kl/kg from 3% become 5%, quality 5.100 – 6.100 k.kal/kg
from 5% become 7% dand quality above 6.100 k.kal/kg from 7% become 9%.
− Open pit mining: quality below 5.100 k.kl/kg from 3% become 7%, quallity 5.100 – 6.100 k.kal/kg from
5% become 9% and quality above 6.100 k.kal/kg from 7% become 13,5%.
2. Increasing mineral and coal value adde to increase price and royalty.
6.4 OPTIMALISATION OF STATE REVENUE (2)
6.4.2 Governance Improvement
1. Establishment of benchmark price for mineral and coal to avoid transfer of pricing.
2. Increasing cooperation with relevant institutions (Local Government, Government Auditor (BPKP), State Auditor
(BPK), Ministry of Trade, Ministry of Finance) for:
a. Auditing fulfillment of royalty payment
b. Reconciliation of Production, Selling and Royalty
c. Data and information sharing among relevant institutions regarding export data (Ministry of Trade, Ministry of
Transportaion, and Custom).
3. Production and trading control:
a. To maintain competitive price of commodity;
b. Trading house for mineral and coal (exampel: Inatin for Tin).
4. Payment of royalty before shipment.
5. Integraton of data and informastion (Minerba One Map of Indonesia/MOMI).
6. Establishment of Export Port, mainly for Coal .
7. Improvement of Role of Surveyor .
8. Sanction for decreasing and delaying of royalty payment.
6.5 RECOMMENDATION
1.
2.
3.
4.
5.
6.
7.
36
Revision of Law No.4/2009 regarding mineral and coal mining
adopting to Law No.23/2014 regarding loclal Government:
- Governor Authority;
- Regent and Mayor Authority
Minerba One Map Indonesia;
Revision of Government regulation No.9/2012 regarding royalty;
Empowering of Mining Inspector;
Increasing of Capacity Building Unit For Public Services (One Stop
Services for Mining License, Online system for Royalty payment )
Assignment of officer (Custom, Port Authority, Local Government, and
MEMR) at designated port to ensure royalty payment before shipment
(Real time monitoring for Trading Commodities)
Performing the function of Ministry of EMR as the Priniple in mining,
meaning that related issues are coordinated and served by the ministry.
RECCOMMENDATION
1. Empowering and certifying competency of profession nad occupation in
mining
2. Empowering and certifying mining services in mining
3. Socializing national standard of resource and reserve assessment , according
to the international one.
4. Cooperation in resources development, establisment geology and mining data
in border area
5. Enriching geology and mining, laws and regulation, investment data and
information that has been developed by Asean Mineral and Coal Database.
Indonesia is the focal point of mineral database system.
6. Cooperation in establishing single mining cadastre and mining tenament
VII. CLOSING REMARKS
38
VII. CLOSING REMARKS
1.
Indonesia has mineral and coal resources and reserves that
still prospective to be exploited in the future both in the
upstream and the downstream industry as well.
2.
Obligation to increase added value domestically and
supporting regulations provide opportunity for
establihsment of mineral processing and refining plant in
Indonesia.
3.
Indonesia still needs big investment to develop the potency
on mineral and coal and encourages all private investment
from ASEAN countries, especially for mineral and coal
processing and refinery.
39
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