120417 nk ozmine 2012

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

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