Essay by sukia_sunHigh School, 12th gradeB, September 2014

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8. Assessment of Industrial Regulations

General Guidelines

Industrial regulations may affect the operating costs, investment costs and the profitability.

This will also affect the logistics (transportation, warehousing, production machinery, production methodologies, etc.)

For certain situation, this will fundamentally affect the investment structure, financing structure as well as the investment decision.

Case #8

Mission: Assess the impact of the following policy changes:

Mining regulations in Indonesia

Before 2012

Raw ore could be exported out with minimal levy (i.e. approx. US$1 per ton)

2012 - Jan 2014

High export levy imposed on exported raw ore (i.e. additional export tax of 20% on "base price" determined by MOF)

After Jan 2014

Export of raw ore banned

Only processed material can be exported

* Amended mining regulation in 2012: Indonesian investors must hold > 51% of a foreign invested mine at the end of 10th years of its production.

* It was also reported in Sept 2014 that a Philippine senator has filed a bill urging a halt to exports of unprocessed mineral ores, similar to the ban by Indonesia.

In 2009, the Indonesian Parliament passed a new Mining Law (Law No.

4 of 2009 on Mineral and Coal Mining). The Mining Law has two aspects which have caused a dampening effect on foreign investment in the resources sector. These are:

export of unprocessed minerals after 12 January 2014 is prohibited, requiring mining companies to process and refine their product in Indonesia

accelerated divestment requirement, under which foreign shareholders in companies holding a mining production permit are required to divest shares to achieve majority Indonesian ownership within 10 years from the commencement of commercial production.

Adding Value Requirement:

The Mining Law requires all mineral ores to be processed in Indonesia before being exported. Under the law, raw ores and semi-processed minerals with purity levels...