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29 Jul 2013
Foreign Shares Status in Mining Business


Mining business in Indonesia is one of promising business to gain a huge profit. However the investors shall understand that its business is complicated and so tricky. The new Investment law opens foreign investor to own mining activity permit (IUP) through the PMA Company.

Regulation and discretion of PMA Mining Company

President Regulation No. 36 of 2010 on Negative Investment List and its details explained in Fix Classification of Business Activity in Indonesia are not restrict PMA Company with 100% foreign shares to obtain IUP. However based on our limited information obtained from Indonesian Investment Coordinating Board (BKPM) staff verbal information, BKPM under its discretion has a power to decide restriction of foreign shares ownership in PMA Mining Company. BKPM will assess the feasibility of foreign shares ownership in PMA Mining Company under prior advices from respective Department. Therefore it may cause foreign shares ownership less than 100% in PMA Mining Company.

In addition BKPM has also discretion to decide the total of required minimum capital of the PMA mining company. Pursuant to Indonesian company law, minimum issued capital in the company is in the amount of Rp. 25.000.000 (twenty five million rupiah). Therefore PMA Mining Company shall find the other capital to met such required minimum capital determined by BKPM.

Law No. 4 of 2009 requires divestment condition to the PMA Mining Company after 5 years of its mine production. Article 97 Government Regulation No 23 of 2009 concerning Implementation of Mineral and Coal Mining Business Activities stipulates that the PMA Mining Company must divest 20% (twenty percent) of its shares to Indonesian investors. Its law is prohibited to former foreign shareholders to buy back their shares and effect local shares less than from 20% shares in its PMA mining company.

In the compliance of reporting obligation, PMA Mining Company has obligations to report its mining activity regularly to the respective mining department. In addition similar to the other Investment Company in Indonesia, PMA Mining Company shall report its AoA amendment to the Ministry of Law and Human Right, BKPM, and the Directorate General of Coal and Minerals (if required). (dj)

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