Spotlight On...

Contact Dr. Mohamed Idwan (‘Kiki’) Ganie

Managing Partner Lubis Ganie Surowidjojo

Menara Imperium 30th Floor Jl. H. R. Rasuna Said Kav. 1 Kuningan Jakarta 12980, Indonesia

Tel: +62 21 831-5005, 831-5025 Email: ganie@lgslaw.co.id We: www.lgsonline.com

The Mining Industry SPOTLIGHT ON...

Dr. Mohamed Idwan (‘Kiki’) Ganie, Lubis Ganie Surowidjojo

“The natural resources sector, and in particular the mining industry, have seen a number of policy changes that appear spurred on by populist sentiment, a trend that is expected to continue in the near future”

M Dr.

ohamed Idwan (‘Kiki’) Ganie is the Managing Partner of Lubis Ganie Surowidjojo (LGS). He graduated from the Faculty of Law of the University of Indonesia

and holds a PhD in Law from the University of Hamburg. Dr. Ganie is a Chairman of the Association of Indonesian Anti-Trust Lawyers, a member of the Regional Panel of the Singapore International Arbitration Centre (SIAC), a fellow (FSIarb) of the Singapore Institute of Arbitrators, and a Panellist of the Kuala Lumpur Regional Centre for Arbitration (KRLCA).

Dr. Ganie has more than 30 years of legal experience, and specializes in

commercial transactions and

commercial litigation, including alternative dispute resolution and has acted as an expert in a number court and arbitration proceedings.

Ganie’s international commercial transactions

and litigation clients include: Goldman Sachs (US), Temasek Holdings (Singapore), Hutchison Whampoa (Hong Kong), and Mitsui (Japan).

In the course of Lubis Ganie Surowidjojo’s (LGS) more than 29 years of service, we have secured our position as the premier Indonesian corporate transaction and commercial litigation law firm. This combination of commercial law experience and litigation uniquely positions LGS to deal with the full range of commercial issues faced by our clients, who include domestic and multinational corporations, public and private companies, Government instrumentalities and State Owned Enterprises.

Q

How has the mining industry developed in recent years and what do you attribute

these changes to? Mining is currently undergoing the implementation of

the 2009 Mining law which mandated divestment of 51% to Indonesian parties and is set to require domestic processing of minerals in the immediate future (unless the policy is reversed due to lack of domestic capacity, as appears possible).

Q

What challenges are currently being faced by the industry?

The natural resources sector, and in particular the mining industry, have seen a number of policy changes that appear spurred on by populist sentiment, a trend that is expected to continue in the near future. A specific challenge this creates is that there appears to be something of a wait and see approach in certain parts of the industry as a result, which is further complicated by certain officials’ reluctance to make any significant decisions in advance of the 2014 parliamentary and presidential elections.

Q

How can the industry overcome these challenges?

Indonesia’s Government issued a series of Regulations implementing the ban on raw mineral exports legislated under the Mining Law. However, the restriction is not in full effect as the regime exempts 5 minerals from a higher standard of refinement for a period of three years, on the condition that the exporter owns sufficient reserves for eventual smelting and has a credible plan to construct a smelter or jointly process the ores.

One should plan for amendments to the regulations. For instance, the regulations stipulate that minerals currently not listed may not be exported until such time as there is definition of the purification standards. In view of this, we anticipate an issuance of subsequent refinement standard for minerals and amalgams currently not listed. We also anticipate that the Ministry

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of Finance may revise the corresponding export duties. Separately, the Government’s previous attempt to restrict export of unprocessed mineral in 2012 was eventually overturned before the Supreme Court. And subsequently a series of amendments to comply with the ruling were issued. The Indonesian Mining Association has stated that it will challenge the current restriction, citing hardship and possible mass layoffs. We anticipate the Government to revise the regulation, either to comply with any subsequent ruling or to soften the blow for small domestic miners.

Q

What do you predict for the industry in the years ahead?

Ultimately the issue is uncertain policy measures rather than bad policy, which at least could be planned around, and such climate is likely to persist until at least the second half of 2014, after both the new parliament and the new president are determined.

Looking ahead, the mining industry is likely to require bankruptcy and restructuring expertise in the near future due to falling coal prices, rising costs, and an increasingly challenging Indonesian regulatory environment as most recently highlighted by the mineral export restrictions and divestment requirements. More broadly, due to the recent dramatic fall in the US Dollar - Indonesian Rupiah exchange rate a number of industries relaying on imports, while also being faced with less consumer spending are likely to find themselves squeezed in the coming months.