Big Indo contracts under threat

FEARS are mounting that the new mining laws of coal heavyweight Indonesia will force foreign companies to renegotiate their current contracts of work – with Australia’s largest construction firm, Leighton Holdings, having $A2.86 billion worth of Indonesian contracts under question.
Big Indo contracts under threat Big Indo contracts under threat Big Indo contracts under threat Big Indo contracts under threat Big Indo contracts under threat


Blair Price

The big change with the new legislation comes in the form of new requirements for only home-grown contracting companies to undertake mining services, but there are provisions for foreign companies to take on the work if suitable Indonesian services are unavailable.

How the new laws will be implemented is uncertain with one unnamed foreign contractor telling the Australian Financial Review newspaper he was nervous as the structure of the legislation has people worried despite the parliament’s best intentions.

The newspaper also reported that construction majors Leighton and Thiess may have to either take on an Indonesian partner or list on the Indonesian Stock Exchange, and there is also the possibility that forced local participation in the contract process could create an opportunity for corruption.

Miners BHP Billiton and OZ Minerals also have contracts of work in the nation.

The new mining law changes stem from Indonesian concerns of receiving less mining-related revenue compared to other resource-rich nations, while there has been ongoing media criticism starting from the proposal stages often centring on issues of providing long-term security to investment.

Thiess Indonesia won a five-year, $A1 billion contract for two coal mine projects in East Kalimantan province in October last year taking its Indonesian contract total to more than $A2 billion.