Indonesia sheds bad vibes

INDONESIA has shed the nationalistic vibe that has dogged it of late for a more realistic focus on economic growth, having already relaxed caps on coal production levels and is frowning on spruiked potential royalty hikes.
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Anthony Barich

Industry finally started smiling on Indonesia when new Mines and Energy Minister Sudirman Said was broadly welcomed by miners after last year’s Indonesian parliamentary and presidential elections resulted in a new President, Joko Widodo (Jokowi) and a new cabinet.

Said brings solid credentials from both the public and private sectors. In fact, one of his previous positions was at a senior corporate level in an Indonesia coal group.

The new president said at the time that the appointment of Said as energy and mineral resources minister was due to the active role he played in the country’s anti-corruption campaign.

“He [Said] is a reliable business manager and an anti-corruption activist who co-founded the Indonesian Transparency Society [MTI],”Jokowi said.

"This [energy and mineral] is a big sector. So I delegate its management to you.”

The nationalism ideals that were used in the 2014 elections are now largely muted and it can be expected that there will be no changes in the laws and regulations regarding foreign investment in the coal industry, according to the World Coal Association’s former policy manager Aleks Tomczak.

“The new administration has so far focused on economic and infrastructure development,” he said.

“On the energy front, one of the key aspects is a plan for considerable growth in power production based on coal-fired power plants.

“It is believed that domestic demand for coal will continue to grow, particularly in two to three years’ time when more new plants come on line.”

While the increase of mining royalties as proposed but not implemented last year is still being considered, Tomczak said the government recognises that such increases at the present time may lead to more mine closure with resultant unemployment and less value flowing to mining communities.

“Overall, the Indonesian coal industry expects that in 2015 there will be limited, if any, increase in regulation of the industry, possibly streamlined in some areas, a small production increase, continuing emphasis on coal supply to the domestic market with a resultant flat, or decline, in export levels,” Tomczak said.

“But the caution is that the new administration has just taken office and has yet to detail all their requirements.”