Indonesia coal group warns govt over hasty policy moves
NUSA DUA INDONESIA should avoid hasty policy announcements on coal that are hurting miners and fuelling perceptions of investment risk in the world’s top thermal coal exporter, an industry group said on Tuesday.
The government on Monday said it was looking to impose controls on the industry in a bid to increase domestic revenue and better manage its natural resources. It also said an export tax on coal remains under consideration.
Those comments drove down shares in the country’s top coal miners Bumi Resources and Adaro Energy by over 13 percent, versus a 4.3 percent drop in the broader Jakarta Index.
“Drafting is okay, but not speaking in public,” Indonesian Coal Mining Association chairman Bob Kamandanu said on the sidelines of the Coaltrans conference in Bali.
Southeast Asia’s largest economy has introduced a series of regulations aimed at squeezing extra state revenue from the mining industry, including limiting foreign ownership and a 20 percent tax on exports of unprocessed minerals.
But the government has so far steered clear of coal exports, worth $27 billion last year, or 13 percent of the country’s total.
No comprehensive details of regulations on coal have been released, but comments from officials since December indicate these could include increasing royalties, introducing an export tax and imposing divestment and domestic market obligations on mining license holders.
In a straw poll of mostly coal producers at the conference, 55 percent of around 400 respondents said they expect the government to implement an export tax on coal.
“The government has put the brakes on everyone,” said Fadjar Kandar, a partner at Jakarta-based law firm Soemadipradja & Taher, which specialises in advocacy for mining companies.
“Investment will definitely be slowing down.” Financial advisor Hadyn Palliser, an associate at Corality Financial Group (Australia), also warned that the government must be clearer in making regulatory announcements. “A lot of our clients are private equity firms and they are particularly concerned about coming in without knowing what they are going to get hold of, what ownership they will have in a company, what are the ways they can structure a transaction,” Palliser said.
Some cautioned investors against over-reacting.
“Everyone’s got their hands thrown up saying this is the death of the mining industry,” said Edward Gustely, managing director of Penida capital advisors and a senior advisor to the Finance Ministry.