indonesia jv

8/8/2019 Indonesia JV

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Major DifferenceJoint

Venture

Straight

Investment

BusinessActivities

Carry out business activities categorizedas important to the State and serving the

public

Yes No

Shareownership

15 years from the commencement of commercial operations, the 100% foreignshareholder must sell at least 5% of thefirm to an Indonesian entity (Divestment)

No Yes


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Government Regulation No.20/1994

Article 1: Form of businessMust be establish in the form of Limited Liability Company subject to theIndonesia Law and domiciled in Indonesia.

Article 3: Business LicenseGranted for a period of thirty (30) years since the commencement of commercialoperation (The business license may be renewed by the Minister forInvestment/Chairman of the Investment Coordinating Board if the company

continues to carry out its business for the benefit of the national economy anddevelopment)

Article 4: LocationMay be located throughout the territory of the Republic of Indonesia (butpreferably in in the regions that have had the Bonded Zone and Industrial Estate )


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Article 5 : Business Activities

May carry out business activities categorized as important to the State and servingthe public: ports, generation and transmission as well as distribution of electricityfor public use, telecommunications, shipping lines, airlines, potable water, publicrailways, atomic energy reactors and mass media

General Requirement from Law of The Republic of Indonesia Number 25 of 2007 Article 17 for Joint

Venture Company engaged in a nonrenewal resource business : Such company must allocate funds by progressive stages for location recovery incompliance with the standard environmental feasibility.

Article 6 : Share ownership1) The Indonesian partner's shares shall be at least five percent (5%) of the total paid-

up capital of the company upon its establishment.2) The company's shares in excess of 5% can be sold to Indonesian citizens or

Indonesian legal entities owned entirely by Indonesian citizens by way of directownership as agreed by the parties and/or through the domestic stock exchange.


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Article 8 : In addition to increase its own equity, foreign direct investmentcompany which has been commercially operating may also:


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Article 9 : Shares purchase1) Foreign enterprises may buy the shares of the existing domestic company including

the existing joint venture company, irrespective as to whether they are incommercial operation or not.2) The purchase of the existing domestic company's shares shall be completed

through direct ownership and/or through the domestic stock exchange.

Law of The Republic of Indonesia Number 25 of 2007

Article 7: Nationalization/Expropriation1) The Government shall take no measures of nationalization or expropriation against

the proprietary rights of investors. Where the Government takes measures of nationalization or expropriation against the proprietary rights then the Governmentshall pay compensation the amount of which shall be established by market value.

Market Value : value that is established in accordance with the internationally-accepted methodsadopted by an independent appraiser named by the parties

2) If both parties fail to reach an agreement of compensation or damages, suchsettlement shall be made through arbitration as an alternative dispute resolution


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Article 8: Asset1) Foreign investor in Joint Venture Company may also transfer assets they own to

parties the investors desire in accordance with provisions of laws and regulations.2) Investor also has several rights to transfer and repatriate their asset in foreign

currencies such as capital, profits, funds for operational fee, additional funds thatare needed for investment financing, income of foreign nationals who works forJoint Venture Company, royalties, proceeds of the sale or liquidation of investment, compensation for damages, and compensation for acquisitions.

Such transfer of asset and repatriation shall not detract from : the power of the Government to effect provisions of laws and regulations that require

reporting of fund transfers; the rights of the Government to draw taxes and/or royalties and/or other Government

revenues from investments in accordance with provisions of laws and regulations. enforcement of law to protect the rights of creditors; and enforcement of law to avoid losses to the state.


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Article 22 : Land Right TitleThere are three major types of land right that available for foreign investor inIndonesia;

1) Right to Cultivate which granted for a maximum period of 95 (ninety five) yearsand can be extend all at once in advance for a period 60 (sixty) years andrenewable for a period of 35 (thirty five) years;

2) Right to Build which granted for a period of 80 (eighty) years and can be extend allat once in advance for a period 50 (fifty) years and renewable for a period of 30(thirty) years and;

3) Right to Use which granted for a maximum period of 70 (seventy) years and canbe extend all at once in advance for a period 45 (forty five) years and renewable

for a period of 25 (thirty five) years.Several criteria of investment for Joint Venture Company that eligible to land title right:

Investment for a long term and linked to structured changes in the Indonesian economy aimed at improving competitiveness;

Investment with an investment risk level that requires a long-term return on capital based on the

types of investment activities carried out, investment that need no large areas; Investments with the state land title that do not undermine a sense of public justice and does not harm the public interest


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PT. Newmont Nusa Tenggara v. The Republic of Indonesia

PT. Newmont Nusa Tenggara signed a Contract of Work Agreement in 1986 tooperate Batu Hijau copper and gold mine. Construction began in early 1997, andcommercial production started on March 1, 2000According to the terms of agreement, PT Newmont Nusa Tenggara must completethe sale of a 51 % stake in the company to local investors by 2010 (10 years fromcommercial production).20 % stake has already been sold to PT Pukuafu Indah (Indonesia) and bothNewmont Corporation (US) and Sumitomo Corporation (Japan) own 45 % and 35% respectively of PT Newmont Nusa Tenggara.

Foreign shareholders in PT Newmont Nusa Tenggara had agreed to sell a 31 %stake gradually by 2010.In February 2008, the Energy Ministry threatened to annul the contract of PTNewmont Nusa Tenggara, because it had not sold its shares in time to localinvestors.On March 2008, both Newmont and the Indonesian government filed an arbitrationcase against each other. On April 2009, the International arbitration has ruled infavor of Indonesia Government.


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NewmontMining

Corporation(USA)

NewmontMining

Corporation(USA)

Nusa TenggaraMining Corp(Sumitomo

Japan)PT. Pukuafu

Indah(Indonesia)

PT. PukuafuIndah

(Indonesia)50%

20%

50%

Newmont NusaTenggara

Corporation

IndonesianGovernment

Mining Contracts

DivestmentDivestment

Mining Contracts: Foreign Shares > 51 %

20 % : PT. Pukuafu Indah 31% : Divestment from Contracts 2006: 3 % Default 2007: 7% Default 2008: 7% Default 2009: 7% 2010: 7%

(USA)5%

(Japan)15%

1

2

3


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Culture barrier (Familyness Concept of Indonesian Business Partner)

Uncertain or unclear government policy

Inefficient bureaucracy

Complicated trading procedures


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indonesia jv

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