(6) KITA - Mining Machinery 20130814

8/20/2019 (6) KITA - Mining Machinery 20130814

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ndonesian Market Focus

Mining Machinery and Parts

Prepared for

Specially by

2013

V V ooll 33


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Korea International Trade Association (KITA) 2

Table of ContentsTable of Contents ................................................................................................................ 2

List of Figures ......................................................................................................................... 3

1.

Executive Summary ............................................................................................................ 4

2. Overall Market Environment and Trend ........................................................................... 7

3. Competitive Landscape .................................................................................................. 10

3.1 PT. Altrak 1978 / Berca Group .................................................................................... 10

3.2 PT. Katsushiro Machinery Indonesia (KMI) ................................................................ 11

3.3 PT. Barata Indonesia (PERSERO) ................................................................................. 11

3.4 PT. Gaya Makmur Tractors (GM Tractors) ................................................................. 12

3.5 PT. United Equipment Indonesia (UNIQUIP).............................................................. 12

4. Future Development ......................................................................................................... 13

5. Key Success Factors, Drivers and Inhibitors of the Industry........................................ 15

5.1. Key Success Factors .................................................................................................... 15

5.2. Drivers ............................................................................................................................ 15

5.3. Inhibitors ........................................................................................................................ 16

6. Regulation and Government Concern .......................................................................... 16

6.1 Investment Facilities and Incentives .......................................................................... 17

7. Industry and Players Related News ................................................................................ 18

7.1 Legal Uncertainty Remains Big Problem in RI Mining Sector .................................. 18

7.2. Anticipating the Weakening Revenues in Mining Sector, INTA Increases Heavy

Equipment Rental Business ................................................................................................... 19

7.3 Indonesian Cement Brings New Mining Equipments ............................................... 19

8. Opportunities in Mining Machineries Sector in Indonesia .......................................... 20

8.1 Trade Events related to the Mining Machineries Sector in Indonesia .................... 21


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List of Figures

Figure 1 – Minerals Production & Export (2009-2012) .......................................................... 7

Figure 2 - Investment Growth in the Mining Sector in Indonesia (2010-2012) ................. 8

Figure 3 - Market Value of Mining Equipment in 2008-2012 (In Million USD) .................... 9

Figure 4 – Production, Export and Domestic Sales of Coal Mining (Future Estimation,

2015-2025) (In Million Tons) ................................................................................................... 13

Figure 5 – Estimated Market Value of Mining Equipment in 2013-2017 (in USD Million)

.................................................................................................................................................. 14

Figure 6 - Project Lists of Smelting Plant in Indonesia ........................................................ 21


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1.

Executive Summary

1.1 Overall Market Environment and Trend

Indonesia’s economic growth is not centered merely in its capital city,

Jakarta; in fact, many other Indonesia cities are growing more rapidly

Inflation has fallen from double to single figure in the country

Indonesia certainly is an important global mining hub, producing and

exporting key commodities

In terms of nominal in production growth, the sector has expanded

rapidly over the past five years or so, supported by the boom in global

commodities prices

A slowdown in global demand and a drop in prices have affected

revenues in recent quarters

The decline in coal exports in 2011 was relatively shallow, with totalexport revenue for the coal sector dropping by 2.8%

Though the export values declined, coal output has continued on an

upward trend

Coal in particular has seen much interest from the ever increasing

demand from China and India

Currently, mining machineries products available in Indonesia market

are excavators, backhoe loaders, wheel loaders, bulldozers and mining

trucks

The production capability of mining machineries is still very limited in the

country and unable to meet the domestic growing demand

Largest importers of mining machineries are originated from Japan,

followed by Thailand, the US, Korea and China

Some of the manufacturers plan to set up and establish an assembly

plant for excavator machineries in the country to increase capacity of

production

The demand of heavy equipment in Indonesia is fueled by the

development of small miners

In 2011, the mining machinery segment has absorbed around 61% of the

total heavy equipment’s sales or as many as 12,186 units

1.2

Competitive Landscape

More than half of total demand for heavy equipments in Indonesia

comes from the mining equipments.

The overseas manufacturers are represented in Indonesia by dealers.

Key players in mining machineries and parts in Indonesia, include:

o PT. Altrak 1978/ Berca Group

o PT. Katsushiro Machinery Indonesia (KMI)

o PT. Barata Indonesia (PERSERO)

o PT. Gaya Makmur Tractors (GM Tractors)

o

PT. United Equipment Indonesia (UNIQUIP)


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1.3 Future Development

The dominant importance of the sector will add force to the assurance

that the policies which would jeopardize growth in the mineral sector will

not be applied.

It is believed that Indonesia will still remain a leading mineral exporter inthe region

The country will also own its status as the largest thermal coal and tin

exporter in the world.

The growth of the mining industry in Indonesia is forecasted at an annual

rate of 11% over the next five years

The demand for mining machinery is expected to grow as well, in line

with the environment outlook in the mining sector

The mining equipment market is set to grow at of 6.2% during 2010-2015,

Indonesian mining sector’s investment spending will be mainly for

replacement plant and acquisition of equipments to maintain or expand

their existing operation.

Upcoming ban on mineral exports drawing a wave of foreign investors

and equipment suppliers as local miners are forced to beef up ore

processing capability before a 2014 deadline and it is assumed that

many processing factories will be needed in Indonesia.

1.4 Key Success Factor, Drivers and Inhibitor of the Industry

Key Success Factor:

o

Technology o Ability to Tailor and Localize the Products

o Excellent Financial Management

o Marketing & Distribution Strength

o Technical Know-How and Qualified Human Resource

Drivers:

o Indonesia Mineral Prospectivity and Government’s Investment

o National and Cross-National Infrastructure

o Replacement Demand

o Comprehensive Government Regulations

Inhibitors:

o Skill Shortage

o Uncertainty of Mining Sector Regulatory in Indonesia

o Slowdown Global Economic

1.5 Regulations and Government Concern

The Mining Industry itself is regulated by central, provincial and municipal

levels of government in Indonesia.

In early 2009, Indonesia has introduced and issued its Mining Law.


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For the import of machinery and equipment or services required in

connection with mining activities, there are no material restrictions or

limitations of any kind imposed under Indonesian law

To facilitate foreign investors, the Investment Law introduced a number

of investment facilities or incentives for qualifying investors. Themachineries sector is one of the sectors eligible for these facilities.

1.6 Industry News

Legal Uncertainty Remains Big Problem in RI Mining Sector - The

decentralization has become a major annoyance to miners attempting to

do business in the country, with most major regional administrators out of

control in terms of issuing mining permits.

Anticipating the Weakening Revenues in Mining Sector, INTA Increases

Heavy Equipment Rental Business – PT. Intraco Penta, one of the key

players in heavy equipment sector offers solution to clients to hire and

eventually will let them buy after the business recovered.

Indonesian Cement Brings New Mining Equipments - Listed cement

producer, PT Semen Indonesia brings in new mining equipment called

crushing vehicles in order to reduce the noise caused by limestone mining

activities.

1.7 Opportunities in Construction Machineries Sector in Indonesia

Supply of Mining Equipments or Parts and Services: Korean Companies

have some significant opportunities to supply of various mining equipmentand services to be utilized in a range of stages of mining operations.

Mining Plant Projects: The Government of Indonesia has received 19

proposals of investment projects to build smelting plants in Indonesia and

10 projects are projected to be operational in 2014. This could be an

opportunity for Korean Heavy Equipment Companies to have more

partnerships with Indonesian mining companies in terms of supplying

machineries and parts to support the operational process.


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2. Overall Market Environment and Trend

It is an unquestionable truth that Indonesia’s economy has enormous promise. Being

the 16th-largest economy in the world, this dynamic archipelago has the potential to

be the seventh biggest by 2030. The country’s economic growth is not centered

merely in its capital city, Jakarta; in fact, many other Indonesia cities are growing

more rapidly, although from a lower base. Another factor is inflation that has fallen

from double to single figure, as well as government debt as a share of GDP is now

lower than the enormous majority of advanced economies.

Resources become the country economy’s main driver and are substantial.

Indonesia certainly is an important global mining hub, producing and exporting key

commodities. It has driven the country being the world’s second largest producer

and exporter of tin and nickel, the fourth-largest producer of copper and a leadingexporter of coal. Reflecting this, the mining sector (excluding oil and gas) remains a

major driving force in the economy, accounting for 12% of total GDP in 2012.

In terms of nominal in production growth, the sector has expanded rapidly over the

past five years or so, supported by the boom in global commodities prices. With a

rate growth averaged 5% in 2006-2007 before shrinking by 1% in 2008 amid the

downturn in the global economy. However, it recovered quickly, growing by 10% in

2009 and since then, there has been some instability on a quarterly basis, but growth

averaged 5.5% a year in 2010-2012.

Figure 1 – Minerals Production & Export (2009-2012)

0

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10

15

20

25

30

35

40

45

2009 2010 2011 2012

Production

Export

Nickel Ore (million ton)

Bauxite (million ton)

Iron Ore (million ton)


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The mining sector is an important source of export revenue to the country, typically

contributing around a third of total export earnings. However, a slowdown in global

demand and a drop in prices have affected revenues in recent quarters. In 2012,

total mining export revenue fell to USD 31.2 billion from USD 34.2 in 2011. Though the

export values declined, coal output has continued on an upward trend. According

to the estimation of the Ministry of Energy and Mineral Resources (ESDM) coal

production rose to 386 million tons in 2012, up from 275 million tons in 2011, with a

23% or 90 million tons was located for domestic use and the remaining 77% was

exported.

Coal in particular has seen much interest from the ever increasing demand from

China and India. With three years having passed since the introduction of the Mining

Law in early 2009, the Indonesia mining sector has seen continued investment

growth despite the lack of regulatory certainty and the need for further clarification

of the law.

Figure 2 - Investment Growth in the Mining Sector in Indonesia (2010-2012)

0

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1200

2009 2010 2011 2012

0

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1000

1500

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2500

3000

3500

4000

2010 2011 2012

Mineral Contract

of Work (COW)

Coal Contract of

Work (COW)

State-Owned

Enterprise (SOE)

Mining Services

Copper (000 ton)

Silver (000 ton)

Tin (000 ton)

Gold (000 ton)

Production

Export


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The production capability of mining machineries is still very limited in the country and

not capable to meet the domestic growing demand. In line with that, local content

of mining machineries and parts are also remained low. For mining trucks, it only

consists of 30% local content and 50% for excavators.

During the global crisis, the production of mining machineries in 2009 was down by

69% in line with the decline in consumption of 31% in the period. In 2011, the

production has grown up to 57% year over year. However, it was still not able to

cover the demand, thus the need of imports remained high. Largest importers are

originated from Japan, followed by Thailand, the US, Korea and China.

Seeing a potential market in the country, few of manufacturers are planning for

expansion and invest more in the next few years. One of the key leaders in the

industry, Sumitomo, plans to set up and establish an assembly plant for excavator

machineries with an investment of USD 320 billion. This further step is believed willincrease the capacity from 1,000 – 2,000 units per year.

Currently, mining machineries products available in Indonesian market are

excavators, backhoe loaders, wheel loaders, bulldozers and mining trucks. An

excavator has the highest demand since it has range of functions from land clearing

up to the extraction of natural resources in coal mining.

Figure 3 - Market Value of Mining Equipment in 2008-2012 (In Million USD)

The demand of heavy equipment fueled by the development of small miners has

caused the heavy equipment market began to shift up as well. It is expected that

demand for mining machineries in 2013-2016 will continue to increase with

dominated mainly by the type of excavator which the biggest market value among

the other equipments had used in the business. In 2011, it is recorded that mining

sector has absorbed around 61% or as many as 12,186 units, followed by plantation

sector for 3,796 units (19%), construction of 2,197 units (11%) and forestry 1,798 units

(9%).

0

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400

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2008

2009 20102011

2012

Mine Conveyors &

Elevators

Excavators (Mining

Use)

Loaders (Underground

Use)

Mining Trucks

Coal Cutting

Machinery


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3.

Competitive Landscape

In line with the substantial growth of coal mining sector in Indonesia, it has dismissed-

off the gloomy economic outlook of the region and been promoting serious

competition between domestic mining companies, as well as foreign operationslooking to capitalize on the country’s vast mineral wealth.

As stated on the previous industry report, for more than half of total demand for

heavy equipments in Indonesia comes from the mining equipments, particularly for

large units, such as giant excavators. Major players have been extending their

facilities in operation in the country. It is an ongoing mission for the players in the

sector to achieve for a higher quality and lower-production cost and a ceaseless

challenge that is striving to be in the lead and be ahead of keen competitions.

The overseas manufacturers are represented in Indonesia by dealers. Others arenow only about to enter the Indonesian market for the first time. Their advance

technology and the variety of products strengthen the performance, productivity

and quality in all areas of construction, mining and building material production and

ensure that this sector remain competitive.

3.1 PT. Altrak 1978 / Berca Group

Founded on June 12, 1978, the Company has ever since been

handling the agency of world class products that have direct

contribution to the government which involved across different

industries including infrastructure, mining, food industry and

other non-oil and gas sectors. The Company has been

expanding its business under the umbrella of Central Cipta Murdaya (CCM) Group

which also handles some 60 subsidiaries operating in various business sectors, with a

total employee of about 35,000 people.

Marketing strategy of PT. Altrak 1978 is by enlarging its networks which involved more

than 30 branches throughout Indonesia. An excellent support is one of the key

success factors of the Company operation. Through the comprehensive network,prompt and adequate after-sales supports can be made readily available for every

customer in line with the high standards imposed by the principals.

The Company continues to support the equipment by interfacing with the OEM and

the mine operators by providing service updates and specific technical data when

required. PT. Altrak 1978 is capable to perform supports in mining sector by repairing

the mining machines and engines or rebuild with complete tools, adequate parts

stock and dynamometer facility in Balikpapan and Samarinda for 1800 – 6000 Hp.


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3.2 PT. Katsushiro Machinery Indonesia (KMI)

PT. Katsushiro Machinery Indonesia is a joint venture company, was established on

April 25, 1995, with a capital of USD 7, 4 million in Kawasan Industri Cikarang with a

total area of 41,889 m2 in Jababeka XII Street Block I in Cikarang Bekasi and 40,880

m2 in Selayar Street, Blok B-II, MM2100 Industrial Estate in Cibitung Bekasi. The

shareholders of the Company are Katsushiro Matex Co., Ltd who holds 90% of

ownership and the remaining 10% goes to PT. Katsushiro Indonesia.

The Company is facilitated with a-68,000 square meter

factory building, latest technology machines, integrated

quality system management and the skillful labors. PT.

Katsushiro Indonesia has been able to perform and produce

high-quality products such as steel plate for heavyequipment components, civil works, industrial generals,

manufacturing and machineries, automotives, agricultural equipments as well as the

customized components according to customer needs and demands. Up to date,

the Company’s annual production capacity has reached 80,000 tons per year

material consumption.

During the first year of operation, PT. Katsushiro Indonesia has able to export its

products into several countries in Asia. As the result of success, the Company was

able to expand the marketing export into European Countries and the United States.

3.3 PT. Barata Indonesia (PERSERO)

Under the name of PT. Barata Metalworks & Engineering, the Company was

established in 1971 as a merger between:

PN. Barata formerly known as NV Braat Machinefabriek. The companyproviding maintenance services for sugar plants and to manufacture bridges

and other steel construction.

PN. Sabang Merauke formerly known as Machinefabriek & Scheepswerf NV.

Molenvliet, specializing in maintenance for the other plantation industry and

production of coaster and lighter.

PN. Peprida, a Government-own Company, providing construction services

for basic industry projects.

In the beginning of operation, the Company’s head office was located in Surabaya

with total area of 6.7 Ha at Ngagel Street, but from time to time this area was growthto a solid downtown. PT. Barata Indonesia decided to relocate all of its facilities to


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Gresik in 2004 up to 2005 with an available area of 22 hectare, considering the

Company’s development in the future expansion.

With the existing facilities, the ability of PT. Barata Indonesia in the field of machinery

and construction is amounted to 14,700 tons/year and for heavy equipment isamounted to 810 units / year. Some of the important machineries in the Company’s

business operation are: Automatic welding machines, TGI welding machines, Gear

maker completely supported with plating unit and Spectrophotometer.

3.4 PT. Gaya Makmur Tractors (GM Tractors)

PT. Gaya Makmur Tractors (GM Tractors) was established on

August 29, 2005 in Jakarta as a wholesale supplier of range of

brand new heavy equipments for road construction,

plantation, forestry, mining and much more. It is a sole

distributor of Wirtgen Group of Germany, specialized in heavy

equipment manufacturing for mining and road construction,

supplying Wirtgen, Hamm and Vogele brands.

The Company is also recorded as a sole distributor for some heavy equipment

manufacturers from China. They are Construction Machinery (Shantui) with their

range product on bulldozers, and Xuzhou Construction Machinery Group (XCMG)

which produces a variety type of cranes, motor graders and wheel loaders.

One of PT. Gaya Makmur Tractors’ key success factors is to provide a total after -sales

service in every of its sale of heavy equipments. To support and perform consistentlythe Company’s service motto “We Assurance Your Machine” , it turned the tools,

facilities, workshops and high mobilization of our technicians into corporate

commitment, in order to achieve the customer satisfaction.

3.5 PT. United Equipment Indonesia (UNIQUIP)

Established in January 26, 2005, PT. United Equipment Indonesia or known as UNIQUIPis engaged in the field of heavy equipment businesses. The Company is an

authorized dealer for product brand names such as Vibromax, JCB, Ammann, Terex

and Genie.

The types of equipment that have been officially approved to be marketed in

Indonesia by PT. United Equipment Indonesia are the construction machinery for the

mining sector in the form of Articulated Dump Truck TA 400, Rigid Dump Truck TR35,

TR45, TR60 and TR100 with a payload capacity ranging from 30 up to 100 tons. The

said units have been known for quite a long time in the county.


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In addition, PT. United Equipment Indonesia distributes Tower Light RL4000, AL5000

and AL8000 with illumination power started from 4000 to 8000 watt. These tower light

products are also well-known to coal mining sites, gold, tin, nickel and so on.

In conducting its marketing activities, the Company is supported with a three-storeybuilding facilities that is used for running the sales activities which integrated with

workshops, spare parts’ warehouse and unit’s storage in Jln. Raya Cakung, Cilincing.

Other office branches are also built and located spread in all over cities of Indonesia

namely Medan, Balikpapan, Banjarmasin and Pekanbaru areas.

4. Future Development

Recent changes to Indonesia’s mining code have undoubtedly reduced the overalllevel of attractiveness for investment in the country. Nevertheless, there is a possibility

for further reforms, especially in the run up to the 2014 general election that caused

the mining sector does not expect significant policy changes in the near term. The

dominant importance of the sector, which has contributed 12% of Indonesia’s GDP,

will strengthen the conviction that the policies which would jeopardize growth in the

mineral sector will not be applied.

It is believed that Indonesia will still remain a leading mineral exporter in the region

and retain its status as the second largest thermal coal and tin exporter in the world.

The growth of the mining industry in Indonesia is forecasted at an annual rate of 11%over the next five years to reach an estimated USD 123 billion in 2014. It is also

predicted that the demand for thermal coal will be increased in the next three

years.

Figure 4 – Production, Export and Domestic Sales of Coal Mining (Future Estimation,

2015-2025) (In Million Tons)

Source: APBI-ICMA, 2012

153184

150175

180

236

326364

421

2015 2020 2025

Export Domestic Production


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In line with the above-mentioned facts, we can easily foresee that the demand for

mining machinery is expected to grow as well. The miners necessarily need to use

mining machineries and parts for the extraction of the country’s rich underground

resources. The mining equipment market is set to grow at of 6.2% during 2010-2015,

with many expansion projects in the pipeline. It is also driven by many global miningfirms entering the Indonesian market.

Figure 5 – Estimated Market Value of Mining Equipment (in USD Million)

The increase number of market value of mining equipments is also driven by the fact

that, Indonesian mining sector’s investment spending will be mainly for replacement

plant and acquisition of equipments to maintain or expand their existing operation. It

is also stated that as a strategy to develop the performance in the future, market

leaders in construction machineries sector are trying to increase their capacity for

mining machinery, especially for ultra-large hydraulic excavators to respond to the

rising market demand from the miners in the country. Based on the data, increases inthe sales of ultra-large hydraulic excavators and dump trucks are forecast beginning

with coal.

On the other hand, Indonesia’s upcoming ban on mineral exports dr awing a wave

of foreign investors and equipment suppliers as local miners are forced to beef up

ore processing capability before a 2014 deadline. The wave may be one of the few

bright spots for aspiring foreign suppliers, many of whom are venturing out of their

home markets for the first time, in bid to offset a construction and investment

downturn in their home market. With so much volume of ore, it is assumed that many

processing factories will be needed in Indonesia.

2013 2014 2105 2016 2017

Mine Conveyors & Elevators 2.59 2.87 3.18 3.54 3.96

Excavators (Mining Use) 718.62 791.83 875.17 971.49 1,083.27

Loaders (Underground Use) 87.99 95.35 103.93 113.67 124.83

Mining Trucks 583.42 641.71 708.68 784.23 870.91

Coal Cutting Machinery 2.82 3.12 3.47 3.87 4.34

0

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5. Key Success Factors, Drivers and Inhibitors of the Industry

5.1. Key Success Factors

Technology: Technology does and will continue to play a vital role inmaintaining the desired productivity and in supporting the concerns of

environment-friendly mining, which is the key success to the mining sector

today.

Ability to Tailor and Localize the Products: Mining machineries players should

be able to understand their market especially in Indonesia and localize of

their product portfolios. Trends need to be understood. OEMs also have to

meet some strict local requirements to be able to compete and succeed in

the business.

Excellent Financial Management: The players in this sector need to focus on

management in working capital, asset utilization and gearing levels to be

able to succeed in the business. The abilities to have an effective forecast

and cost efficiency will also help the players to perform well in the operation.

Marketing & Distribution Strength: To be able to strengthen downstream

marketing and distribution channels to accommodate the growing capacity

and additional downstream products would help the players succeed in the

business.

People: A highly-skill, reliable, solid and trustworthy people as well as technical

know-how played a key role in the operational field. When both factors are

functioning very well in the long-term operation, it will lead to a long-term

success of the Company.

5.2. Drivers

Indonesia Mineral Prospectivity and Government’s Investment: Consistent to

the previous years, many of international mining companies continue to rankIndonesia highly in terms of mineral prospectivity and have attracted its fair

share of investors. In addition, Government data also shows a positive trend in

2012 with a further increase in investment spending in the Indonesian mining

sector. These factors would be the one of the drivers in mining machineries

project volume in the future.

National and Cross-National Infrastructure: The majority of new reserves of coal

and some other mining resources are expected to be located in the more

remote locations that will be the one of the main reasons why mining projects

rely on the transport of bulk over long distances. Efficient transport corridors

are indeed key driver to the sector growth and development.


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Replacement Demand: Parts replacement demand has also been showing a

positive growth in terms of value since the mining and contractor companies

are eager to maintain the performance and availability at mine sites. This

would be also one of the drivers of OEMs to earn more profits and grow their

market segments.

Comprehensive Government Regulations: The mining sector is one of the most

regulated sectors in the country. The future of Indonesia’s mining industry is

heavily dependent on the attractiveness of the regulatory environment and

resolution of the challenges arising from the Law and Mineral and Coal Mining

as well as subsequent implementing regulations. The Government regulations

will give a significant impact to the foreign investors and stakeholders to

decide on how they would perform the business in the business.

5.3. Inhibitors

Skill Shortage: Significant risks associated with skill shortage include impact to

production, project delays and increasing labor costs. Moreover, in this

volatile environment, it is increasingly difficult to forecast and plan future

workforce requirements. OEMs should be able to identify, attract and retain

mining machineries operator skills as one of the top priorities

Uncertainty of Mining Sector Regulatory in Indonesia: Uncertain regulations

will cause confusion, doubts and contention for investors. The highbureaucratic costs in almost every sector in Indonesia and would remain as

an obstacle for all industries, not to mention mining industry. Regulatory

framework and regulations on foreign ownership has made the sector less

competitive.

Global Economic Slowdown: The continuing Eurozone sovereign debt

problem has adversely impacted the global economy since 2011 and it

decreases the commodity prices in 2012 and surely is a significant threat to

the mining activities.

6. Regulation and Government Concern

The Mining Industry itself is regulated by central, provincial and municipal levels of

government in Indonesia. In early 2009, Indonesia has introduced and issued its

Mining Law. Since then, the sector has seen continued investment growth despite

what some have seemed as a lack of regulatory certainty and the need for further

clarification of the law.

For the import of machinery and equipment or services required in connection withmining activities, there are no material restrictions or limitations of any kind imposed


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under Indonesian law. Normally, required services for mining activities may also be

obtained and provided in Indonesia. But the importation of such services is closely

regulated to the extent that individual or corporate service providers establish a

physical presence to have a permanent establishment for tax purposes in Indonesia.

6.1 Investment Facilities and Incentives

Tax Holiday

Based on the Ministry of Finance Regulation No. 130/PMK.011/2011 the Government

may grant Corporate Income Tax (CIT) holidays or reductions to companies

investing in “pioneer industries”. It defined as ‘industries that have extensive links,

give additional value and high externality, introduce new technologies and have

strategic value for the country’s economy.’ Currently, investors in machinery are

eligible however there are no implementing regulations yet issued which define

what is included in “machinery”, the Ministry of Industry maintains an unpublished list

of qualifying activities and will generally confirm classifications on request.

The facilities which may be provided are:

A CIT exemption for a period of five to ten years from the beginning of

commercial production; and

A 50% reduction in the CIT due for the period of two years after the end of the

CIT exemption period.

Import Duties

All investments approved by BKPM would attract the following supports:

a. A reduction from import duty rates to 0% on:

o The importation of capital goods (machinery, equipment, spare parts,

auxiliary e equipments, etc) for an import period of two years.a.

The importation of goods, materials or raw materials used to produce

finished goods or to produce services for two years of production.

b. An exemption from the Transfer of the Ownership Fee for ship registration

deeds or certificates made for the first time in Indonesia.

Bonded Zones

This investment incentives is provided to the companies located in bonded area

with facilities are as follow:

An exemption from import duty, VAT and Article 22 withholding tax on the

importation of capital goods and equipment including raw materials required

for a production process;

An entitlement to divert up to 25% of exports (in terms of value) into the

Indonesian customs area;

An entitlement to sell scrap or waste into the Indonesian custom’s area incertain cases;


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An entitlement to transfer machinery and equipment to subcontractorslocated outside bonded zones for no longer than 2 (two) years in order to re-

process their products; and

An exemption from VAT on the delivery of products for further processing from

bonded zones to subcontractors outside the bonded zones (or vice versa) orto other companies in these areas.

Capital Allowances Depreciation

Mining machineries falls in category as assets with beneficial life of 16 years and

would be depreciated for 12.5% (declining-balance) or 6.25% (straight-line) from the

month of acquisition by the consistent use.

7. Industry and Players Related News

7.1 Legal Uncertainty Remains Big Problem in RI Mining Sector

http://www.thejakartapost.com/news/2013/06/17/legal-uncertainty-remains-big-problem-ri-

mining-sector.html

A former deputy president director with US-based mining giant PT. Newmont Nusa

Tenggara expressed his concern with regards to the future of mining sector in the

country.

A recent survey conducted by PricewaterhouseCoopers (PWC) entitled “MineIndonesia 2013” deemed that Indonesia’s mining industry has become less attractive

due to recent government actions. The decentralization has become a major

annoyance to miners attempting to do business in the country, with most major

regional administrators out of control in terms of issuing mining permits.

Another point was also highlighted with regards to the export ban on mining firms for

unprocessed ore from 2014 and requires the firms to build local smelters to process

the ore.

Moreover, Indonesia was ranked 96th down from 85th in 2011 by the survey recently

published by Canadian think tank the Fraser Institute, which placed Southeast Asia’s

largest economy at the bottom of 96 countries in terms of the policy potential index

in 2012.

Deputy Energy and Mineral Resources Minister, Susilo Siswoutomo commented that

the government would keep on carrying out the implementation of the 2009 law

and there would be a possibility for the new government would alter the law after

next year’s election.

http://www.thejakartapost.com/news/2013/06/17/legal-uncertainty-remains-big-problem-ri-mining-sector.htmlhttp://www.thejakartapost.com/news/2013/06/17/legal-uncertainty-remains-big-problem-ri-mining-sector.htmlhttp://www.thejakartapost.com/news/2013/06/17/legal-uncertainty-remains-big-problem-ri-mining-sector.htmlhttp://www.thejakartapost.com/news/2013/06/17/legal-uncertainty-remains-big-problem-ri-mining-sector.htmlhttp://www.thejakartapost.com/news/2013/06/17/legal-uncertainty-remains-big-problem-ri-mining-sector.html


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7.2. Anticipating the Weakening Revenues in Mining Sector, INTA Increases Heavy

Equipment Rental Business

http://energitoday.com/2013/05/10/antisipasi-pelemahan-bisnis-tambang-inta-tingkatkan-

bisnis-penyewaan-alat-berat/

One of the market leaders in heavy equipment sector, Intraco Penta (INTA) will

increase the rental business of its heavy equipment products in order to anticipate

the weakening mining business which impacted on the company’s sales.

Petrus Halim, the President Director of the Company said that the Company offers

solution to the miners to hire and eventually will let them buy after their business

recovered.

In the first quarter of 2013, Intraco recorded a 13.5% decline in revenue to Rp 780.5

billion from the realization of the first quarter of 2012 amounted to Rp 900.8 billion.Heavy equipment segment accounted for 72%, 14% spare parts sales, and rental of

4%. In the first quarter of 2013, the Intraco posted a net profit increase of 20.6% to Rp

61.89 billion.

In addition, the company will start diversifying businesses beyond coal mining, which

includes nickel, gold, agriculture, and infrastructure.

Imam Liyanto, Head of Investor Relations and Corporate Finance Intraco added

that, although the 1st quarter in 2013 revenue fell, but there was an increase of the

EBITDA and profit before tax.

7.3 Indonesian Cement Brings New Mining Equipments

http://www.tempo.co/read/news/2013/06/27/088491761/Semen-Indonesia-Datangkan-Alat-

Pertambangan-Baru

Listed cement producer, PT Semen Indonesia (Persero) Tbk (SMGR) brings in new

mining equipment such as limestone crushing vehicles in order to reduce the noise

caused by limestone mining activities. That new mining equipment formed by one

unit of Wirtgen and one unit of Vermeer which today has been tested in Tuban, East

Java.

President Director of Semen Indonesia, Dwi Soetjipto said before there are limestone

crushers, the company used to mine by blasting or detonate the mining areas.

However, it is difficult to do in the way of land mines, which are located near or

around 500-700 meters from residential areas.

According to Dwi, limestone crusher is also improving the efficiency of the company

since the upstream mine. "Because it is small, the crusher system will work faster and

has minimal damage, so it can reduce the cost of maintenance as well as crusher,"

he said.

http://energitoday.com/2013/05/10/antisipasi-pelemahan-bisnis-tambang-inta-tingkatkan-bisnis-penyewaan-alat-berat/http://energitoday.com/2013/05/10/antisipasi-pelemahan-bisnis-tambang-inta-tingkatkan-bisnis-penyewaan-alat-berat/http://energitoday.com/2013/05/10/antisipasi-pelemahan-bisnis-tambang-inta-tingkatkan-bisnis-penyewaan-alat-berat/http://www.tempo.co/read/news/2013/06/27/088491761/Semen-Indonesia-Datangkan-Alat-Pertambangan-Baruhttp://www.tempo.co/read/news/2013/06/27/088491761/Semen-Indonesia-Datangkan-Alat-Pertambangan-Baruhttp://www.tempo.co/read/news/2013/06/27/088491761/Semen-Indonesia-Datangkan-Alat-Pertambangan-Baruhttp://www.tempo.co/read/news/2013/06/27/088491761/Semen-Indonesia-Datangkan-Alat-Pertambangan-Baruhttp://www.tempo.co/read/news/2013/06/27/088491761/Semen-Indonesia-Datangkan-Alat-Pertambangan-Baruhttp://energitoday.com/2013/05/10/antisipasi-pelemahan-bisnis-tambang-inta-tingkatkan-bisnis-penyewaan-alat-berat/http://energitoday.com/2013/05/10/antisipasi-pelemahan-bisnis-tambang-inta-tingkatkan-bisnis-penyewaan-alat-berat/


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The capacity of new mining equipment is maximum 300 tons of material per hour.

However, normally only be used in the capacity of 200 tons per hour. The target

volume of raw materials produced by each of the new equipment is 100 thousand

tons per month.

8. Opportunities in Mining Machineries Sector in Indonesia

Supply of Mining Equipments or Parts and Services

Korean Companies have some significant opportunities to supply of various mining

equipment and services to be utilized in a range of stages of mining operations

including but not limited to:

Drilling equipments and parts; Moving and hauling equipment, front end loaders;

Milling and processing equipment such as conveyors, sub-mills, cyclones,

crushers;

Consumables such as chemicals and reagents, filtration equipment,

explosives;

Mine safety equipments;

Replacement parts and

Ancillary services such as equipment repair and maintenance and mine

rehabilitation.

Mining Plant Projects

Several mining companies will continue to implement part of their investment plans

in 2013. Under the new law, mining companies must refine the raw materials in

Indonesia before they ship it out overseas. This could be an opportunity for Korean

Heavy Equipment Companies to have more partnerships with Indonesian mining

companies in terms of supplying machineries and parts to support the operational

process.

As of 2012, The Government of Indonesia has received 19 proposals of investmentprojects to build smelting plants in Indonesia and 10 projects are projected to be

operational in 2014. The data is stated in below table:


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Figure 6 - Project Lists of Smelting Plant in Indonesia

No. Company Location Operation

1 PT. Aneka Tambang Halmahera, North Maluku 2014

2 PT. Aneka TambangMandiodo, NorthKonawe,

Southeast Sulawesi 2014

3 PT. Aneka Tambang Mempawah, West Kalimantan 2014

4 PT. Indonesia Chemical

Alumnia (ICA)Tayan, West Kalimantan 2014

5 PT. Vale Indonesia (INCO) Pormala, Southeast Sulawesi 2017

6 PT. Weda Bay Nikel Weda, North Maluku 2016

7 Meratus Jaya Iron & Steel Batu Licin, South Kalimantan 2014

8 Indofero Cilegon, Banten 2012

9 PT. Sebuku Iron Lateritic Sebuku, South Kalimantan 2014

10 PT. Krakatau Steel Posco Cilegon, Banten 2014

11 PT. Nusantara Smelting Bontang, East Kalimantan 201412 PT. Aneka Tambang Gresik, East Java -

13 PT. Indosmelt Maros, South Sulawesi 2014

14 Pendopo Coal Gasification Prabumulih, South Sumatra 2016

15 Pendopo Coal Up Grading Prabumulih, South Sumatra 2013

16 PT. Dairi Prima Mineral Dairi, North Sumatra 2014

17 PT. Agincourt Resources South Tapanuli, North Sumatra 2015

18 PT. Jinhuang Indonesia Morowali, South Sulawesi -

19 PT. Timah Cilegon, Banten 2015

Source: Energy and Mineral Resources Ministry

8.1 Trade Events related to the Mining Machineries Sector in Indonesia

Mining Indonesia - http://www.pamerindo.com/events/5

Mining Indonesia is an annual event; this year will be held on September 4-7 in

Jakarta International Expo Kemayoran. This event is recognized as the one that

offers a networking opportunity and industry platform for suppliers to promote

mining technologies to the Indonesia market. Last year’s event was attended by

more than 700 exhibiting companies with more than 11,000 visitors.

Indonesia Annual Mining Conference - http://www.claridenglobal.com/indonesiamining/

The 3rd Annual Indonesia Mining 2014 Conference will be held in Nusa Dua, Bali,

Indonesia in February 2014. The Conference provides information to investors and

miners for identifying mining investment opportunities for the coal and non-coal

sectors in Indonesia, with the best strategies to succeed while ensuring the

security of their investments. The topics will be discussed include Global Trends in

Financial Markets Affecting the Mining Industry in Indonesia, Assessing

Infrastructure Developments to Unlock Mining Potential, Recent Environmental

Regulation Changes which Affect Mining Industry in Indonesia, etc.
http://www.pamerindo.com/events/5http://www.pamerindo.com/events/5http://www.pamerindo.com/events/5http://www.claridenglobal.com/indonesiamining/http://www.claridenglobal.com/indonesiamining/http://www.claridenglobal.com/indonesiamining/http://www.claridenglobal.com/indonesiamining/http://www.pamerindo.com/events/5

(6) KITA - Mining Machinery 20130814

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