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Indonesian Market Focus

Mining Machinery and Parts

2013
Vol 3

Prepared for

Specially by

Mining Machinery
Table of Contents
Table 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
Indonesias 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 total
export 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 equipments 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 in
the 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 sectors 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 Governments 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. The
machineries 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 equipment
and 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 Indonesias 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 countrys 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 economys 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 worlds second largest producer
and exporter of tin and nickel, the fourth-largest producer of copper and a leading
exporter 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)
Production
45

Copper (000 ton)


Export

40
35
Nickel Ore (million ton)

30
25
20
15
10

Bauxite (million ton)

Iron Ore (million ton)

0
2009

2010

2011

2012

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1200

Production
Copper (000 ton)
Export

1000

Copper (000 ton)

800
Copper (000 ton)
600

Production
Copper (000 ton)

400
Silver (000 ton)

200

Gold (000 ton)


Tin (000 ton)

0
2009

2010

2011

2012

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)
4000
3500

Mineral Contract
of Work (COW)

3000
2500

Coal Contract of
Work (COW)

2000
1500

State-Owned
Enterprise (SOE)

1000

Mining Services

500
0
2010

2011

2012

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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 will
increase 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)
1400

Mine Conveyors &


Elevators

1200
1000

Excavators (Mining
Use)

800
600
400

Loaders (Underground
Use)

200

Mining Trucks

2008

2009

2010

Coal Cutting
Machinery
2011

2012

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%).
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3. Competitive Landscape
In line with the substantial growth of coal mining sector in Indonesia, it has dismissedoff the gloomy economic outlook of the region and been promoting serious
competition between domestic mining companies, as well as foreign operations
looking to capitalize on the countrys 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 are
now 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 heavy
equipment 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 Companys 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 company


providing 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 Companys head office was located in Surabaya
with total area of 6.7 Ha at Ngagel Street, but from time to time this area was growth
to 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
Companys 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 is
amounted to 810 units / year. Some of the important machineries in the Companys
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 consistently
the Companys 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 UNIQUIP
is 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-storey
building facilities that is used for running the sales activities which integrated with
workshops, spare parts warehouse and units 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 Indonesias mining code have undoubtedly reduced the overall
level 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 Indonesias 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)

Export

Domestic

Production
421

364

326

236
175
153

2015

180 184

2020

150

2025

Source: APBI-ICMA, 2012

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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 countrys 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 mining
firms entering the Indonesian market.
Figure 5 Estimated Market Value of Mining Equipment (in USD Million)
2500
2000
1500
1000
500
0

2013

2014

2105

2016

2017

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

2.82

3.12

3.47

3.87

4.34

Mine Conveyors & Elevators

Coal Cutting Machinery

The increase number of market value of mining equipments is also driven by the fact
that, Indonesian mining sectors 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 in
the sales of ultra-large hydraulic excavators and dump trucks are forecast beginning
with coal.
On the other hand, Indonesias 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. 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.

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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 in
maintaining 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 Governments Investment: Consistent to
the previous years, many of international mining companies continue to rank
Indonesia 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 Indonesias 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 high
bureaucratic 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 with
mining 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 countrys 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 customs area in
certain cases;
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An entitlement to transfer machinery and equipment to subcontractors


located outside bonded zones for no longer than 2 (two) years in order to reprocess 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) or
to 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-rimining-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 Mine
Indonesia 2013 deemed that Indonesias 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 Asias
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 years election.

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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-tingkatkanbisnis-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 companys 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-AlatPertambangan-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.

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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 investment
projects 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
1
PT. Aneka Tambang
2

PT. Aneka Tambang

PT. Aneka Tambang


PT. Indonesia Chemical
Alumnia (ICA)
PT. Vale Indonesia (INCO)
PT. Weda Bay Nikel
Meratus Jaya Iron & Steel
Indofero
PT. Sebuku Iron Lateritic
PT. Krakatau Steel Posco
PT. Nusantara Smelting
PT. Aneka Tambang
PT. Indosmelt
Pendopo Coal Gasification
Pendopo Coal Up Grading
PT. Dairi Prima Mineral
PT. Agincourt Resources
PT. Jinhuang Indonesia
PT. Timah

4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

Location
Halmahera, North Maluku
Mandiodo, NorthKonawe,
Southeast Sulawesi
Mempawah, West Kalimantan

Operation
2014

Tayan, West Kalimantan

2014

Pormala, Southeast Sulawesi


Weda, North Maluku
Batu Licin, South Kalimantan
Cilegon, Banten
Sebuku, South Kalimantan
Cilegon, Banten
Bontang, East Kalimantan
Gresik, East Java
Maros, South Sulawesi
Prabumulih, South Sumatra
Prabumulih, South Sumatra
Dairi, North Sumatra
South Tapanuli, North Sumatra
Morowali, South Sulawesi
Cilegon, Banten

2017
2016
2014
2012
2014
2014
2014
2014
2016
2013
2014
2015
2015

2014
2014

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 years 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.

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