RISK MITIGATION- Current scenario

Long term risk embedded in the regulatory and social structure of

Indonesia

Complex Regulatory regime:

Given the complexity of Law 4/2009 on coal and mineral mining a well-defined
strategy has to be ideated before making the investments, . The road to robust
strategy, which in turn would help out with mitigation of risk, would be consulting the
decision makers such as MEMR, governors, regents and mayors before venturing.
Along with these the authorities relevant to geography selected, have to be
consulted.

Based on the response of the local consultancies regarding the licensing decision to
set up, Exploration IUPs and Exploration IUPKs or IUP-OPs and IUPK-Ops or IUP-
OPs and IUPK-Ops(refining and/or processing) or IUP-OPs conducting underground
mining could be taken. However, deducing based on the information available on the
outset the best choice would be to get license for IUP-OPs and IUPK-OPs .

Xenophobic attitude towards Chinese

Given the Xenophobic attitude towards Chinese there is a lot that investors could do,
that would garner long term benefits. Some efforts that could be put forth are as
follows:

1) Celebrate local communities: Showing support to the local ethnic groups by

supporting the fund raising events run by local organisations.(
https://www.unicefusa.org/stories/5-ways-fight-racism-and-xenophobia/34567)
2) Support human rights organisations like UNICEF.
3) Intervene and reporting attacks, when it is safe to do so:
(https://www.redpepper.org.uk/ten-things-you-can-do-to-combat-racism-and-
xenophobia/)
Medium term (upto 10 years) risks mitigation
Economic viability:
Indonesian mining exploration – Time for reset By: Sacha Winzenried
Similar to other countries, Indonesia is not immune to the commodities downturn.
Since the onset of falling commodity prices in 2012, Indonesian mining companies
have consistently reported a drop-off in their revenues and profitability, in turn
resulting in a lackluster performance in mining equities. This demonstrates the
continued lack of confidence from investors in the mining sector driven by historical
performance of mining companies and the negative commodity price outlook-In
response to falling commodity prices.

As indicated in the same report one of the ways to tackle the issue would be to shift
our focus from increasing production and development to cutting operational
expenditures, and focusing on easier-to-mine mineral deposits, while curtailing
capital expenditures.

Infrastructure
Recently Indonesia’s chief economic minister said that 14 infrastructure projects,
worth 264 trillion rupiah ($19.17 billion), are expected to be dropped from the
government’s strategic development plan due to lack of progress.

Unskilled labour: (ANALYSIS OF TRENDS AND CHALLENGES IN THE

INDONESIAN LABOR MARKET by Emma R. Allen)

The Indonesian regulatory framework prioritizes Indonesian owned companies in the

instances of subcontracting requirements. Since there is a high possibility that skill
sets of domestic labourers may not match Chinese standards, this makes a risk
mitigation framework a necessity.

(https://www.hcmworks.com/blog/5-ways-companies-can-address-a-skills-shortage)
Partnering with Educational Facilities: Though rarer in recent times, many
organizations tend to partner with local (or national) educational facilities – this would
mean we would have a fresh supply of skilled potential workers, and the school
would be able to help graduates in job placement. Opening up the company up to
apprenticeships, co-op work placements and internships, which can help cultivate
the next generation of skilled workers. Best of all, we can keep a close eye on the
future of your industry.
This approach will have a multi fold benefit as not only with it help with labour but
also with Xenophobia issue.
Additional a deal could be struck with the policy makers such that the royalty rates
be alleviated in exchange of funding to relevant educational institution.