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Amendment to Smelter Licenses in Indonesia: Annulment of Special Operation Production Mining Business License for Implementation of Industrial Business License

In accordance with the government's program to promote the value of natural resource commodities and with the enactment of Law No.3 of 2020 concerning amendments to Law No.4 of 2009 ("Law 3/2020"), there has been a significant change in the licensing to carry out smelter operation business, especially smelter for nickel as a commodity. It is hoped that the optimization of nickel's added value will increase the nickel industry's growth in the country under the guidance of the regulations in Indonesia.

It is necessary for business actors in the nickel smelter sector, whose business is not integrated with nickel mining, to understand that the scope of licensing required in the implementation of a nickel smelter business consists of micro scale business with low risk level to large scale business with a high risk level. Therefore, the required business licensing would also vary with the details as follows:

a) Micro Scale Business : Business Identification Number or Nomor Induk Berusaha ("NIB").
b) Small Scale Business : NIB.
c) Intermediate Scale Business : Standard Certificate.
d) Large Scale Business : Necessary Permits.

The required permit for the operation of the nickel smelter was previously regulated under Law No.4 of 2009 concerning Mineral and Coal Mining in the form of a Special Mining Business License for Processing and/or Purification or Izin Usaha Pertambangan Operasi Produksi Khusus Pengolahan dan/atau Pemurnian ("IUP OPK Processing and Purification"). However, it should be noted that the authority for issuance of nickel smelter permits has been changed. Previously, it was authorized by the Ministry of Energy and Mineral Resources, but has been transferred to the Ministry of Industry as regulated under Law 3/2020 and through Indonesian government regulation, namely Government Regulation No.96 of 2021 concerning Implementation of Mineral and Coal Mining Business Activities ("GR 96/2021"). The permit needed to operate a smelter was previously the IUP OPK Processing and Purification, but is now an Industrial Business License or Izin Usaha Industri ("IUI").

For foreign investment (PMA) business entities, there are no limitations on the percentage of share ownership in accordance with Presidential Regulation No. 49 of 2021 concerning Amendment to Presidential Regulation No. 10 of 2021 concerning the Investment Business Sector ("Positive List"). Additionally, there are exceptions in the provisions regarding the minimum investment value for business entities classified as PMA with a total investment of more than IDR 10,000,000,000.00 (ten billion Rupiah), excluding land and buildings per 5 (five) digits KBLI business field per project location.

Suppose you, a prospective client, wants to start a business in the nickel smelter sector. Schinder Law Firm is one of many corporate law firms in Indonesia that have handled a lot of similar matters, with many experienced and professional civil lawyers and investment lawyers in its arsenal, making it one of the top consulting firms in Indonesia. Feel free to contact us at info@schinderlawfirm.com for further consultation.

Author: Dewi Susanti