G/TRIMS/W/123  
 
30 April 2013  
(13-2283)  Page: 1/3  
Committee on Trade-Related Investment Measures  Original: English  
 
INDONESIA  CERTAIN LOCAL CONTENT PROVISIONS IN  
THE ENERGY SECTOR (MINING, OIL AND GAS) 
REPLIES BY INDONESIA TO THE QUESTIONS POSED BY 
THE UNITED STATES1 
The following communication, dated 29 April 2013, is being circulated at the request of the 
Delegation of Indonesia. 
 
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We refer to the United States' questions contained in document G/TRIMS/W/108 dated 20 September 2012, Indonesia hereby wishes to provide the following clarifications: 
 
The United States appreciates the responses Indonesia has provides in document G/TRIMS/W/100 (6 July 2012) in answer to questions posed by the United States and the European Union in 
document G/TRIMS/W/88 (22 September 2011). We note that this exchange followed responses 
Indonesia provided in documents G/TRIMS/W/74 (6 August 2010) and G/TRIMS/W/79 
(22 December 2010) in answer to questions posed by the United States and the European Union in document G/TRIMS/W/70 (9 October 2009). 
 
This exchange of information notwithstanding, the United States continues to have a number of questions about policies applicable to the mining and to the oil and gas sectors. 
 
In response to a question from the United States about the meaning of the term "prioritize" in the 
2009 Mining Law and Government Regulation No. 23 Year 2010, Indonesia explained that the term 
"encourages companies to give preference to dome stic goods and services provided that they are 
available in the Indonesia market and meet the qu ality and post-sales service standards, as well 
as having their sustainability of supply and timely  distribution warranted" and that "[i]nvestors are 
considered to have prioritized the use of th ose goods and services when they have given 
preference to domestic goods, equipments, services, raw materials and/or components as well as 
imported products sold in Indonesia."  
Question 1 : 
In determining the availability of the product, are investors permitted to consider the price at 
which such products may be available?   
Reply: There is no limitation with regard to price consideration, provided that the goods and 
services meet the above-mentioned criteria.  
 
Question 2 : 
Indonesia did not respond to our question ab out "who determines whether local goods and 
services are available, and whether a foreign investor has "prioritized" use of those goods and 
service." Please describe the process for making the availability determination. 
 Reply: 
The Ministry of Energy and Mineral Resources c.q.  Director General of Mineral and Coal and the 
Indonesia Investment Coordinating Board (BKPM) determine the availability and preference of 
goods and services based on masterlist approval da tabase and evaluation of domestic producers' 
capacity.  
                                               
1 G/TRIMS/W/108. G/TRIMS/W/123 
 
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In response to a question from the United Stat es concerning law No. 4/2009, Indonesia explained 
that the implementing regulations of this law, spec ifically Minister of Energy and Mineral Resources 
Decree No. 34/2009 "require a minimum percentage of mining and coal production be prioritized 
for domestic needs at a benchmark price in accordance with the generally effective price in the 
international market."  
Question 3 : 
How does Indonesia define the term "prioritize" in decree No. 34/2009? Are there any circumstances in which an investor may allocate less than the minimum percentage for domestic use in Indonesia? 
 
Reply: 
The term "prioritize" in the Minister of Ener gy and Mineral Resources Regulation No.34/2009 
means operator(s) are required to meet the minimum domestic need. The purpose of this 
provision is to maintain the sustainability of domestic energy supply. The shortage of energy 
supply unquestionably generates serious impacts on all economic activities in the country e.g. 
disrupt supply of energy to power plants, industri es, and households. In this case, Indonesia has 
suffered electricity blackouts in numerous areas due to lack of energy supply in several power plants.  
Regarding the minimum percentage, investors may allocate less in certain conditions which render 
them unable to meet the minimum domestic needs.   
Question 4 : 
Indonesia explained that the Minister for Energy and Mineral Resources establishes an annual decision on the domestic need and the minimu m sale requirement percentage for mineral and 
coal. Please describe the process for reaching this decision? Will investors be given an opportunity 
to provide information relevant to this decision? W ill a draft of the decision be made available for 
comment?  
Reply: 
In the process of making the annual decision, the Ministry of Energy and Mineral Resources 
conducts inventory by collecting relevant information and data from domestic end-users, 
associations, producers and other stakeholders. After all data and information are collected, the 
Ministry invites them and jointly estimate the production and formulate the domestic needs plans for the following year. The formula to calculate the minimum sale requirement percentage is by 
summing up the total domestic needs divided by the national production and multiplied by 100%. 
 While currently there are no available mechanisms for investors to provide their comments on the draft decision, the investors have been extensively engaged in the earlier proceedings. 
 
Question 5 : 
Please describe the process for calculating the "b enchmark price." What does Indonesia mean by 
the "generally effective price in the internationa l market?" How does Indonesia identify such a 
price?  
Reply: 
Benchmark price for steam or thermal coal is determined by averaging 4 (four) indexes published 
by Indonesian Coal Index (ICI), New Castle Export Index, Platts, and Global Coal New Castle 
Index. For coking or metallurgical coal, benchmark price is taken from Platts and Energy 
Publishing. 
 In response to question from the United States  regarding Presidential Regulation No. 35/2004, 
which regulates contractor activities in the upstream oil and gas sector, regarding requirements to 
"prioritize" the use of local goods and services Indonesia explained that the regulation "does not differentiate between the implementation of prefer ence to domestic goods/services in the mineral 
and coal mining sector and that in the oil and gas sector." 
 G/TRIMS/W/123 
 
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  Question 6 : 
Does Indonesia's answer mean that the requirem ents to provide preferences to domestic goods 
and services and the process for determining whethe r that requirement is fulfilled are the same for 
the mineral and coal mining sector and the oil and gas sector? Please describe any differences. 
 
Reply: 
In principle, the requirments apply to both the mi neral and coal mining sector and the oil and gas 
sector in their respective regulations. The differe nce lies on the implemention, in which the oil and 
gas sector refers to Production Sharing Contract whereas the mineral and coal mining sector refers to Mineral Contract of Works and Coal Contract of Works.   
 
Question 7 : 
What is the APDN Book? Who writes and published this book? Are there similar books cataloging domestically available goods for sectors other than oil and gas? How frequently is the book 
updated? 
 Reply: 
The APDN Book is a reference for procurement in oil and gas upstream activities. The book contains a list of goods/services provided by national companies, either local or foreign investors, to support oil and gas upstream activities.   
The book is written and published by the Minist ry of Energy and Mineral Resources, and is 
regularly published every 2 (two) years.  
 
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