link international and domestic factors to investors

write a essay link international and domestic factors to investors, explain what they need to know before investing in Indonesian mining in around 2000 words or what national, international and industrial factors investors in Indonesian mining have to take into account when investing in the industry and country;
So you should take in to three part of the essay the first part is indonesia country analysis about the culture, economy, logistics, geography, political and technology link with the mining factor. Second part link with the first part you have just said and talk about indonesia mining and third part is the recommendations for the investors what is the risk and do you recommend they invest indonesian mining.

INSTRUCTIONS ATTACHED
Write to the point like using the world bank data to supporting your point

for example if you using the world bank data or something to supporting your point said the indonesian mining is decrease every year please show how much decrease with the data and link with the other factor and recommend should we invest the Indonesian mining
nathan: I think should be really simple with the example document I provide to you, but the tutor said we did mention is decrease but didnt say how much is decrease something like this

and just like I said first analysis the country and second the country mining link with the first part we analysis with the country and third part basis with you said on the first two part and then give your recommendations to the investor
Here is a example document
And please use good and reliable references to support your points like world banks.

Mining in Indonesia and challenges for foreign investors

Background
Indonesia is a country consisting of 18,000 islands with a rough population of 253 million people (World Atlas, 2016). Currently Indonesia is ranked 131st overall for GDP per capita averaging $11,300 per person with a vast chasm existing between the wealthy and the poor, with roughly 11% of the population living below the poverty line. GDP has been steadily declining since 2012, however inflation rates are at an all time low (CIA, 2015).
Currently, Indonesia is considered to be the 24th largest export economy and 27th largest import economy in the world. Major exports include coal briquettes, crude petroleum and various metal ores. Major imports include refined petroleum and crude petroleum (CIA, 2015). Currently, Indonesia’s exports, exceed its imports pointing towards a Mencantilism view by achieving a trade surplus. Currently, exports outweigh imports by roughly 19 billion dollars, suggesting there is not much foreign investment.
Geographically, Indonesia is part of the ‘ring of fire,’ which means that it is subject to regular volcanic activity and is also quite susceptible to regular, sizeable earthquakes and tsunamis. Indonesia is often exposed to regular cyclonic activity and has distinct seasonal rains between December and March (About Education, 2016).
Politically, Indonesia is currently enjoying a period of stability and is the third largest democracy in the world, behind the United States and India. This period of stability has encouraged economic growth. Indonesia gained independence in 1945, where it was previously a Dutch colony. As a result of European occupation, Indonesia was also influenced legally by aspects of Dutch civil law, which can be seen throughout the Indonesian legal system today.
Indonesia currently has 9 active trade agreements in place varying from free trade to tariff reduction, 2 are signed but not yet in effect, while 6 are currently being negotiated (ARIC, 2015). The free trade agreements are both regional and bilateral. Indonesia is part of the Association of Southeast Asian Nations (ASEAN) that encourages collaboration throughout the region of Southeast Asian with the goal of economic prosperity.
Foreign direct investment (FDI) is often encouraged by developing countries that are primarily manufacturing based. Incentives such as low tariffs help to attract interest from firms that are seeking both comparative or competitive advantage over competitors by seeking access to resources that are inaccessible to competitors. A firm achieves internalisation when their international business strategy includes ownership of infrastructure in foreign countries, but this can only be facilitated, if the governing country allows this to occur.

Recommendations
Michael Porter’s diamond model uses four points as a guide for FD I. These points are firm strategy, structure and rivalry, demand conditions, factor conditions and related and supporting industries. Indonesia does not lack for natural resources, but is greatly hampered by accessibility to resources that are spread across 17,000 islands. Infrastructure is limited, leading Indonesia to have some of the highest logistics costs worldwide because of its remote nature. Indonesia rates poorly on the world corruption index, suggesting that local competition is not based on merit, limiting local competition and limiting the efficiency of the local market. Government policy dictates the direction of the economy and what industries will drive it. With the Indonesian government trying to promote the manufacturing industry and limiting mining interests by proposing tariffs will severely reduce interest from firms that are interested in investing.
All of these factors make the concept of investing in Indonesia a daunting prospect. Security of investment, as well as access to limited technology and human capital place great responsibility on the investors to provide the service to maximise efficiency for the venture. Investment in the developing country Indonesia should be encouraged by the local government, by providing enticing incentives to invest in exchange from knowledge sharing to help improve their technology and infrastructure.
Based on these factors we would recommend not investing in Indonesia in the current economic climate because the risk involved is not worth the potential reward because of the unstable nature of Indonesian business practices.
Things to add
– Regional free trade agreements
– World organisations that they are apart of
– Reasons for signing free trade agreements
– Benefits of free trade agreements
– Not a great deal of competition
–
References

About Education, 2016, ‘Geography of Indonesia,’ viewed 12/04/2016, <https://www.cia.gov/library/publications/the-world-factbook/geos/id.html>

Anonymous, 2014, ‘Indonesia: An overview Beating the Dark Horse,’ Engineering and Mining Journal, v. 215, p. 88-91

Anonymous, 2014, ‘Production Growth Continues,’ Engineering and Mining Journal, v. 215, p. 92-102

ARIC, 2015, ‘Free trade agreements by Country/Economy,’ viewed 21/04/2016, <https://aric.adb.org/fta-country>

CIA, 2015, ‘The World Factbook – Indonesia,’ viewed 10/04/2016, <https://www.cia.gov/library/publications/the-world-factbook/geos/id.html>

Global Business Reports, 2012, ‘The 2009 Mining Law: Justifiable protection of national sovereignty or damaging resource nationalism?’ Engineering and Mining Journal, July, p. 66-67

Transparency International, 2016, ‘Corruption by Country/Territory,’ viewed 28/04/2016, <https://www.transparency.org/country/#IDN>

World Atlas, 2016, ‘Indonesia Geography,’ viewed 15/04/2016, <http://www.worldatlas.com/webimage/countrys/asia/indonesia/idland.htm#page>

http://www.infoplease.com/country/indonesia.html

http://atlas.media.mit.edu/en/profile/country/idn/#Exports

Corruption Index demonstrating how far Indonesia is behind many of ASEAN nations in terms of corruption. (Transparency International, 2016) http://www.todayonline.com/singapore/singapore-8th-least-corrupt-nation-world-index

Map of Indonesia (Nationsonline, 2013)

Nationsonline, 2013, ‘Political Map of Indonesia,’ viewed 20/05/2016, http://www.nationsonline.org/oneworld/map/indonesia_map2.htm
Indonesia is a country consisting of 17,000 islands with a rough population of 253 million people [2]. Currently Indonesia is ranked 131st overall for GDP per capita averaging $11,300 per person with a vast chasm existing between the wealthy and the poor, with roughly 11% of the population living below the poverty line. GDP has been steadily declining since 2012, however inflation rates are at an all-time low [3].
Currently, Indonesia is considered to be the 24th largest export economy and 27th largest import economy in the world. Major exports include coal briquettes, crude petroleum and various metal ores. Major imports include refined petroleum and crude petroleum [3]. Currently, Indonesia’s exports, exceed its imports pointing towards a Mencantilism view by achieving a trade surplus. Currently, exports outweigh imports by roughly 19 billion dollars, suggesting there is not much foreign investment.
Geographically, Indonesia is part of the ‘ring of fire,’ which means that it is subject to regular volcanic activity and is also quite susceptible to regular, sizeable earthquakes and tsunamis. Indonesia is often exposed to regular cyclonic activity and has distinct seasonal rains between December and March [4], suggesting activities in remote areas could be hampered by lack of access because of natural disasters.
Politically, Indonesia is currently enjoying a period of stability and is the third largest democracy in the world, behind the United States and India. This period of stability has encouraged economic growth. Indonesia gained independence in 1945, where it was previously a Dutch colony. As a result of European occupation, Indonesia was also influenced legally by aspects of Dutch civil law, which can be seen throughout the Indonesian legal system today.
Indonesia currently has 9 active trade agreements in place varying from free trade to tariff reduction, 2 are signed but not yet in effect, while 6 are currently being negotiated [5]. The free trade agreements are both regional and bilateral. Indonesia is part of the Association of Southeast Asian Nations (ASEAN) that encourages collaboration throughout the region of Southeast Asian with the goal of economic prosperity.
Foreign direct investment (FDI) is often encouraged by developing countries that are primarily manufacturing based. Incentives such as low tariffs help to attract interest from firms that are seeking both comparative or competitive advantage over competitors by seeking access to resources that are inaccessible to competitors. A firm achieves internationlisation when their international business strategy includes ownership of infrastructure in foreign countries, but this can only be facilitated, if the governing country allows this to occur.

Contents
1 Background
2 the Mining Industry
3 Recommendations
4 References

The Mining Industry
Indonesia is rich with natural resources, with the main mining ventures focused on coal, oil and gold, while there is a market for a focus on other elements. Due to the unique environmental conditions and vast layout of the country of Indonesia, there is a distinct lack of infrastructure in place to facilitate easy access to potential mining sites and a lack of infrastructure to allow easy transport of products that are extracted.
Indonesia is susceptible to corruption, ranking 88th in the corruption perception index [6]. Corruption is often seen as doing wrong for personal gain and developing countries don’t have infrastructure and technology in place to be able to keep track of all agreements. Since 2009, mining permits are issued by state governments as opposed to the national government. State governments wanted better control over their natural resources and to have the ability to control the way the mining companies operated within their state. This however has led to corruption via state officials as opposed to national officials, with over half of the issued mining licenses not meeting standard procedures [7]. In 2014 Indonesia introduced theKorsup Minerba scheme, which was designed to reduce the effects of corruption within the mining sector. Since the introduction of the scheme 721 mining permits have been revoked while improving state revenue by 770 USD (Endcoal, 2016).
Regulations continue to be a burden for the Indonesian government with corruption and illegal mining operations continually diminishing their natural resources. It was estimated that in 2013 that one eighth of Indonesia’s formal coal production, roughly 50 million metric tonnes left the country illegally [8]. Other issues that result from illegal mining are not restricted to monetary loss. Illegal mining ventures are often crude and lacking technology meaning that efficient mining practices are not observed harming extraction percentage, while also directly affecting the environment and scarring the surrounding landscape because of the crude practices that have been adapted.
Foreign direct investment in the mining sector suffered a setback when an ambitious plan was announced to nationalise the mining sector through Law Number 4/2009 on Mineral and Coal[8], while redirecting foreign investment into the manufacturing industry to try and enhance other industries within Indonesia. In an effort to gain control of the mining industry for economic advantage, Indonesia must be careful to utilise resources efficiently, while also continuing to advance their own technology and infrastructure to help encourage more yield from their mineral resources. Law Number 4/2009 was also seen as a way to work with the new mindset that Indonesia was working towards a democracy while new laws such as Government Regulation 23/2010 places an emphasis on processing mined products in Indonesia, adding value for export, while also helping the mining industry in Indonesia to grow. Government regulations have made investment within the resource sector difficult with Indonesia ranking 112th out of 122 countries in the Fraser Institute’s Mining Policy Perception Index [9]. Ideally, working with both the local and national governments, foreign investors were given clear instructions about their legal operations, something that was not clear under the previous regime in Indonesia [10].
Current worldwide coal prices are causing concern within Indonesia as they are having a direct affect on the longevity of coal reserves in Indonesia. Current prices are causing mining companies to reduce stripping techniques and exploration. By reducing stripping techniques, mining companies are reducing costs but are also reducing efficiency leading to a possible exhaustion of reserves by 2033 [11]. Government intervention is required to extend the life of coal reserves by maintaining appropriate prices to increase the competitive nature of mining in Indonesia but also to maximize efficiency from resources.
Michael Porter’s diamond theory uses six points as a guide for understanding why some nations and corporations can achieve competitive advantage by demanding efficiency from local firms in the global economy. These points are firm strategy, structure and rivalry, demand conditions, factor conditions and related and supporting industries with the government and chance playing a pivotal role.
Firm strategy, structure and rivalry plays an important role in the decision to invest in Indonesia. Very rarely is one market identical to another. The strategy required to enter the Indonesian mining sector must consider hurdles such as government intervention and natural disasters. A joint venture could be the best available option as corruption occurs regularly, potentially limiting available investment opportunities.
Factor conditions require careful consideration in regards to entry into a market. Human capital in Indonesia is limited, with the need to provide training with both mining techniques and technology to encourage efficiency. Labour shortages should not be underestimated in regards to how they can effect the Indonesian mining industry. A shortage of skilled workers can drastically reduce efficiency. Indonesia does not lack for natural resources, but is greatly hampered by accessibility to resources that are spread across 17,000 islands. Infrastructure is limited, leading Indonesia to have some of the highest logistics costs worldwide because of its remote nature.
Demand conditions are often considered to be driven by the requirements of the local market. Natural resources are often different, as they are seen as a sought after commodity that is traded worldwide to meet global demands. Natural resources are often globally traded with large MNC’s behind mining ventures as they have the resources and technology to efficiently extract the resources. The local mining industry in Indonesia is often only small or illegal mining operations. The largest mining operations in Indonesia are large MNC’s such as Vale or BHP Billiton.
The related and supporting industries for the mining industry in Indonesia are reliant upon the processes and technology that large MNC’s can provide. Sharing knowledge is a key reason to encourage FDI in developing countries. Through exposure to new technology and practices, Indonesia can start to improve their own mining industry. Government Regulation 23/2010 was a way for the Indonesian government to try and encourage growth within the mining industry by insisting that mined natural resources be refined in Indonesia before exporting.
Government influence has the ability to affect all of the above conditions through rules and regulations. A major cause for concern is the extreme measures being taken in regards to resource nationalism and asset nationalisation [12]. Currently Indonesia is trying to encourage growth throughout their manufacturing industry, while discouraging FDI in the mining sector. This can also be seen as a way of the Indonesian government preserving natural resources.
Chance has to be considered when investing in Indonesia. Because of the unique geographical location that Indonesia currently inhabits, they are susceptible to natural disasters that can include land slides, earthquakes and volcanic activity. These occurrences can destroy infrastructure while also affecting accessibility, which has the ability to affect overall efficiency. Government stability plays a role in chance as well, having the potential to disrupt mining operations through potential policy or government changes affecting agreements in place.
Michael Porter’s Diamond Theory is a perfect example of what to consider about local markets when considering investments opportunities as any of those factors have the ability to affect the efficiency and success of a move into a foreign market.

Recommendations
Mining companies worldwide are faced with challenges of conducting business with developing countries. These challenges include lack of skilled workers, implementation of technology, accessibility, government regulations and corruption. These challenges will continue to exist as global demand for natural resources continues.
Indonesia must do what they can to maximise economic opportunities from their natural resources without discouraging FDI. The benefits that can be gained through FDI can help to improve efficiency within the mining industry will also accumulating human capital.
It is therefore that we recommend Indonesia must encourage FDI for their economic future. FDI can create infrastructure that will encourage future investments. Heavy government regulations continue to inhibit business transactions while corruption continues to discourage investment requiring Indonesia to utilise Korsup Minerba for the mindset of foreign investors and the integrity of the local mining industry.
In the current economic and political environment of Indonesia we have decided that investment in the mining industry in Indonesia is unwise and we will focus on safer investments in other countries. Michael Porter’s Diamond Theory demonstrated key factors that must be acknowledged and as a group we viewed each factor to be problematic for foreign entry into Indonesia. The rewards associated with investment in Indonesia do not equal the risks. The entry method into Indonesia would have to change to provide more assurances for entry into the mining industry.

References
1. Wikipedia, 2016. “Indonesia”, viewed 7/05/2016, <https://en.wikipedia.org/wiki/Indonesia>
2. World Atlas, 2016, ‘Indonesia Geography,’ viewed 15/04/2016, <http://www.worldatlas.com/webimage/countrys/asia/indonesia/idland.htm#page>
3. CIA, 2015, ‘The World Factbook – Indonesia,’ viewed 10/04/2016, <https://www.cia.gov/library/publications/the-world-factbook/geos/id.html>
4. About Education, 2016, ‘Geography of Indonesia,’ viewed 12/04/2016, <https://www.cia.gov/library/publications/the-world-factbook/geos/id.html>
5. ARIC, 2015, ‘Free trade agreements by Country/Economy,’ viewed 21/04/2016, <https://aric.adb.org/fta-country>
6. Transparency International, 2016, ‘Corruption by Country/Territory,’ viewed 28/04/2016, <https://www.transparency.org/country/#IDN>
7. Indonesia-Investments, 2016, ‘Weak Governance in Indonesian Mining Sector: Overlapping Mining Areas,’ viewed 17/05/2016, http://www.indonesia-investments.com/news/todays-headlines/weak-governance-in-indonesian-mining-sector-overlapping-mining-areas/item2114
8. Anonymous, 2014, ‘Indonesia: An overview Beating the Dark Horse,’ Engineering and Mining Journal, v. 215, p. 88-91
9. US Department of State, 2015, ‘2015 Investment Climate Statement – Indonesia,’ viewed 19/05/2016, http://www.state.gov/e/eb/rls/othr/ics/2015/241597.htm
10. Anonymous, 2014, ‘Production Growth Continues,’ Engineering and Mining Journal, v. 215, p. 92-102
11.Reuters, 2016, ‘Indonesia could deplete coal reserves by 2033,’ viewed 17/05/2016, http://www.reuters.com/article/indonesia-coal-idUSL4N16F4C4
12. PWC, 2015, ‘Mine: The Growing Disconnect,’ viewed 19/05/2016, https://www.pwc.ch/user_content/editor/files/publ_energy/pwc_mine_the_growing_disconnect_e.pdf
Global Business Reports, 2012, ‘The 2009 Mining Law: Justifiable protection of national sovereignty or damaging resource nationalism?’ Engineering and Mining Journal, July, p. 66-67
13. OEC, 2106. ‘Indonesia’, viewed 28/04/2016, <http://atlas.media.mit.edu/en/profile/country/idn/#Exports>
14. Infoplease, 2016. ‘Indonesia’, viewed 28/04/2016, <http://www.infoplease.com/country/indonesia.html>
Endcoal, 2016, ‘Corruption and Illegalities in the Mining Sector in Indonesia: A Ranking of 12 Provinces involved in Korsup Minerba,’ viewed 15/04/2016, http://endcoal.org/2016/02/media-briefing-corruption-and-illegalities-in-the-mining-sector-in-indonesia-a-ranking-of-12-provinces-involved-in-korsup-minerba/

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