Attakcs on mining firms misplaced<\/p>\n
JAKARTA (JP): Mining analysts here have expressed great
\nconcern over what they see as misplaced and groundless criticism
\nof the role of foreign contractors in Indonesia's mining
\ndevelopment.<\/p>\n
Soetaryo Sigit, a former secretary-general of the Ministry of
\nMines and Energy, is concerned that the sweeping criticism of the
\ngovernment's mining contract policy may, falsely, give the
\nimpression that foreign investment in the sector is no longer
\nneeded.<\/p>\n
Soetaryo, one of the architects of the mining Contract of Work
\nscheme, said such an impression would discourage foreigners from
\ninvesting in the country at a time when \"we badly need foreign
\ncapital and technology to develop our resources.\"<\/p>\n
Mining consultant Rachman Wiriosudarmo shared Soetaryo's
\nconcern, contending that such insensitive criticism was harmful
\nto mining development, especially now when the international
\ncompetition for foreign capital to finance highly risky mining
\noperations had become keen.<\/p>\n
Several politicians, such as Amien Rais, and analysts such as
\nRizal Ramli recently attacked the domination of Indonesia's
\nmining industry by foreign companies and the manner in which the
\ngovernment has been managing foreign investor operations in the
\nsector.<\/p>\n
They sharply criticized the government for asking for only a
\n10 percent stake in the Canadian joint venture which plans to
\ndevelop the Busang gold mine in East Kalimantan.<\/p>\n
\"We must admit that high-risk mining activities are still
\nunattractive to domestic investors not only because they have
\nlimited capital and technology, but also because they are not
\nvery familiar with mining operations,\" Soetaryo said.<\/p>\n
Foreign mining contractors account for 100 percent of crude
\ncopper production, 93 percent of gold, 89 percent of silver, 25
\npercent of tin and almost 70 percent of coal production in
\nIndonesia. Foreign oil contractors also dominate the hydrocarbon
\nsector.<\/p>\n
Soetaryo predicted that the role of foreign investors in the
\ndevelopment of Indonesia's mining sector would continue to be
\nconsiderable for \"quite a long period of time\".<\/p>\n
\"It is therefore a pity that much criticism of mining
\noperations in Indonesia has been based on wrong presumptions.
\nCritics do not fully understand the laws which, in fact, have
\nmanaged to attract foreign investors,\" Soetaryo said.<\/p>\n
The Ministry of Mines and Energy has been criticized lately by
\nmining analysts and consultants for failing to solve promptly the
\ndispute between Bre-X Minerals and Barrick Gold Corp. both of
\nCanada over a potentially huge gold mine in Busang, East
\nKalimantan.<\/p>\n
The dispute between the two mining giants -- each of which has
\npolitically influential businesspeople as local partners -- has
\ncaused some critics to demand the government review its mining
\nContract of Work policy.<\/p>\n
The critics said the government should strengthen its
\nbargaining position and increase the role of local companies in
\nmining contracts. They demanded that mining activities be
\ndesigned for the greatest welfare of the people and not the
\nbenefits of foreign contractors.<\/p>\n
Soetaryo explained that according to current regulations (Law
\nNo. 1\/1967), foreign investment in a mining operation should be
\nbased on a contract of work with the government or a cooperation
\nagreement with a state-owned company.<\/p>\n
Contracts of Work -- which stipulate technical, financial,
\nfiscal and legal clauses -- must gain Presidential approval after
\nbeing discussed by the House of Representatives.<\/p>\n
Contrary to the criticism, Soetaryo said, the Contract of Work
\nscheme brought many benefits to the nation.<\/p>\n
These included contract fees, exploitation royalties and
\nvarious taxes and levies imposed by local administrations and the
\ncentral government, and indirect benefits such as jobs, basic
\ninfrastructure, the transfer of skills and technology.<\/p>\n
\"I think the terms settled in the mining contracts of work
\nwith foreign investors are quite good, meaning they are fair and
\nmutually beneficial to both the investor and the government,\" he
\nsaid.<\/p>\n
\"What's important is that all government offices involved
\nexercise effective control of the implementation of the contracts
\nof work,\" he added.<\/p>\n
Rachman also saw most of the recent criticism against foreign
\nmining contractors as misplaced and out of proportion.<\/p>\n
\"The size of government shareholding in a foreign mining
\ncontract is not crucial to ensuring that a mining concession
\ncontributes greatly to the public's welfare,\" he argued.<\/p>\n
According to him, the most important thing is that the terms
\nof the mining contract of work are designed to enable Indonesia
\nto gain the greatest benefits from the mining activities.<\/p>\n
\"The size of shareholding only influences the level of
\ndividends to be paid out of profits every year,\" Rachman said.<\/p>\n
He shared Soetaryo's views that the national capability to
\ndevelop mineral resources is still very limited, especially
\nbecause mining operations are highly risky and capital and
\ntechnology-intensive ventures.<\/p>\n
In fact, Rachman noted, almost all of the private national
\ncompanies which obtained mining concessions eventually involved
\nforeign contractors in their business.<\/p>\n
He turned down as completely groundless the allegations of
\npoaching or robbing leveled by several critics against foreign
\nmining contractors.<\/p>\n
\"The mining Contract of Work is the only one of the numerous
\nbusiness deals between the government and foreign entities which
\nmust first be discussed by the House of Representatives before
\nthe deal is approved by the President,\" Wiriosudarmo pointed out.<\/p>\n
\"If the critics' allegations that most of the mining contracts
\nare harmful to the national interest is true, should that mean
\nthe ministry of mines and energy, the House and the President
\nhimself have so far made big mistakes?\" he asked.<\/p>\n
He rejected the demand of some critics for the closing down of
\nforeign mining concessions as entirely impractical and illogical
\nespecially because the critics had not suggested an alternative
\ncontractual concept that could contribute more to the public's
\nwelfare. (pwn\/vin)<\/p>",
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"sponsor": "Okusi Associates",
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