Autonomy holds bumpy ride for mining industry<\/p>\n
By Berni K. Moestafa<\/p>\n
JAKARTA (JP): In early November, members of the South Sulawesi
\nLegislative Council demanded the central government pay some Rp 6
\nbillion (nearly US$900,000), saying the money was outstanding in
\nroyalties from a massive local nickel mining operation.<\/p>\n
The royalties in question were derived from PT International
\nNickel Indonesia. Tbk (Inco), a Canadian company listed on the
\nJakarta Stock Exchange, which operates the Soroako mines.<\/p>\n
By law, 80 percent of royalties paid by Inco to the Indonesian
\ngovernment should be paid to the local administration.<\/p>\n
The legislators said Jakarta had always been slow in
\ndisbursing the province's entitlement.<\/p>\n
South Sulawesi is not the only province critical of Jakarta's
\ninability to promptly pay royalty payments. Throughout Indonesia,
\nlocal administrations have been grumbling about the drawn-out
\nprocedures for obtaining their share of royalty payments.<\/p>\n
Many resource-rich provinces have, over the past year, balked
\nat the manner in which Jakarta has delayed paying their royalty
\nshares. They claim the central government has also been helping
\nitself to disproportionally larger shares of the royalty payments
\nfor minerals extracted from their regions.<\/p>\n
In spite of their massive contribution to the central
\nadministration, the economy of these provinces remains
\nunderdeveloped.<\/p>\n
Irian Jaya, which produces copper and gold, South Sulawesi,
\nwhich produces nickel and South Kalimantan and East Kalimantan
\nwith their coal deposits, are far less developed compared to
\nJava, where most of the mining royalty money is spent.<\/p>\n
Regional discontent and resentment came into the open with the
\ndawn of political reforms and democracy in Indonesia.<\/p>\n
It was partly in response to this outcry that the House of
\nRepresentative passed in April Law No. 22\/1999 on Regional
\nAdministration and Law No. 25\/1999 on Intergovernmental Fiscal
\nBalance.<\/p>\n
The two legislations give the regions greater autonomy in
\nmanaging their own affairs and a greater share of the revenues
\nthat are generated in their areas.<\/p>\n
The regions, as well as all parties concerned, have two years
\nto prepare for the new laws before they are fully enforced.<\/p>\n
Under the intergovernmental fiscal balance law, provinces will
\nget 15 percent of the government's oil revenue, 30 percent of gas
\nreceipts and 80 percent of mining royalties.<\/p>\n
This allocation could be a big boon for the resource-rich
\nprovinces in Sumatra, Kalimantan, Sulawesi and Irian Jaya.<\/p>\n
There are currently 32 major mining companies operating
\nthroughout the archipelago, extracting coal, nickel, gold, copper
\nand other minerals. The mining industry generated some $4 billion
\nin domestic and export sales in 1998.<\/p>\n
Their total contribution to government coffers amounted last
\nyear to about $540 million.<\/p>\n
Armed with the newfound autonomy, some provincial
\nadministrations have began moves to try to skim even more money
\nfrom mining companies extracting minerals from their provinces.<\/p>\n
The chairman of the Board of Advisors at the Indonesian Coal
\nMining Association, Soetaryo Sigit, said many local
\nadministrations saw the autonomy law as a \"weapon\" to boost local
\nrevenues.<\/p>\n
Soetaryo said however, that the targeting of the mining
\ncompanies was wrong, and that they should keep their focus on the
\ncentral government.<\/p>\n
\"They assume that just because the money from Jakarta never
\narrives on time, they must now turn to the companies,\" he said.<\/p>\n
He cited as an example a regulation passed by the South
\nKalimantan Legislative Council imposing a yearly Rp 55,000 fee
\nfor each hectare mined by companies.<\/p>\n
He said because mining companies operated over thousands of
\nhectares, they would end up paying hundreds of million in rupiah
\nfor land usage alone.<\/p>\n
Future problems<\/p>\n
He also foresaw problems with mining companies working under
\ntwo different tax regimes, because the concessions would run over
\ntwo regencies.<\/p>\n
\"Implementing the autonomy law doesn't seem to be that easy,\"
\nsaid Soetaryo, who is also a commissioner with PT Adaro
\nIndonesia, which has a coal mining operation in South Kalimantan.<\/p>\n
Soetaryo said local people often regarded mining companies as
\ncolonizers depriving them of their natural resources.<\/p>\n
He said that because locals were unaware about mining
\ncontributions to the regions, they did not know the benefit of
\nthe presence of these companies.<\/p>\n
Soetaryo, who is a former director general of general mines at
\nthe Ministry of Mines and Energy, faulted the central government
\nfor failing to involve local administrations in drafting the
\ncontracts with investors.<\/p>\n
Even the governors are still blind to the contracts,\" he said.<\/p>\n
He said all royalty payments were currently paid to the
\ncentral government, which then disbursed a share to the provinces
\nin a process that could take at least six months.<\/p>\n
\"Royalties should be directly paid to the regions.\"<\/p>\n
He said the government should explain the content of mining
\ncontracts to regional administrations before permitting them to
\nissue mining regulations.<\/p>\n
The chairman of South Kalimantan's provincial development
\nboard, Ismet Ahmad, said regency administrations had been under
\npressure to regulate mining companies in their areas in order to
\nwin autonomous status before the law comes into effect in two
\nyears time.<\/p>\n
Under Article 6 of the Regional Administration Law, regional
\nadministrations that are not prepared to become autonomous when
\nthe law comes into force will be dissolved or merged.<\/p>\n
Ismet said the clause was forcing many regencies or
\nmayoralties to issue regulations to quickly generate increased
\nrevenues.<\/p>\n
He warned that some regencies and mayoralties might not meet
\nthe criteria to become autonomous status. The criteria includes
\nthe ability to manage their own affairs and a certain degree of
\nfinancial independence.<\/p>\n
\"That's why many are turning to mining companies to collect
\nfunds,\" said Ismet, a PhD holder in economic development from the
\nUniversity of Florida.<\/p>\n
He suggested that local administrations turn their attention
\nto the agriculture or the manufacturing sectors, which offer
\nlonger term benefits compared to the mining sector.<\/p>\n
The chairman of the Association of Indonesian Mining
\nProfessionals, Herman Afif Kusumo, said that with the greater
\nautonomy for the regions, the Ministry of Mines and Energy in
\nJakarta had become dispensable.<\/p>\n
\"The central government would coordinate the mining industry,
\nbut on the fields it would be managed by regional
\nadministrations,\" Herman said.<\/p>\n
The success of the transfer of authority from the center to
\nthe regions would largely depend on Jakarta's \"sincerity\", he
\nsaid, adding that most ministry officials would probably be
\nreluctant to be reassigned to the regions.<\/p>\n
Herman also cautioned the need to thoroughly prepare officials
\nin the regions in handling their new responsibility.<\/p>\n
\"We have to guide the regional administrations so that they
\ndon't mess it up.\"<\/p>\n
He said local officials were not used to handling the
\nopportunities and the authorities given to them under the new
\nautonomy law.<\/p>\n
Herman said the provinces should not hesitate to recruit
\nmining experts from abroad if they could not find them locally,
\nadding that the two-year preparation period was insufficient
\nbecause the regions lacked qualified human resources.<\/p>\n
He said decentralization benefited mining companies because it
\nwould simplify the investment process and open up opportunities
\nto foster better relations with the locals.<\/p>\n
PT Adaro general affairs manager Eddy Suwikno said the
\nprestige of a mining company would be defined by how well it
\nconducted its community development programs.<\/p>\n
He said as close neighbors, mining companies should listen to
\nthe needs of the locals.<\/p>\n
The spokesman for the giant gold and copper mining company PT
\nFreeport in Irian Jaya, Siddharta Moersjid, said companies
\nmust maintain constant communication networks with local people.<\/p>\n
He said that in implementing the autonomy law, it would be
\ndifficult to please all the different parties, from the local
\ninhabitants to the central and local administrations.<\/p>\n
The tediousness of the slow-moving shift from the decade-long
\ncentralization to decentralization is to be expected.<\/p>\n
In Ismet's words: \"of course there'll be bumps in the road --
\nwe're moving from one state of balance into another. What counts
\nis how we get to the new state of balance with a minimum of
\nsuffering.\"<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/autonomy-holds-bumpy-ride-for-mining-industry-1447893297",
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"sponsor": "Okusi Associates",
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