Confusion reigns over mining laws<\/p>\n
By Berni K. Moestafa<\/p>\n
JAKARTA (JP): New mining exploration has come to a virtual
\nhalt as confusion reigns over the existing mining law that has
\nbecome outdated with the implementation of regional autonomy this
\nyear.<\/p>\n
Already some 20 foreign and local mining firms were reported
\nto have stopped or suspended their exploration activities.
\nChairman of the Indonesian Mining Association (IMA), B.N. Wahju
\nblamed the suspension of exploration on legal uncertainties under
\nregional autonomy.<\/p>\n
\"The current legal mining framework does not support the
\nautonomy laws,\" Wahju told The Jakarta Post in an interview last
\nweek.<\/p>\n
The mining industry has been left with an obsolete mining law
\nsince the government implemented regional autonomy on Jan. 1,
\n2001. The government did issue regulations that govern the mining
\nindustry under regional autonomy but they do not comply with the
\nexisting mining law.<\/p>\n
\"The present mining law No 11\/1967 is centralistic, while the
\nforthcoming one is based on decentralization,\" Wahju said.<\/p>\n
Because of the inconsistency in the legal system, many banks
\ndeclined channeling loans to mining firms wishing to invest here.<\/p>\n
\"The current law is simply not bankable,\" he explained.<\/p>\n
He warned that foreign mining firms could continue to defer
\ntheir investments here until the government can sort out this
\nlegal mess.<\/p>\n
Wahju did not specify the companies that have suspended or
\nhalted their exploration activities. Earlier, American mining
\nfirm PT Newmont Pacific Nusantara was reported to have suspended
\nits activities.<\/p>\n
The government is now drafting an amendment of the current
\nlaw, and it hopes to submit the bill to the House of
\nRepresentatives this year.<\/p>\n
But for now, submission of the mining bill must await the
\nenactment of two other bills, that of oil and gas, and power.<\/p>\n
Wahju said that based on an early draft of the mining bill,
\ncontracts of work (COW) for foreign companies would be replaced
\nby mining agreements.<\/p>\n
Unlike the current COW, which is signed by the President of
\nIndonesia, future mining agreements would be subject only to
\napproval from the local authorities, although the central
\ngovernment would handle the drafting of the contents of the
\ncontracts with foreign mining firms.<\/p>\n
Sensitive issues in the contract concerning state income, he
\nsaid, would be handled directly by the central government.<\/p>\n
\"A regency head then only needs to negotiate affairs that
\ndirectly affect his regency, such as community development
\nprograms,\" he explained.<\/p>\n
Under the autonomy law, regional governments retain 80 percent
\nof mining royalties.<\/p>\n
The autonomy laws, Regional Administration Law No22\/1999, and
\nthe Intergovernmental Balance Law No25\/1999, were enacted amid
\nregions' outcries for greater authority in managing their own
\naffairs.<\/p>\n
Provinces rich in natural resources demanded a fairer
\ndistribution of the revenue generated in their area.<\/p>\n
Under the autonomy laws, regions could issue their own mining
\npermits and regulations, and receive a greater share of their
\nmining revenues.<\/p>\n
Mining Specialist at consulting firm PricewaterhouseCoopers,
\nBob Parsons predicted last year, that a \"legal limbo\" would scare
\naway foreign mining investment already here.<\/p>\n
He estimated that spending on exploration activities in
\nIndonesia would drop fast.<\/p>\n
Exploration investments have already declined since 1998, from
\n$75 million to $50 million in the year following.<\/p>\n
He has said that Indonesia must spend at least $300 million
\nper year on exploration, and discover new resources to sustain
\nthe country's production level.<\/p>\n
Minister of Energy and Mineral Resources Purnomo Yusgiantoro
\nsaid the government could do little to prevent the suspension of
\nmining investment here until the new law comes out.<\/p>\n
\"It's a fact that we'll just have to live with, \" he said.<\/p>\n
Former director general for general mining at the Ministry of
\nEnergy and Mineral Resources Surna Tjahja Djadjadiningrat also
\nadmitted that the mining industry was facing a legal gap.<\/p>\n
He said a new ruling in preparation for the gradual
\nimplementation of mining autonomy rights, is expected to iron out
\nsome of the uncertainties.<\/p>\n
Under the draft ruling, which will become a presidential
\ndecree, regions must undergo preparation before exercising their
\nfull mining autonomy rights.<\/p>\n
Surna, who is now the head of the ministry's education and
\ntraining center, said he would lead a task force in charge of
\npreparing the regions.<\/p>\n
\"We are trying to facilitate the regions' preparations for
\nmining autonomy,\" Surna explained.<\/p>\n
The task force would assist local governments in preparing
\ntheir human resources, infrastructure and regional laws under the
\nautonomy arrangements, he said.<\/p>\n
A forum comprising locals, non-government organizations,
\ngovernment officials, and mining firms would be established to
\nhold regular dialogues, he went on.<\/p>\n
\"This forum will act as a sort of medium for mining firms,
\nlocals and the government to meet, exchange opinions, and resolve
\nissues,\" he said.<\/p>\n
The forum and the task force would then work together to
\nimprove regions' skills in managing their mining affairs.<\/p>\n
According to Surna, regions have acknowledged their lack of
\nexperience in the mining industry, and accepted the need for
\nestablishing the task force.<\/p>\n
Last year, his office held a road-show to assess regions'
\nreadiness in adopting full autonomy.<\/p>\n
It said that regions were eager to exercise their mining
\nautonomy rights, but lacked the expertise to do so.<\/p>\n
Surna said that although the central government had officially
\ntransferred much of its mining authority to regions as of Jan. 1,
\nthe implementation is pending the regions' readiness.<\/p>\n
Local governments, he went on, could exercise their autonomy
\nrights in stages in accordance with their capabilities.<\/p>\n
He said the central government would retain some of the
\ncomplicated tasks until regions were capable of carrying them out
\nthemselves.<\/p>\n
\"When regions feel they are prepared to exercise their
\nautonomy rights in full, they can declare so to the Ministry of
\nHome Affairs and Regional Autonomy,\" he said.<\/p>\n
The home affairs ministry, with the help from officials of the
\nmineral resources ministry, would then evaluate the region's
\nreadiness.<\/p>\n
He said that specific criteria were set out to determine a
\nregion's capability to fully handle its own mining affairs.<\/p>\n
\"They (the ministry of home affairs) will decide whether a
\nregion is ready or not,\" Surna explained.<\/p>\n
According to him, the home affairs ministry could either
\nrecognize the region's declaration of readiness, accept it with
\nconditions, or completely reject it.<\/p>\n
But the government, he said, had not decided yet what to do
\nwith regions unable to implement their mining autonomy rights.<\/p>\n
\"Unprepared regencies might have to surrender their rights to
\nprovinces, and if the provinces can't do it, the central
\ngovernment might take over,\" he said.<\/p>\n
Under the autonomy law, regions unfit for autonomy face
\ndissolution, or merger with other regions.<\/p>\n
Surna said the draft of the ruling was still in discussion
\nwithin the ministry of home affairs.<\/p>\n
\"I don't know when they (the ministry of home affairs) will
\npass it,\" he said.<\/p>",
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