Mining industry faces uncertainty in 'reformasi' era<\/p>\n
By Johannes Simbolon<\/p>\n
JAKARTA (JP): The fall of Soeharto in May 1998 marked the
\nbeginning of the era of reformasi, with high expectations for
\ndemocracy and openness in the country's political life.<\/p>\n
The end of Soeharto's 32-year presidency also carried far-
\nreaching implications for the country's business sector.<\/p>\n
In particular, it brought insecurity for the mining sector
\nwhich enjoyed stability and security for decades under Soeharto's
\nhigh-handed administration, an analyst said.<\/p>\n
\"From mid-1998 until today, a climate of indecision has hung
\nover the industry in general and the mining industry in
\nparticular,\" said the executive director of the Indonesian Mining
\nAssociation (IMA) Paul Louis Courtier.<\/p>\n
\"The euphoria of reforms and democracy sparked general
\ncriticism of big corporations which are accused of not doing
\nenough to improve the welfare of the local people.\"<\/p>\n
As law and order collapsed, illegal mining proliferated in the
\nmineral-rich provinces across the country, including East
\nKalimantan, South Kalimantan, Central Kalimantan, South Sumatra
\nand North Sulawesi. Law enforcers were incapable of handling the
\nrampant lawlessness, Coutrier said.<\/p>\n
He said the illegal mining activities initially only involved
\nlocal people but gradually well-to-do outsiders arrived with
\ncapital and heavy equipment to capitalize on the situation.<\/p>\n
In coal-rich South Kalimantan, illegal miners extracted
\nbetween five million tons and six million tons of coal worth Rp
\n990 billion (about US$140 million) over the past two years,
\naccording to the provincial daily Banjarmasin Pos.<\/p>\n
Major mining companies in the province, including PT Adaro
\nIndonesia and PT Arutmin, have long complained of illegal miners
\nencroaching on their contract areas.<\/p>\n
The local authorities have thus far been unable to resolve the
\nmatter.<\/p>\n
State-owned general mining company PT Aneka Tambang (Antam)
\nalso faced similar problems at its gold mine in Pongkor area,
\nWest Java, as coal mining company PT Bukit Asam did at its coal
\nmines in South Sumatra and West Sumatra.<\/p>\n
Illegal mining inflicts great costs on both the government --
\nthe miners of course do not pay taxes and mining royalties -- and
\nthe environment because the activities do not come under an
\nenvironmental protection program.<\/p>\n
Dozens of illegal miners have been killed in landslides in
\nAntam's Pongkor gold mine last year.<\/p>\n
Demand<\/p>\n
Political openness, which started in urban areas with
\nSoeharto's exit, has gradually spread to rural areas.<\/p>\n
In the new environment of democracy, villagers who long
\nsuppressed their dissatisfaction over mining operations in their
\nareas suddenly found the courage to demand more financial
\nbenefits from mining companies.<\/p>\n
In some cases, the expression of their demands verged on
\nanarchy.<\/p>\n
Dayak tribespeople occupied the gold mines of PT Indo Muro
\nKencana -- a subsidiary of Australian mining firm Aurora Gold --
\nin Betmen, Halubai, Permata and Kerikil, in North Barito regency,
\nCentral Kalimantan, in the middle of the year.<\/p>\n
Some of the mines remain occupied.<\/p>\n
They claimed Indo Muro appropriated their land during
\nSoeharto's era without paying full compensation and used police
\nofficers and members of the military to forcibly evict them.<\/p>\n
Indo Muro and the local authorities have found it difficult to
\nresolve the dispute because some of the villagers have refused
\nall offers of compensation, arguing the mines are their ancestral
\nproperty and are not for sale.<\/p>\n
Another landmark case is the dispute between the Minahasa
\nregency administration in North Sulawesi and gold mining company
\nPT Newmont Minahasa Raya, a subsidiary of American mining firm
\nNewmont Corp.<\/p>\n
The regency sued the gold mining company in the Tondano
\nDistrict Court for refusing to pay C-class taxes on building
\nmaterials and industrial minerals, including stone, sand and
\nkaolin.<\/p>\n
Under the existing regulation, the C-class taxes are payable
\nby mining companies to local administrations.<\/p>\n
Newmont refused to pay the C-class taxes on the grounds that
\nit was not included in the taxes stipulated under its contract of
\nwork.<\/p>\n
The company acknowledged excavating the soil containing the
\nbuilding materials and industrial minerals, but it did not use
\nthe materials. It said it removed them to facilitate the
\nexcavation of the gold deposits.<\/p>\n
The regency insisted Newmont pay for the excavation of the
\noverburden and hired noted lawyer OC Kaligis to represent it in
\nthe suit.<\/p>\n
The Tondano court has held several hearings, which were marked
\nby rallies by supporters of both sides.<\/p>\n
The country's mining industry is closely watching the verdict.<\/p>\n
Analysts said the lawsuit reflected the dissatisfaction felt
\nby the Minahasa regency over the fact it received only a small
\namount of revenue from Newmont, with the largest revenue taken by
\nthe central government.<\/p>\n
They also blamed the former administration of Soeharto for not
\nconsulting with the Minahasa regency during the drafting of
\nNewmont's contract of work.<\/p>\n
Coutrier said mining companies were being blamed for the
\nfailure of Soeharto's mining policies.<\/p>\n
\"Most of the producing mines are under criticism for
\nenvironmental and social dissatisfaction. In many cases, this has
\nits roots in the dissatisfaction against the previous regime but
\nthe companies are being blamed,\" he said.<\/p>\n
Regional autonomy<\/p>\n
Under the existing regulation, mining companies are required
\nto pay royalties to the central government, which keeps 20
\npercent of the royalties and delivers remainder to local
\nadministration through state budgets disbursement.<\/p>\n
The government receives between 1 percent and 2 percent of the
\ngold sales and 13 percent of coal output in royalties from mining
\ncompanies.<\/p>\n
The provinces complain that the royalty split is only good on
\npaper and that they never receive the royalty payment in full.<\/p>\n
The central government negotiates with foreign investors on
\nthe contract of work and consults with the House of
\nRepresentatives on the their contents before they are issued.<\/p>\n
For many years, no consultation was made on the contents of
\nthe contracts with the provincial administrations and the latter
\nwere often surprised to discover that mining exploration was
\ndesignated for their area.<\/p>\n
The central government changed the policy several years ago to
\nallow the provincial administrations to express opinions on the
\ndraft contracts of work prior to their issuance. The policy did
\nlittle to end the dissatisfaction.<\/p>\n
In response to growing separatist sentiments in the mineral
\nand hydrocarbon-rich provinces cross the country after Soeharto's
\nfall, B.J. Habibie's Cabinet proposed two bills to increase the
\nprovincial administrations' revenues from their natural resources
\nand their role in managing their natural resources.<\/p>\n
Autonomy Law No. 22\/1999 and the Intergovernmental Fiscal
\nBalance Law No. 25\/1999 were passed by the House of
\nRepresentatives in April last year.<\/p>\n
Under the Intergovernmental Fiscal Balance Law, the regional
\nadministrations would receive 15 percent of the government's oil
\nrevenue and 30 percent of gas receipts.<\/p>\n
As far as mineral mining is concerned, the law stipulates that
\nthe regions will receive 80 percent of royalties and land rent,
\nwith the remainder to the central government.<\/p>\n
Of the 80 percent land rents for the regions, 16 percent will
\nbe delivered to the provincial administration and 64 percent to
\nthe regencies which host the mining operations.<\/p>\n
Of the 80 percent royalties for the regions, 16 percent will
\nbe delivered to the provincial administration, 32 percent to the
\nhosting regency and 32 percent to other regencies in the
\nprovince.<\/p>\n
Aside from land rent and royalties, the regions will also
\nobtain some portion of taxes payable to the mining companies to
\nthe central government.<\/p>\n
The government initially expected to implement the laws in
\n2001 but Minister of Regional Autonomy Ryaas Rasyid recently said
\nthe implementation would be speeded up to next year.<\/p>\n
Mining executives expected the implementation of both laws to
\nprovide bigger revenues to the regions, satisfy the local people
\nand in turn secure their investment.<\/p>\n
The president of Rio Tinto Indonesia, Noke Kiroyan, predicted
\ninvestment in the country's mining sector would be stagnant next
\nyear as investors were awaiting the implementation of both laws.<\/p>\n
Minister of Mines and Energy Susilo Bambang Yudhoyono also
\nunderlined the importance of raising the welfare of the community
\nliving around mining sites to secure mining investment.<\/p>\n
He said the ministry would allocate some plots of land to the
\nillegal miners for excavation and would push mining companies to
\npromote community development.<\/p>\n
The acceptance of the local people is key to the security of
\nmining investment.<\/p>\n
Indonesian-Australian gold joint venture PT Barisan Tropical
\nMining in South Sumatra recently decided to hire pam-swakarsa
\n(community guards) rather than military and police personnel to
\nprotect its operations.<\/p>\n
The company believes that using military members and police
\nofficers could cause more problems than solutions in the era of
\nreformasi, when the people are no longer afraid to have their
\nsay.<\/p>",
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