Addressing mining critics
The recent heated debate about the manner in which the Indonesian government has licensed foreign companies to extract the country's mineral resources has apparently caused great concern for President Soeharto. This is apparent from his special instruction earlier this week to Minister of Mines and Energy I.B. Sudjana to prepare an information program to brief the general public on the government's mining policy.
Never before has the government's mining policy come under such scrutiny and sharp criticism by analysts and politicians as that sparked by the battle for the control and ownership of huge gold deposits at Busang in East Kalimantan. The debate on the Busang mine later broadened to what critics called the questionable benefits of the mining policy for the public's welfare. What made the issue more appealing was the controversy it raised and the old issues that resurfaced concerning the huge copper and gold mine developed in Irian Jaya by Freeport-McMoran of the United States in the late 1960s.
What seemed to have triggered the President's concern, given his determination to do everything strictly according to the Constitution, was the critics' allegations that the exploitation of mineral resources had not conformed with Article 33 of the Constitution. This article stipulates that the exploitation of natural resources be made to the greatest benefit of the people.
It seemed strange, however, that it was former mining officials such as Mohammad Sadli, Soetaryo Sigit and Rahman Wiriosudarmo, and not the incumbent ones, who aggressively tried to enlighten the general public of the real issues in the mining sector. One might suspect their comments on the positive points of the mining policies were simply designed to defend their reputation as they had played a major part in the formulation of the policy in the 1970s and 1980s. However, their eloquent point of view served to reject the allegations as groundless.
Former mining officials have admitted it is true the contract- of-work (COW) concept in the general mining sector needs review from time to time, taking into account the prevailing changes, including the international competition for foreign capital and technology. In fact, as far as minerals -- except for oil and natural gas -- are concerned, the COW concept has so far been changed five times.
The concept for the sixth generation COW is now being finalized and it is this concept which will be applied to the contract for the Busang gold mine. The basic concept stipulates, among other things, the amount or rate of permanent fees, royalties, income tax, property tax, value added tax, import duty, stamp duty, local taxes and fees and gradual relinquishment of the concession areas. It also includes additional requirements designed to suit the specific characteristics of the minerals to be developed.
Officials, politicians and both domestic and foreign businessmen have praised the basic COW concept as the most transparent deal between the government and private investors. Every COW agreement has to be consulted through open debates with the House of Representatives before it is approved by the President. Several other countries have followed the Indonesian production sharing contract concept in the hydrocarbon sector as a model.
The government would likely address the wrong issues and not satisfactorily answer the critics if its information campaign focused on the general mining policy. We are familiar with wandering criticisms by detractors who want to avoid head-on confrontation with a powerful target. We believe the criticisms were triggered not by what might be perceived as the shortcomings of the mining policy itself, but mainly by the sudden, unprecedented entry of what the public sees as politically well- connected businessmen into the gold mining industry. This is the real issue which the Minister of Mines and Energy Sudjana will have to explain.