Bureaucratic inefficiency hampers growth of mining industry
JAKARTA (JP): A leading businessman believes that the extensive bureaucracy at the mining and energy offices is responsible for the reluctance of project financiers to back mine construction.
Theo van Leuwen, project manager of PT Rio Tinto Indonesia, said yesterday that inefficient handling of license and permit procedures for developing mines often causes delays.
"It is important to understand that as bureaucratic inefficiency delays projects, when they are moving through the development stage, the additional cost to the developers -- even to the lenders -- becomes very great," Theo said at a two-day seminar on Indonesian mining.
Theo suggested that the government accelerate establishment of one-stop service for dealing with necessary licenses, permits and approvals needed by foreign investors.
Assets
He said that the government-set scheme of asset ownership has also created real problems for lenders.
"Though foreign companies under hard-rock mining contracts are allowed to own movable assets, they cannot get titles for their mining rights, titles which can then be charged to the lenders," he said.
In the coal mining sector, for example, he expressed concern over the fact that contracts for foreign companies allow the state coal company PT Tambang Batubara Bukit Asam (PTBA) to own all the assets they procure for coal exploration and production.
This is not necessary, he added.
"Lenders normally want charge over project assets so as to secure foreign investor borrowing for the mining development. But this cannot be done if PTBA owns those assets," Theo said.
He added that the financiers's reluctance to provide more funds for mining is understandable, given the risks associated with mining.
The downward revision of Jakarta's country risk credit rating has also tightened up capital.
"Indonesia has failed in recent years to maintain its country- risk rating relative to its competitors," Theo said.
Canada, Australia and the United States are among countries which have the lowest level of country risks, he added.
However, in spite of the challenges, Indonesia's mining industry appeared to be in good health at the end of 1993, he said.
Exploration expenditures last year by foreign companies was approximately US$67.8 million, up from $50 million in 1992.
The seminar, opened by Minister of Mines and Energy Ida Bagus Sudjana on Tuesday, presented papers from Coordinating Minister for Economy and Finance Saleh Afiff, State Minister of Investment/Chairman of Investment Coordinating Board Sanyoto Sastrowardoyo, Minister of Forestry Djamaloedin Soeryohadikoesoemo, Minister of Cooperatives and Small Enterprises Subiakto Tjakrawerdaja and a number of experts.
Meanwhile, Sanyoto told the seminar that foreign and local investments committed for mining activities (excluding oil and gas) for the next five years will likely reach Rp 19.9 trillion ($9.3 billion). (fhp)