Bureaucratic inefficiency hampers growth of mining industry
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)