Mon, 30 Oct 2000

Central government 'must control foreign mining investment'

JAKARTA (JP): The Ministry of Energy and Mineral Resources said it was considering delaying the implementation of regional autonomy on foreign mining investment by five years.

The ministry's director general for general mining, Surna Tjahja Djadjadiningrat, said he had proposed a transition period of five years because of concern that regions were still unprepared to handle foreign mining investments.

"We're bit concerned when it comes to foreign investments once autonomy is implemented," Surna told The Jakarta Post over the weekend.

As stipulated in Law No. 22/1999 on regional autonomy, provinces, regencies and mayoralties will be given greater autonomy to manage their own affairs.

Regional autonomy will be enacted on Jan. 1, 2001, allowing local administrations, among other things, to award contracts of work to both local and foreign mining companies.

However, Surna questioned the regions' readiness to carry out this job, especially negotiating mining contracts with large multinational companies. He said most local administrations lacked skilled personnel to assume such tasks.

According to him, it would be best if the central government retained its right to sign foreign mining contracts until local administrations were capable to take over the task.

"It's just a proposal, and it's subject to the approval of the Ministry of Home Affairs and Regional Autonomy," Surna said, adding that his proposal had also yet to receive the green light from energy and mineral resources minister Purnomo Yusgiantoro.

Surna said earlier foreign investors were concerned that mining contracts signed by a governor or a mayor would lack legal strength.

He said that mining companies feared such contracts would discourage banks from funding their investments.

At present, foreign mining contracts are signed by the president and approved by the House of Representatives.

The executive director of the Indonesian Mining Association, Paul Louis Coutrier, said foreign investors would welcome a delay in the implementation of autonomy.

"Sudden changes are upsetting," he told the Post.

Coutrier went on to say that at present foreign investors were concerned over the central government's commitment to their mining contracts.

"It is only naturally that the central government wants to delay the implementation," he continued.

According to him, Purnomo said earlier that a step-by-step approach was preferable in transferring the contract rights of large foreign investors to local administrations.

Coutrier said the central government had the experts to draft and negotiate contracts with foreign investors.

He suggested the central government form teams of these experts to guide local administrations during negotiations with foreign investors.

Surna said his office would issue next month the procedures to guide local administrations through the implementation of autonomy.

The guidelines are part of Government Regulation No. 25/2000 on the authority of the central government and provinces as autonomous regions.

He said that under the regulation, local administrations could choose which of their rights as autonomous regions they were prepared to take over by Jan. 1.

"It's actually a bottom-up process, where the local administration decides its own readiness," he said.

Observers have said that with the implementation of full autonomy in the mining industry, the presence of a directorate general for general mining would become obsolete. (bkm)