Conflicts with locals scare off mining investors

Conflicts with locals scare off mining investors

JAKARTA (JP): Mining exploration activities in Indonesia
continue to drop as foreign firms are discouraged by widespread
conflicts between locals and mining companies, analysts said on
Tuesday.

Mining analyst at PricewaterhouseCoopers Bob Parsons said this
year's expenditure on mining explorations was likely to decline
from last year's US$50 million and $75 million in 1998.

He said Indonesia's legal and security uncertainties were
taken into account when international mining firms established
their annual exploration budgets.

"Multinational companies will defer investments in Indonesia
until some of the uncertainties have been sorted out," he told
The Jakarta Post following a business forum jointly held by PT
Harvest International Indonesia and the state-owned radio
broadcasting network Radio Republik Indonesia (RRI).

Minister of Energy and Mineral Resources Purnomo Yusgiantoro
was the main speaker at the forum.

Mining firms in Indonesia have had frequent run-ins with local
communities or administrations over land, tax, human rights and
environmental issues.

PT Newmont Minahasa Raya, which operates a gold mine in
Minahasa, North Sulawesi was shut down last week when locals took
over its production facilities over a land dispute.

Newmont said it had reopened its mining site on Sunday after
police arrested several of the protesting locals.

Parsons said Indonesia must spend at least $300 million per
year in exploration to discover new resources to sustain the
country's production levels.

According to him, in the next four years, at least three
mining firms would shut down because they would have run out of
reserves.

"The question is, are there three new mines to replace those
three that will be closing down?," he asked.

Globally, he went on, spending on explorations were down
because metal prices were down.

A surge in supply with the opening of new mines in Latin
America have driven prices down, he said, adding that recovery
could be expected in the next two to three years.

He further said uncertainties over Indonesia's future mining
regulations had also led to suspensions in a number of mining
projects.

"The old contract of work (COW) system is in limbo and
everybody is waiting for the new mining law; so we don't have a
regulatory framework now," he explained.

But he added that Indonesia's mining potentials remained good.

"Nobody disputes the geological potential of Indonesia," he
said.

President of Harvest International, Harvey Goldstein said
foreign investors were dismayed by the current violent nature of
local communities.

"It's really a question of the empowered masses as they seek
restitution for the past thirty years of injustice," he said,
referring to the three decades under the authoritarian government
of former president Soeharto.

He called for a clear punishment and reward system for the
people taking illegal actions against mining companies.

"The minister (Purnomo) has said the law will be upheld, that
the law comes first. But there are people in the regions that
have taken the law into their own hands," he went on.

He suggested a combination of better community development
programs by mining companies and law enforcement to help reduce
conflicts.

"It's a problem when people can't get their staff to work,
it's a problem when you can't deliver on contracts," he
explained.

On hold

Separately, Purnomo said all decisions on contracts for oil
and gas extraction and mining in Indonesia would be put on hold
next week until the country's regions are officially given
autonomy on Jan 1.

"There is a rule that when the government regulation (was)
issued ... it said that six months thereafter, which means Nov 6,
the central government should not issue strategic decisions,"
Purnomo told reporters after a meeting with the House of
Representatives' Commission VIII, which oversees among others
mines and energy affairs.

"I will not take any strategic decision until the regional
autonomy is transferred to the regional offices on January 1,
2001."

The minister also said foreign and local mining companies
would be invited to help regional governments ready themselves to
take over administering contracts.

Existing mining contracts would remain in effect, he said, but
he did not rule out demands for changes in some regions.

"The contract is law between two parties, we must respect it,
we must keep consistent to hold the contract until the end of the
contract ... unless regents want to change ... and that's a
different story," he said, without elaborating.

Under new regional autonomy laws, the power to award contracts
to oil and mining companies will be transferred from the central
government to provinces, regencies and mayoralties. (bkm/tnt)