Government: Mining deals must be unaffected by autonomy law

JAKARTA (JP): The Ministry of Mines and Energy has demanded that the wider autonomy to be given to provincial administrations should not affect existing mining contracts.

Soedjoko Tirtosoekotjo, the head of the coal directorate at the ministry, said on Saturday that existing mining regulations should be protected from being overruled by regional regulations.

"We need to make sure that the regions do not modify existing contracts," Soedjoko told The Jakarta Post on the sidelines of the Indonesian Mining Conference.

He said future mining investors would shy away from Indonesia if present mining contracts were subjected to follow provincial regulations.

Soedjoko said existing contracts clearly stated mining companies' rights and obligations, and as such regions should not impose new obligations on them.

The government has issued a number of laws as part of the gradual transfer of its policy-making power to provincial administrations.

Under Law No. 22/1999 on regional administration and Law No. 25/1999 on intergovernmental fiscal balance, regions will have greater autonomy over managing their affairs.

The government plans to introduce autonomy next year and the Ministry of Home Affairs is currently preparing a series of regulations to support the implementation of laws.

Based on the draft regulation supporting the Autonomy Law, the ministry will delegate a portion of its authority to provinces, regencies and/or mayoralties.

Regions, for example, could issue mining permits on exploration and production, including new forms of mining taxes.

The central government, however, will still regulate the use of mineral resources and energy on a national scale, including contractual terms and mining fees.

Soedjoko said the ministry had proposed the clause containing the contract sanctuary in the regulation so that the existing mining contracts would not be affected.

The central government also has to consider proposals from the provinces, he added.

He said the regulation was due out next May, and his ministry should have the final draft approved by then.

He said there were signs of local governments preparing bylaws to gain additional revenue from present mining companies.

The Minahasa regency has been accused by gold mining company PT Newmont Minahasa Raya of ignoring locally imposed tax payments, which, according to the company, were outside its contract of work (COW) signed in 1986.

The regency demanded Newmont pay Rp 19.357 billion (US$2.4 million) in overdue taxes from 1995 to 1998.

Soedjoko said locally issued mining regulations should be applied only in future mining contracts.

However, he said local governments should allow the natural resources they own to benefit the entire nation. (bkm)