Government prepares provinces for autonomy of mining

JAKARTA (JP): The government is beginning the transfer of mining authority to the provinces following the issuance of the autonomy regulation earlier this month, a government official said.

"We will gradually shift more mining authority to the provinces," the director general of general mining at the Ministry of Mines and Energy, Surna Tjahja Djajadiningrat, told The Jakarta Post over the weekend.

Surna said the provinces would gain full autonomy by June of next year.

However, before transferring mining authority, he said the government would first have to establish the required procedures on mining autonomy.

Surna said that with the autonomy regulation being issued, he had six months to set up the procedures guiding provinces on how to exercise their mining authority.

The procedures would come in the form of a ministerial decree, he added.

Surna said the autonomy regulation, Government Regulation No. 25/2000 on the authority of the central government and provinces as autonomous regions, had been issued in early May.

The government regulation details the implementation of autonomy as stipulated in Law No. 22/1999 on regional government.

Under the law, provinces, regencies and mayoralties will gain greater autonomy to manage their own affairs.

He said that among the preparations for transferring mining authority was restructuring of the central government's working procedures with provincial administrations.

"We're outlining a basic concept first," Surna said.

The concept will establish operational standards for provinces, such as how to deal with foreign institutions and companies, a ministry press release said.

The government will also have to train provincial administrations in their new authority, the release said.

While designing the procedures, Surna added that the government would ask for input from the provincial administrations and local residents. "We will publicized our drafts."

However, Surna said several provinces were eager to apply their autonomous mining authority ahead of schedule.

He said the province of Riau, for example, asked him to grant it the right to issue its own permits for offshore mining activities.

Several mining companies have reported that local authorities, on their own initiative, plan to impose taxes on the companies' operations without awaiting the issuance of the autonomy regulation.

Surna said that although the autonomy regulation had already been issued, many provinces had not yet received a copy.

According to the regulation's draft, provincial administrations will issue mining permits for investment, exploration and production in overlapping areas in regencies and/or mayoralties, and offshore within 12 miles of their coasts.

Regencies and mayoralties will receive the authority to issue permits for mining core businesses, limited to their respective regions and up to four miles off their coasts.

Surna added that under the regulation, provinces, regencies and mayoralties would have the right to sign their own contracts of work (COWs) with foreign mining companies.

However, he said this had caused concern among foreign mining companies that their contracts would lack in legal strength.

According to these companies, COWs signed only by governors or district heads would appear less credible before creditors.

"Mining companies fear that such COWs would discourage banks from funding their investments," he said.

Based on the regulation, provinces will have to honor existing COWs, but in turn the central government will also have to honor future COWs signed by provinces, he said.

Surna said he was examining ways to satisfy the demands of foreign mining companies while respecting local authorities.

He said he might propose that COWs continue to be signed by the president and approved by the House of Representatives, without ignoring the provinces' role in the process.

However, this would require an amendment to Law No. 11/1967 on mining, which Surna said was outdated.

"The law is too centralistic and not suitable to our present situation," he said.

Therefore, he added that it was urgent the mining law be amended before autonomy came into effect next year. (bkm)