Government prepares provinces for autonomy of mining

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)