Govt drops planned changes to mining COWs

Govt drops planned changes to mining COWs

JAKARTA (JP): The Ministry of Mines and Energy has canceled
its planned changes to new mining contracts of work (COW) which,
among other things, would have obliged contractors to give the
state 10 percent of their mining ventures.

Director General of Mining Adjat Sudradjat announced yesterday
the withdrawal of the plan at a meeting with representatives of
around 60 of the mining companies that have applied for seventh-
generation COWs and third generation coal contracts.

"Adjat promised at the meeting that the government would
complete the processing of the COWs by September," M. Simatupang,
vice president of the Indonesian Mining Association (IMA) told
The Jakarta Post yesterday.

"To my understanding, Adjat meant that contracts would be
approved by the President by that month," Simatupang said.

Adjat was quoted by Reuters as saying yesterday that "We will
now go back to the COWs that were initialed (last year)."

Adjat said the 176 mineral contracts of the seventh generation
and 15 coal contracts of the third generation would soon be sent
to the House of Representatives for formal approval.

COWs have to be discussed and approved by the House and the
Investment Coordinating Board before they are sent to the
President for final approval.

Adjat said last week and early this week that the ministry
proposed that 191 contracts, which were initialed by mining
officials and contractors in Sept. 1996, be amended to further
national interests.

Mining officials said they had asked for 16 points of change
in the new COWs which included an obligation to give the state
(government) at least a 10 percent equity stake and the right to
share in capital gains generated by any share issuance overseas.

Foreign companies adamantly rejected any changes to their
draft contracts because they had been negotiated with and
approved by former director general of mining Kuntoro
Mangkusubroto.

Kuntoro was stripped of his authority to initial draft COWs by
Minister of Mines and Energy I. B. Sudjana in October, 1996, one
month after initialing the seventh generation COWs, and was
replaced by Adjat in April.

Foreign investors expected only minor changes would be made to
their draft contracts when officials took them to the House and
the Investment Coordinating Board.

The contractors were given by the ministry until early this
week to say whether they were for or against the proposed
changes.

"They said it would be difficult to implement. Almost all of
them were not in favor for practical reasons," he said.

The plan has drawn criticism from various parties, including
analysts, consultants and the Association of Indonesian Mining
Professionals (Perhapi).

They suggested the government introduce the changes to the
next generation of COWs.

Perhapi Chairman Herman Afif Kusumo said yesterday the
government's decision to cancel the planned changes to the COWs
would be a boon to the reputation of the Indonesian mining
industry.

"Indonesia would be commended for being consistent with its
regulations," Herman told the Post.

"We feel relieved now. With the withdrawal of the planned
changes, the Indonesian mining world will be calm again," Herman
said. (jsk)