Govt expects new mining law to revive investment
Govt expects new mining law to revive investment
Fitri Wulandari, The Jakarta Post, Jakarta
The government expects the new mining law, which is now in the
final stage of the drafting process, to revive the country's
mining industry, which has been in the doldrums for years.
Minister of Energy and Mineral Resources Purnomo Yusgiantoro
said on Thursday the bill had been sent to the State Secretary
for approval from President Megawati Soekarnoputri before being
proposed to the House of Representatives.
He did not provide details of the bill, but he said it had
been long awaited by investors.
The current Mining Law of 1967 is considered ineffective
because many of its clauses are in conflict with the 1999
Autonomy Law.
Purnomo said the absence of an effective mining law was one of
the main factors undermining investment in the sector. Other
factors that have a negative impact on the mining industry are
the unfavorable fiscal policy, confusion over regional autonomy,
illegal mining and security problems, the minister said on the
sidelines of a discussion on rural electricity.
General mining contributes 10 percent of gross domestic
product (GDP). PricewaterhouseCoopers (PwC)in its mining report
cited that investment in the mining sector fell by 35 percent and
67 percent in 2000 and 2001 respectively. In 2001, it contributed
US$813 million in tax and royalties.
On fiscal policy, Purnomo said there were a lot of fiscal
regulations on the mining sector which discouraged mining
companies from investing.
Purnomo did not provide details. However, the Indonesian
Mining Association (IMA) has criticized various taxes levied on
mining companies by regions in a bid to boost their revenue.
Regional autonomy, Purnomo admitted, remains a major hurdle in
mining investment. Despite efforts to disseminate information on
regional autonomy, Purnomo said not all regions were ready to
establish new contracts with investors.
"Regions needs time to prepare and scrutinize new contracts.
Investors think twice before signing any contract with them,"
Purnomo said.
"Frankly speaking, regional autonomy has not been able to
boost investment in mining," he added.
Unlike oil and gas where the business is supervised by the
central government through the Oil and Gas Implementing Body (BP
Migas), the supervision of mining businesses has been given to
regional governments.
Overlapping governmental policies have also hurt mining
investors' confidence in the country, Purnomo added.
Law No. 41/1999 which bans open-pit mining in protected forest
areas is the latest example of such policies. Some 50 companies
were forced to stop operation due to the law.
Purnomo said illegal mining and security problems have also
contributed to the declining investment in the mining sector.