Govt proposal on royalties' split gets widespread supports

Govt proposal on royalties' split gets widespread supports

JAKARTA (JP): Minister of Mines and Energy Kuntoro
Mangkusubroto's proposal to split the government's royalties from
mining, oil and gas operations with the producing provinces has
received widespread support from legislators.

F.X. Soejitno of the Armed Forces faction and Djusril Djusan
of the Golkar ruling party agreed yesterday with Kuntoro that the
country should have a law to allow provinces to get part of the
royalties from the development of their natural resources.

But, they said, such a law should also leave the central
government sufficient royalties to finance the development of
provinces with fewer natural resources.

"Indonesia is a unitary state, not a federal state. Provinces
which lack natural resources, like West Sumatra and Nusa
Tenggara, should also be given chances to develop along with
those rich in natural resources," Djusril said.

Soejitno said such a law should appease the growing protests
from people in several provinces who are demanding a part of the
earnings from oil, gas and mining operations in their regions.

"I think protesters in such remote provinces like Aceh and
Irian Jaya are not actually demanding political separation. They
are only demanding that the central government give them a fair
share of the earnings from their areas," Soejitno said.

Soejitno said House Commission VIII for the state budget and
science and technology was preparing a bill on the balancing of
central and provincial finance which would, among other things,
regulate the sharing of royalties from mining, gas and oil
operations between the central and provincial administrations.

Protests have been raised for years by people in several
provinces about the fact that they do not receive part of
earnings from the development of natural resources.

The protests have intensified since the downfall of Soeharto,
who paid little attention to the complaints.

Some government critics are now warning about possible
national disintegration if the central government does not heed
the provinces' demands.

Under current production sharing contracts (PSC) with oil and
gas contractors, the government receives between 75 percent and
90 percent of their output.

Under current contracts of work (COW) with mining contractors,
the government receives taxes and royalties.

The earnings from oil and gas operations, as well as tax and
royalties from mining companies are at present pooled into the
state budget and then distributed to the provinces with little
regard to their contribution to the state budget.

Furthermore, provincial administrations only receive half of
the land and building tax with all other taxes going wholly to
the central government.

Kuntoro said his ministry had made a regulation which obliged
the holders of mining contracts signed since 1995 to send 80
percent of the royalties to local authorities and only 20 percent
to the central government.

But the regulation has not been implemented because it is in
conflict with another governmental regulation requiring that the
royalties be delivered to the central government before being
redistributed to the provincial administrations.

Soejitno said the 80 percent-20 percent split was fair enough
and could be applied to other sectors like oil and gas. (jsk)