Govt revokes 68 bylaws in energy and mineral sector

Govt revokes 68 bylaws in energy and mineral sector

A'an Suryana, The Jakarta Post, Jakarta

The government has revoked 68 bylaws in the energy and mineral
sector that were in conflict with both higher laws and contracts
between the government and investors, a senior official said on
Wednesday.

Secretary-general of the Ministry of Energy and Mineral
Resources Djoko Darmono said that the move was made to help end
legal uncertainty in the sector, which emerged after the
government implemented its regional autonomy policy early last
year.

He explained that as regional governments had obtained greater
autonomy, many of them issued bylaws as the legal basis for
collecting revenue from investors, but the move had created
onerous burdens for the companies and discouraged investors from
making new investments.

"If stern measures are not taken, we are afraid that the new
bylaws will scare away investors," said Djoko, in a paper
presented to participants of a seminar on investment in the
energy and minerals sector.

The one-day seminar was attended by officials from various
regional administrations and by investors.

According to Djoko, the 68 bylaws mostly covered rules on the
taxation imposed by regional governments on companies exploiting
local mineral and gas resources.

The bylaws state that companies must pay a tax on every ton of
mineral output extracted from exploration sites, he said.

"The regions have also requested coal mining companies pay a
certain amount of money for coal transported through their
respective territories," said Djoko.

He pointed out as example Samarinda mayoralty bylaw No.
20/2002, in East Kalimantan, which was revoked by the Ministry of
Home Affairs as it was against government decree No. 65/2001 on
regional taxation.

The bylaws have created legal uncertainties for investors.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro
concurred that if this situation were not addressed immediately,
foreign investors would cease making any new investments in the
energy and mining sector.

"The bylaw is one of the reasons why foreign investors are
reluctant to invest in Indonesia," Purnomo told the same seminar.

According to the Indonesian Mining Association (IMA) there had
been relatively few new investments in the mining sector since
1998, partly due to the legal uncertainties created by poor
implementation of the regional autonomy policy.

According to chairman of IMA B.N. Wahju, citing a study by
international survey firm Fraser Institute, Indonesia ranked 40
out of 45 countries on a policy potential index in 2001/2002.

"This means that our confusing regulations have discouraged
foreign investors from investing in Indonesia," he said.

Indonesia should produce investment-friendly regulations, in a
bid to lure investors, Wahju asserted.

Meanwhile, the regions themselves countered that they had
created the bylaws to increase revenue, which had long been
neglected by the previous Soeharto authoritarian government.

"For sure, the regions have not recklessly produced
regulations without consulting first with the investment
community and the central government," said S. Banjarnahor,
deputy regent of Sorong, Papua province.