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He pointed out as example Samarinda mayoralty bylaw No. 20/2002, in East Kalimantan, which was revoked by the Ministry of Home Affairs as it was against government decree No. 65/2001 on regional taxation.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