Govt told to think twice on local firms leading mining

JAKARTA (JP): The government should conduct a comprehensive study before letting local companies play the lead role in developing the country's mining sector, the finance director of PT Astra International said yesterday.

Rini M. Soewandi said, "The mining business is very high risk. It needs a large amount of long term investment. Are we ready to do such business?"

Rini was commenting on local analysts' view that the government should let local companies play the main role in developing domestic mining resources.

She said that if the study concluded that local companies were capable of taking over foreign contractors' domination in mining, "then we should allow them to do so".

Several analysts have urged the government in the last few days to let local companies play a key role in developing the mining sector. They include Amien Rais, the chairman of the influential social and educational organization, Muhammadiyah; Rizal Ramli, an executive of the advisory agency Econit; and Kwik Kian Gie, an outspoken member of the Indonesian Democratic Party.

Kwik Kian Gie, a noted economist, joined the chorus for more local participation in mining at a discussion on mining development organized by Prisma magazine early this week. He said that many local companies including the state-owned companies, PT Aneka Tambang and PT Tambang Timah, could lead mining projects.

"We can develop and own 100 percent of mining projects, like the Busang gold mine. With mining deposits we can secure large amounts of funding from foreign banks and can hire foreign experts in exploiting the projects," he said.

Herman Afif Kusumo, the chairman of the Association of the Indonesian Mining Experts, warmly welcomed the analysts' opinions, but said that local firms' majority shareholdings in mining should be introduced in a way that did not contradict existing regulations.

"Its quite an achievement for Indonesia if it manages to get a total 40 percent share in the Busang gold mine," he said.

But M. Simatupang, a mining analyst and the vice president of the Indonesian Mining Association, said the idea of allowing local companies to play the lead role in mining would not work.

"The problem is not the opportunity for local firms to play the key role. They have that chance from the very beginning. But as you can see not many of them have big mining projects like Freeport or Busang. Most of them are involved in small mining projects with foreign partners," he told the Post.

He stressed that local and foreign companies were standing on a level playing field. "We're facing the globalization era which requires no discrimination against foreigners," he said, adding that there was no government regulation which limited local firms' participation in mining.

Simatupang said, "We should learn from the experiences of Australia and the Philippines. Australia decided to nationalize its mining sector in 1970 because of pressure from its labor organizations. The Philippines in 1985 decided to close its mining sector to foreign investment. As a result the two countries' economies suffered."

Foreign contractors dominate Indonesia's mining sector. They account for 100 percent of the country's crude copper production, 93 percent of its gold output, 89 percent of its silver output, 25 percent of its tin production and almost 70 percent of its coal output. Foreign oil contractors also dominate the hydrocarbon industry. (bnt)