Govt told to think twice on local firms leading mining

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)