Govt urged to be wise in tackling Busang gold mine
JAKARTA (JP): The government should tackle the problem of the gold mine in Busang, East Kalimantan, soon and wisely if it wants to maintain foreign investors' confidence in Indonesia, analysts said over the weekend.
"A quick and wise solution to the Busang problem would certainly support the government's efforts to attract foreign direct investment which is badly needed by the country," Hartojo Wignjowijoto, an Asia-Pacific economic consultant, was reported by the Kompas daily as saying.
He said that amid the current account deficit increase and its shrinking chances of getting soft loans, Indonesia needed more foreign direct investment.
Hartojo was commenting on the protracted problem of the Busang mine which involves several local companies and two Canadian mining companies: Barrick Gold Corp. and Bre-X Minerals Ltd.
The problem arose after the government's decision to choose Barrick as the partner of Bre-X, which discovered the 57 million ounces gold deposit in Busang last year, to develop the mine.
The government had agreed to a 10 percent stake in the project with Barrick having 67.5 percent and Bre-X 22.5 percent.
Several times the government gave deadlines for the two Canadian companies to solve their dispute over terms for developing mine. The latest deadline is Feb.17.
If they fail to agree, the government will take over the project and find other foreign investors.
Before the deadline, Placer Dome Inc., another Canadian mining company, intensified its efforts to win the competition to become Bre-X's partner.
It offered to merge with Bre-X and promised Indonesia a 40 percent stake if it won the contract.
Minister of Mines and Energy I.B. Sudjana said early last month there was still a chance for other foreign investors, including Placer Dome, to develop the mine.
Analysts said the minister's statement added to confusion among foreign investors.
Mining analyst Soebroto, who is a former minister of mines and energy, said that traditionally a mining company which discovered a deposit would get government approval to start the project.
"This is a procedure that has been traditionally practiced and seen as the right and fair one," he said.
He said that traditionally a company like Bre-X, which discovered the huge gold deposit, was allowed to choose its partners and distribute shares.
Conflict
He also said that traditionally the government did not intervene in a conflict between investors.
"This is a new approach and I think foreign investors were surprised to learn that," he told Bisnis Indonesia. over the weekend.
"Foreign investors are now waiting for the government's solution to the problem. It will determine whether they will invest in Indonesia or not," he said.
Hartojo said the basic problem was not limited to certain business groups. He said it also had to do with a serious corruption problem and political instability in Indonesia.
He said because Indonesia was rich in minerals, particularly gold, the government should form a strategy to develop Indonesia's natural resources. (bnt)