Govt will open Java, Bali to foreign mining investments
Govt will open Java, Bali to foreign mining investments
BANDUNG, West Java (JP): Both Java and Bali will be opened to
foreign mining investments under the eighth generation Contract
of Work (COW) which is being drafted by the Ministry of Mines and
Energy, a ministry official said here on Tuesday.
Director General of Mining at the ministry Rozik B. Soetjipto
said the current policy which only allowed domestic investors to
develop the mining resources on both islands was considered by
the ministry ineffective given the fact that domestic investors
mostly cooperated with foreign investors instead of developing
the resources on their own.
The domestic holders of the mining contracts initially only
asked for technical assistance from foreign investors. But, at a
later stage, the foreign partners not only provide technical
assistance but also finance the project.
"The domestic investors only hold the contract but in reality
it's the foreigners who develop and finance the project. That's
why we have decided to open Java and Bali to foreign mining
investors," Rozik said in the annual mining discussion at the
Mineral Technology Research and Development Center.
The two-day discussion, which is sponsored by coal mining
company PT Kaltim Prima Coal (KPC), featured speakers including
economists Hartojo Wignjowijoto and Lukman Soetrisno and mining
experts from across the country.
The Directorate General of Mining issued a decree in 1986 to
forbid foreign mining investors from developing the mining
resources of Java and Bali.
The policy was aimed at increasing the role of domestic
investors in the country's mining industry, Rozik said.
"Developing mining resources in Java and Bali is much easier
than on other islands since we have complete geological data on
them there and the islands have excellent infrastructure," Rozik
said.
"That's why the ministry made the policy putting the islands
out of bounds for foreign mining investors," Rozik said.
Rozik said geologists believe Java, especially its southern
belt, and Bali are rich in gold reserves and industrial minerals,
like kaolin and zeolith. The largest gold mine in Java is the
Pongkor gold field in West Java owned by state general mining
company PT Aneka Tambang.
Rozik noted however that the government would impose stricter
rules on mining investment by foreign contractors on both islands
than on other islands. They will be only allowed to hold a much
more limited contract area compared to those elsewhere.
"We have not yet made a final decision on the maximum size of
the contract areas on Java and Bali. We are currently thinking
about imposing a 25,000 hectares maximum," Rozik said.
Under the normal COW, investors may apply for an unlimited
contract area but they are only allowed to retain a maximum
contract area of 62,500 hectares at the start of production. The
remaining contract areas must be relinquished to the government
during exploration.
Rozik also said the eighth generation COW will put emphasis on
community development.
The contract will oblige mining companies to formulate their
community development strategy during the feasibility study and
they will have to hire community development consultancy firms to
do that.
"The community development program should be adjusted to the
government's program and be drawn up with informal leaders of the
communities living around the mines," Rozik said.
The previous COW in fact obliged mining contractors to carry
out community development programs but thus far no guidelines
have been set by the government on the matter. As such, each
mining company draws up and carries out their own community
development programs.
The eighth generation COW will also raise the government
mining royalty to about 5 percent of the sales from between 1
percent and 2 percent paid by many mining contractors at present.
The discussion on Tuesday will highlight the latest issues in
the mining sector, including the national shares in mining
operations, distribution of revenues from mining operations to
central and local government and the role of local cooperatives
in the sector.
Minister of Mines and Energy Kuntoro Mangkusubroto, in his
speech read out by Rozik, welcomed the discussion and hoped that
it would give input to the ministry in its bids to reform all the
country's mining policy. (jsk)