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)