New investment in the mining sector is likely to grow at a slow pace this year as investors wait for the enactment of a new mining bill being deliberated at the House of Representatives.
The Energy and Mineral Resources Ministry's director general of coal, mineral and geothermal Simon Sembiring said on Thursday investment was estimated to grow by 2.5 percent this year, to US$1.38 billion from $1.35 billion.
Investments expected for this year included a project by mining firm PT Dairy Prima Mineral and Herald Resources of Australia, which would cost a total of $180 million, he said.
The project has been stalled for some time because of permit problems.
The ministry has refused to allow the company to operate in a protected forest area where its mining concession is located.
With the recent issue of a new governmental regulation on forest use, however, Dairy would have a chance to realize its investment, Simon said.
The new regulation allows mining firms to operate in protected forest areas in exchange for financial compensation for future forest rehabilitation.
Compensation costs are calculated at Rp 3 million (some $331) per hectare per year.
Simon said Dairy's project was slated to start this year.
He said in general most mining companies remained hesitant about starting new operations in Indonesia because of several legal hurdles in the new mining bill.
He said the hurdles included potential legal uncertainty for mining firms in the future.
"That is why we hope to be able to enact the new law before the House recess session in April," Simon said.
"That will be our priority for this year."
The new law was expected to lure more investment into the mining sector but stumbling blocks in the deliberation of the bill included a so-called transition period.
Mining companies with government contracts will have a wait period before they can comply their operations with the planned new permit system under the new law.
The government and lawmakers are at odds over the length of the transition period.
Lawmakers want companies to immediately comply with the new law within certain period of time.
The government, however, said companies with already-secured permits should not have to comply with the new law until their permit expires.
Indonesia, the world's largest archipelago, is rich with various mining resources including gold, copper, tin, coal, bauxite and nickel.
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