Investors urged to be 'flexible' over contracts

Investors urged to be 'flexible' over contracts

JAKARTA (JP): Minister of Mines and Energy Susilo Bambang Yudhoyono said the government would honor all mining contracts awarded by previous governments, but called on foreign investors to be "flexible".

"(There is) no idea at all on the government's side to alter the contracts ... but if we face problems on the ground, we ask and encourage everybody to sit down, talk and negotiate to find a solution without changing the contract," Bambang said on Wednesday evening during a dinner with foreign investors in the mining sector.

"If the contractors say this is my contract, this is my book, OK. (But) a black-and-white approach is not conducive to (reaching) a proper solution," he said.

The event was organized by the Indonesia-Australia Business Council (IABC) and moderated by IABC president Sabam Siagian.

Bambang's statement comes amid a growing number of disputes in the mining and power sectors between investors, state companies, provincial administrations and the public.

In the power sector, state electricity company PLN is seeking to renegotiate the terms of the power purchase contracts signed by its former management, claiming the contracts were the result of collusion, corruption and nepotism during the reign of former president Soeharto.

In the mining sector, several mining companies in Kalimantan have been the target of protests by locals demanding compensation for land and property the companies appropriated during the Soeharto regime.

The villagers claim the companies, backed by security personnel, used force to expel them from their land without paying them full compensation.

In North Sulawesi, Minahasa regency sued gold mining company PT Newmont Minahasa Raya for refusing to pay C-class taxes to the regency administration.

These taxes are imposed for the excavation of building materials and industrial minerals, including sands, stone and kaolin.

Newmont has reportedly refused to pay these taxes, saying there is no clause in its contract of work requiring it to pay C- class taxes.

During Soeharto's rule, the central government failed to consult with local residents and provincial administrations when negotiating mining contracts of work.

Bambang said the new government would encourage conflicting parties to negotiate and reach win-win solutions without changing the contracts of work or going to the courts.

Intelligence

During the dinner, Bambang, who spoke in English, outlined the policies his ministry planned to pursue in the oil, mining and power sectors.

In the mining sector, he said his ministry would focus on measures to put an end to illegal mining, which has flourished during the economic crisis to the detriment of many mining contractors.

He said his ministry would take measures to legalize small- scale mining by so-called "illegal miners" by allocating land to them and issuing them licenses.

The government will train them in proper mining practices and supervise their activities, he said. "But we shall enforce the law if they are in the wrong."

Bambang said provincial administrations often failed to crack down on illegal mining because the miners were backed by people in positions of power, including members of the military and police.

He said his ministry would send intelligence officers into the field to find out who was backing the illegal miners, adding that appropriate action would be taken against those found guilty of such activities.

Bambang was Indonesian Military chief of staff for territorial affairs before being appointed minister of mines and energy last month.

Bambang said his ministry also would take measures to ensure all mining contractors employed correct mining procedures, supported community development programs and protected the environment.

He said all mining contractors currently had some type of community development programs, but the government would seek to improve the programs by outlining for the contractors the types of programs they would be required to implement and the amount of money they would obligated to budget for these programs. (jsk)