Johannes Simbolon The Jakarta Post/Jakarta

The nation's mining industry, which has been mired in problems during the past six years, has yet to see the light at the end of tunnel, experts say.

For decades, the industry enjoyed peace and growth during the authoritarian regime of former president Soeharto, who did not hesitate to silence anyone perceived to be making trouble for investors, including those in the mining industry.

However after Soeharto's downfall in 1998, local communities, who before had got almost nothing from miners began demanding a portion of revenue from nearby mines.

Anti-mining protests by villagers broke out across the country and some miners were forced to suspend operations due to blockades by villagers.

This year, the enforcing of the autonomy laws (Law No. 22/1999 and the Intergovernmental Fiscal Balance Law No. 25/1999), which give local governments a share in the central government's revenue from mining, have quieted many of the protesters.

Mining companies have also become more willing to allocate some of their earnings to fund community development programs and prioritize local people in their recruitment programs.

However, despite the generally improved relations with local communities, the investment climate in the industry remains bleak, with new foreign investors still avoiding the country and existing investors still reluctant to make new investment. There have been no new mining contracts signed by the government during the past six years.

This is because of among others the absence of a new mining law that is not in conflict with the autonomy laws and the existence of Forestry Law, which bars companies from operating open-pit mines in protected forests.

Ministry of Energy and Mineral Resources director general Simon F. Sembiring said early this month the government expected to complete the drafting of the new law early next year. The new law will replace the 1967 Mining Law, which is in conflict with the autonomy laws.

Mining companies, meanwhile, say they are not opposed to the 1999 forestry law, as they are aware of the right of every nation to determine which areas are out of bounds from mining.

Their complaint, however, is the law does not provide a solution to mining investors, who had already invested large sums of money into exploration but could no longer continue their activities because their contract areas had been declared protected forests. These investors have threatened to sue the government if the latter failed to honor their contracts.

After protracted debates among then-president Megawati Soekarnoputri's Cabinet and between the government and the House of Representatives, Megawati decided to solve the problem by issuing a governmental regulation in lieu of a law early this year that allowed existing mining companies to continue their open-pit mining activities in protected forests. New investors are however barred from conducting such activities.

The regulation adds a new article to the forestry law stating all mining licenses and agreements in forests that were in place prior to the imposition of Law No.41/1999 will remain in effect until those agreements or licenses expire.

The House later endorsed the regulation as a new forestry law.

The endorsement of the regulation raised protests from non- governmental organizations, who fear the law will result in a greater destruction of the nation's rapidly-depleting forests, and created resentment among legislators who opposed it, some of whom privately accused their fellow legislators of taking bribes.

The loud protests from NGOs and some legislators against the amendment of the law reflect the public's greater attention to environmental matters as well as the deep suspicion among some groups towards the mining industry.

And the most high-profile mining story this year, the uproar over the alleged pollution caused by PT Newmont Minahasa Raya, highlights the deep suspicion, experts say.

NGOs had begun accusing the subsidiary of American mining giant Newmont Corp. of polluting Buyat Bay in North Sulawesi several years ago.

The story, however, did not become national news until the middle of this year, when some residents of the area claimed to be infected by "Minamata" disease; a condition brought on by mercury poisoning first discovered in Minamata village, Japan.

However, the first studies by several international agencies, including a key Minamata researcher, indicated the "skin disease" suffered by the Buyat people bore little resemblance to the condition in Japan, and the Japanese scientist concluded the waters of the bay were not polluted by mercury.

The police then did a study of their own, concluding the bay had been polluted by mercury, even though Newmont executives insisted they did not use the substance.

A later study by a team, involving government officials, police, NGOs, and local experts concluded that Newmont, which disposed of its tailings in Buyat Bay from 1996 to this year, 2004, had contaminated the bay with arsenic and that the people living in the area should be relocated due to the contamination.

While acknowledging there were elevated levels of arsenic and mercury in its tailings, Newmont, has maintained it adhered to government regulations and provisions of its environmental impact analysis in disposing of the tailings.

It also stressed that both the arsenic and mercury found in Buyat Bay "were in a stable form that does not affect the water, as shown by several years of monitoring".

The government has decided to file lawsuit against the firm and several top staff about the alleged pollution.

The trial of Newmont pollution case, the first in the country against a big foreign firm, is expected to attract much attention next year.

Mining and oil analyst Paul L. Coutrier warned that the court should examine the case fairly. Otherwise, it would further hurt the nation's already unfavorable investment climate.

"The international community will closely watch the trial process. The court has to examine the case fairly and objectively and any decision it is going to make should be based on scientific proofs acceptable internationally," Coutrier said.

Despite all the problems now confronting the industry, Irwandi Arief, an expert at the Association of Indonesian Mining Professionals is optimistic that the nation's mining industry will recover.

"We are still optimistic about the future of the industry. We are going to solve the problems gradually," he said.