Fri, 12 May 2000

KEM land dispute won't affect foreign investment: Rozy

By Reiner S

SANUR, Bali (JP): Newly appointed Minister of Investment and State Enterprises Development Rozy Munir played down on Thursday the impact of the high profile land dispute between giant gold mining firm PT Kelian Equatorial Mining (KEM) and local people in East Kalimantan.

"I don't think so. Don't worry," he told reporters in response to questions that the KEM case would create fear among foreign investors.

The minister said that the inflow of foreign investment into the country showed an upward trend in the first three months despite reports of conflicts between some mining companies and local communities and local governments.

The value and the number of projects approved during the three months were not huge but the important thing is that there's an increasing trend, he added.

Rozy said that his office would continue to improve communication efforts with the foreign investment community to get first hand information about the problems faced by investors in the country, and to explain what measures should be taken and what has been implemented.

Rozy was speaking on the sidelines on an international forum on the privatization program.

KEM, which is 90 percent owned by the giant Rio Tinto mining group, has temporarily shut down its mining operation. Local people have blockaded the road into the site and the company has been unable to deliver basic supplies including fuel and food to its 1,500 employees since April 18.

The local villagers have demanded compensation for the land acquired by the company. KEM claims to have settled the dispute two years ago, but they have received some 6,000 new claims from local residents.

Rozy said that his office would gather the necessary information from related ministries to help resolve the KEM problem.

"We will gather complete information first. Our office is interested in the problem from the investment aspect," he said.

Rozy added that he is scheduled to meet with the Minister of Defense and Security Juwono Sudarsono today (Friday) together with the foreign investment community in Jakarta to help resolve the various problems encountered by foreign investors.

"We will respond to their concerns and complaints seriously," he said.

Rozy was appointed to the current position late last month, replacing Laksamana Sukardi.

He said that the ministry had been engaged in regular meetings with the foreign community and diplomats in a bid to help maintain and encourage foreign investment in the country.

Foreign investment is seen as a crucial element to help the country recover from the economic crisis that has gripped it for two years.

Unfortunately, persistent social unrest and security problems have plagued various parts of the country since the downfall of former president Soeharto and handling these problems in the new democratic environment has required patience and understanding by all parties. The problems and the slow pace and uncertainty of negotiations has created jitters to some investors.

The launch of the new autonomy law giving greater power to regional administrations also has created some confusion and fears among businesses.

Meanwhile Australian miner Rio Tinto said separately on Thursday that it would restart operations at its 14-metric-ton-a- year gold mine in East Kalimantan after local activists ended a road block that had cut off essential supplies to the mine and forced it to suspend operations on May 6.

Company spokesman Anang Noor said the protesters agreed Wednesday to further negotiations over their land rights claim, but he wasn't immediately able to provide details of any new offer from the company.

"We have now started negotiating again," Anang told Dow Jones.

The dispute is the latest in a string of clashes between foreign resource companies and local communities in Indonesia, where local authorities in several resource-rich provinces are trying to wrest a greater share of income from such companies.

The East Kalimantan mine is owned and operated by PT Kelian Equatorial Mining, which is 90 percent-owned by Rio Tinto and 10%-owned by local partner PT Harita Jayaraya.

The protesters are demanding compensation from Rio Tinto and the Indonesian government for land they allege was taken from them in the late 1980s, the company said. They are seeking compensation of Rp 100,000 per square meter of land.

Last week's suspension was the first time that Rio Tinto has stopped production since it began operating the US$250 million mine in 1992.