The energy and mineral resources ministry has issued a ministerial regulation ordering mining firms to prioritize hiring domestic service companies in a bid to expand local capacity.
The regulation is part of the enactment of the new mining law, M.S Marpaung, a technical and environmental director for minerals, coal and geothermal at the ministry told members of Indonesian Mining Services Association (Aspindo) on Wednesday.
The Energy and Mineral Resources Minister’s new regulation, which took effect on Sept. 30, requires mining license holders to make more use of local service companies.
The firms can only use foreign-owned service companies after they have announced tenders through the mass media, when no local companies are technically and financially capable of doing the work.
The regulation applies now to companies jointly owned by domestic and foreign investors operating under the new mining license regime, while those under the old working contract regime are a given three-year transition period.
The regulation stipulates that appointed foreign-owned service companies must outsource part of the work to local service companies.
“Outsourced jobs must be part of core activities,” Marpaung said.
He added that the regulation aimed at helping the country to benefit more from the mining sector. “To get a bigger slice from the sector, we must develop the peripheral parts of the sector,” he said.
Aspindo has 120 mining service companies as members and 90 percent are domestic firms, including big national companies operating as miner contractors including PT Pama Persada Nusantara (PAMA), PT Bukit Makmur Mandiri Utama, PT Saptaindra Sejati (SIS), PT Cipta Kridatama, and PT Darma Henwa.
The foreign-controlled companies include Thiess Contractors, PT Petrosea, and Leighton.
Aspindo’s chairman Tjahjono Imawan said the regulation was positive, especially for domestic companies. “In general, the regulation gives a legal basis for service companies’ activities. For the domestic companies, the regulation will give more opportunities,” he said.
Nur Hardono, head of sub directorate for minerals, coal, and geothermal supporting businesses at the ministry, said the regulation was the legal basis for mining service activities given the new mining law.
The new regulation should give clarity to government institutions and law enforcement agents in safeguarding the implementation of the law, he said. Nur said recently PT Timah had problems with the police in Bangka Belitung due to a misinterpretation of the law.
“Without detailed explanation, this may create misunderstandings as this can make the service companies’ activities appear to be illegal,” Nur said.
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