Mining firms in limbo under regional autonomy
Mining firms in limbo under regional autonomy
JAKARTA (JP): Six months after the implementation of regional
autonomy, unprepared local governments have left mining firms
adrift in legal limbo, the Indonesian Mining Association (IMA)
said on Wednesday
IMA executive Kosim Gandataruna said in a report to
legislators that the decentralization of powers over mining came
too quickly and lacked preparation.
"As a consequence of this hastiness, a legal vacuum has
emerged and with it the investment climate has deteriorated,"
Kosim said at a hearing with House of Representatives' Commission
VIII, which among other things overseas mining affairs.
Regional autonomy is based on two 1999 laws that gave the
country's regions greater authority to manage their own
administrative and financial affairs.
Foreboding the impact they have had on the mining sector,
mining firms had warned the government against decentralizing
mining powers to unprepared regions.
In response, the government promised to grant only prepared
regions full autonomy over the mining sector.
But no presidential decree regulating this requirement has
been issued to date.
Mining firms were also facing new fiscal regulations that
imposed numerous levies as local administrations tried to raise
as much local revenue as possible.
"The cumulative effect of all this is stagnation, or even
dramatic regression in the exploration, development and
exploitation of Indonesia's mineral resources," he said.
The IMA's bleak prognosis for the mining industry came after
some 20 foreign and local mining firms were reported earlier this
year to have stopped prospecting.
The association has blamed this development partly on the
legal uncertainty created by an obsolete mining law.
Kosim said the government must replace the present central-
administration-orientated Mining Law No. 11 of 1967 with a new
one reflecting the decentralized industry.
Legal uncertainties also led to security problems as law
enforcement deteriorated, he added.
Security threats arose from various sources such as demands
for land compensation payments, environmental problems and labor
disputes.
Giant coal miner PT Kaltim Prima Coal in East Kalimantan has
been unable to maintain production at its normal rate due to a
series of blockades by its workers and local residents.
Meanwhile, the activities of illegal miners have been
interfering with the mining operations of gold mining company PT
Aneka Tambang in West Java, as well as a number of coal mining
companies in East Kalimantan.
Kosim said the reform era had brought to the surface public
demands for more transparency, greater revenue sharing, more
local participation in the mining sector and better community
development programs.
He also urged the government to improve the quality of its
human resources both at the local and central levels.
The government should review the existing regulations in the
forestry, fiscal and environmental sectors that impacted upon the
mining industry, he added.
"A comprehensive overhaul has to be carried out simultaneously
and within a short space of time to restore the conducive
conditions that have proven to be the key to the rapid
development of the mining sector over the past three decades," he
said.
Among these success factors were Indonesia's mineral wealth,
political and social stability, law and order, and a conducive
investment climate, he said.
Another IMA member, Bob Parsons, suggested that the government
remove the mandatory divestment requirements from future
contracts of work with foreign mining firms.
"The foreign investor puts in the money up front and takes all
the risks, and then once the risk has been taken they find
themselves in a position where they have to divest. That's not an
attractive set of rules," he explained.
He said that this requirement was not necessary as it only
discouraged new investment in the highly risky mining industry.
According to him, the host country should focus on tax
payments, job creation and community development by mining
investors. (bkm)