Mining firms told to be more flexible over regional demands

Mining firms told to be more flexible over regional demands

JAKARTA (JP): Mining companies should be more flexible in
facing vocal and often demanding provincial administrations, a
senior mining official said on Wednesday.

Director general of general mining at the Ministry of Mines
and Energy Surna Tjahja Djajadiningrat said mining companies
should be willing to listen to aspirations of the regions.

"Don't deceive people by saying that it's not stated in the
contract," Surna said at a business luncheon held by the
Indonesian Australian Business Council (IABC). The mining
companies should be able to make a compromise, he added.

Surna acknowledged the importance of legal certainties in the
mining industry, but added that they should not hinder options of
win-win solutions.

He cited the recent Newmont case as an example. Surna said
both parties, the Minahasa regency and gold mining company PT
Newmont Minahasa Raya, had to make compromises to reach an
amiable solution.

The Minahasa administration filed a legal suit against the
Colorado-based mining company after the later refused to pay a
local tax.

Newmont said that the tax imposed by the local government on
the Category C mineral deposits such as stones, sand and gravel
was not stated in the contract. The local court ordered the
closure of Newmont's mining operation but it was later canceled
due to intervention from the Supreme Court in Jakarta.

The administration then dropped the case after Newmont agreed
to pay a portion of the disputed tax.

Many other mining companies, however, are still wrestling with
demands made by regions on taxes, environmental issues and land
concessions.

Surna attributed Indonesia's newly obtained democracy to the
reason behind the outburst of these regional demands.

"It's like when your hands are tied for over 30 years and
suddenly you're free," he said.

According to him, many governors and district heads felt that
they had been left out during the 30 years under former president
Soeharto's government.

"Nobody listens to the bupati (regency head), so now its my
turn," Surna, mimicking a bupati's frustration, said.

He was referring to Autonomy Law No 22/1999 and
Intergovernmental Fiscal Balance Law No 25/1999, which give
regions greater autonomy to manage their own affairs, including
in the mining sector.

Under these laws, provinces and mayoralties alike can draft
their own mining contracts while also receiving a greater share
of the revenue in the mining sector.

Surna, however, said that present mining contracts, would
still be affected by the autonomy law and would be continue to be
overseen by the central government.

He further said that most regions were still unable to manage
the mining sector on their own.

"They lack in almost everything," he said, "but we can't just
tell them they are nobodies."

Regions, he added, should make their ventures into the mining
sector step by step. (bkm)