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)