Mining in protected forests

Apparently concerned by the risk of messy litigation, as state oil and gas company Pertamina is now experiencing in its dispute with U.S.-based Karaha Bodas Company, the House of Representatives approved last week a government regulation in lieu of law allowing mining firms to resume open-pit mining in protected forests.

This political compromise will once and for all put an end to the imbroglio that has virtually stopped investment in the mining sector since 2002 and threatened to plunge the government into messy and costly international litigation.

The decision nonetheless seemed to be a very tough one, with six of the nine factions in the House outrightly opposing the regulation. But since the decision was taken through a vote, not through consensus, the three largest factions in the House, which backed the government in this matter, were able to flex their muscle and push through the regulation.

This is, however, a dangerous precedent as the House's decision virtually violates Law No. 41/1999 on forestry, which prohibits open-pit mining in areas designated as protected forests and conservation areas.

The great dilemma, though, was that the government licensed about 150 companies, mostly foreign ones, to carry out open-pit mining in areas classified as protected forests long before the 1999 law, and many of the companies had invested hundreds of millions of dollars in their concession areas.

Unilaterally revoking their concessions on the virtue of a law that was made retroactive would surely leave the government facing dozens of messy lawsuits and billions of dollars in possible damages. Serving as a warning is the case of Pertamina, whose overseas assets are now at risk of being seized because Karaha Bodas won a lawsuit in a Swiss arbitration court for more than US$290 million in damages as a result of the government's unilateral termination of a contract.

The government did have a valid point in its argument that the sanctity of a contract should be honored, otherwise our economy would be in complete chaos. Moreover, mining is now one of the most promising resource-based sectors in the country, especially in the less-developed eastern region, and has multiple benefits for the economy and the people.

However, allowing all of the mining concessionaires to continue their open-pit operations would have a devastating impact on Indonesia's forest resources and biodiversity.

The new regulation seems to be the best compromise solution to this dilemma because it specifically allows only 13 of the 150 mining concessionaires to resume their open-pit operations, under very strict environmental guidelines.

The 13 concessionaires were selected by a joint House- government committee based on the amount of investment already made, the commercial volume of mineral deposits already found in the concession areas and the potential benefits of the operations for the country's economy.

Put another way, the new law does not reopen protected forests to new investors, not even to the other 137 concessionaires who signed their contracts before 1999. The regulation will not be applied across the board, but was drafted specifically for the 13 selected concessionaires.

This compromise is aimed at correcting a grave mistake made by the government in drafting the Forestry Law at the least cost to both taxpayers and the environment.

Even though illegal loggers, not mining firms, are the biggest threat to our forestry resources, since most major mining companies are usually more careful about their environmental management in view of the long-term nature of their investment, obviously the 13 concessionaires being allowed to resume their operations should be stringently supervised by both the House and non-governmental organizations.

Moreover, the House and environmental NGOs should see to it that the 13 concessionaires are the only companies allowed to carry out open-pit mining in protected forests, even at the risk that several of the other 137 concessionaires may file lawsuits.

The international community will support the government in this matter because the global community also benefits from the biodiversity and climate-regulating role of our tropical forests.