Mining sector dives amid economic woes

JAKARTA (JP): New foreign investment in the country's mining sector has plummeted this year, but activities of existing contract holders are expected to significantly increase over the next five years, Minister of Mines and Energy Kuntoro Mangkusubroto has said.

Speaking at a hearing with the House of Representatives's Commission V on Tuesday, Kuntoro said the ministry received only six applications for mineral contracts of work (COW) from foreign investors as of last month, compared with 50 applications throughout last year and 239 applications in 1996.

He attributed the downturn to the drop in prices of mineral products, including gold, on the international market, the global monetary crisis and low investor confidence in the country's political and economic outlook.

A downward trend was also registered in applications for mineral contracts from domestic investors and for coal contracts from domestic and foreign investor.

The ministry received 219 applications for mineral contracts from domestic investors as of last month, as against 414 applications throughout last year and 380 applications in 1996.

It received 11 applications for coal contracts from local and foreign investors as of last month, compared to 19 applications last year and 70 applications in 1996.

However, in the next five years the country would register an increase in the activities of mining companies already awarded contracts, Kuntoro told the commission which oversees mines and energy, industry and trade, investment, manpower, environment and cooperatives.

The government awarded 95 fourth generation mineral COWs between 1985 and 1990, seven fifth generation mineral COWs between 1991 and 1994, 65 sixth generation mineral COWs last year and 38 seventh generation mineral COWs early this year. Most of the contracts went to foreign mining companies.

Contracts require mining companies to carry out their activities in stages beginning with a general survey (one year), then exploration (three years), feasibility study (one year), construction (three years) and production (30 years).

Kuntoro said holders of the seventh generation COWs would soon start field activities.

About 101 holders of the previous generation COWs are currently conducting a general survey, and seven companies have embarked on exploration.

Sixteen companies are already in the feasibility study stage, five companies are in the construction stage and 12 companies are in production.

He added the government was drafting the eighth generation mineral COWs. Different from previous generation COWs, the terms will specify obligations of contractors in regard to community development. (jsk)