Provinces may receive royalties directly from firms
JAKARTA (JP): Local administrations soon may receive mining royalties and deadrent directly from mining companies.
Minister of Mines and Energy Kuntoro Mangkusubroto said on Thursday he proposed to the government that mining companies directly pay part of the mining royalties and deadrent to local administrations to ensure they receive their rights in full.
He said under mining contract of works (COWs), mining companies are required to pay 80 percent of mining royalties and deadrent to local administrations, including 64 percent to provincial administrations and 16 percent to district administrations. The remaining 20 percent is paid to the central government.
However, mining companies cannot meet this contractual obligation due to the governmental regulation which obliges them to deliver all mining royalties and deadrent to the central government.
Under the regulation, the central government then distributes the money to local administrations.
Local administrations, however, do not receive their royalties and deadrent in full since the money is distributed regardless of the contributions of each area.
"It must be admitted the distribution of the rights thus far is not smooth since (the royalties and deadrent) first have to be conveyed to the central government," Kuntoro said in a speech at a seminar on mining in Palembang, South Sumatra, a copy of which was made available to The Jakarta Post.
Pressure has been mounting on the central government to share revenue from natural resources with the provinces more equitably.
Several natural resources-rich provinces, including Riau, Aceh and Irian Jaya, have remained poor despite the fact they contribute a large amount of revenue to the central government.
The provinces, which did not dare object or complain during the 32-year rule of former president Soeharto, have threatened to declare independence if the central government refuses them a greater share of the revenue from their natural resources.
In response to the protests, the government has proposed a bill on financial balance between the central government and provincial administrations. The bill currently is being debated in the House of Representatives.
However, legislators and analysts have criticized the bill for lacking a clear-cut revenue-sharing formula. They doubt the government's commitment to empower local administrations, both politically and economically.
An explicit revenue-sharing formula also is absent from the government-proposed oil and gas bill currently being debated in the House.
Kuntoro also said the ministry was mulling replacing the 1967 mining law with a new one which would strengthen the role of local administrations in mining affairs.
"The new policy's bottom line is focused on giving local administrations more rights and responsibilities in managing mineral resources in their respective areas."
Kuntoro also said the government was drafting the eighth generation COWs, which were expected to address community development, environmental protection and divestment programs, issues which were largely absent from previous COWs.
Under the eighth generation COWs, contractors will be obliged to participate in developing the community around their mining operations and enhancing the welfare of the local population. They also will have to pay higher royalties to the government.
Kuntoro said the government also would allow local investors to bid for mining contract areas using the COW system.
Presently, the COW system is reserved for foreign investors, while local investors are restricted to the concession contract system, which is lower than a COW in terms of legal status. (jsk)