RI mining investment climate considered poor, survey says
RI mining investment climate considered poor, survey says
Fitri Wulandari, Dow Jones/Jakarta
Indonesia will attract only less than 1 percent of the global spending on new mining exploration in 2005 as its poor investment climate continues to drive investors away from the country, PriceWaterhouseCoopers said late on Thursday.
Although mining companies view Indonesian mines as highly prospective, they will not increase their exploration activities until investment conditions are improved, said Marc Upcroft, partner at PWC Mining Practice.
He was speaking after releasing a survey conducted by PriceWaterhouseCoopers on the Indonesian mining sector.
According to the survey, Indonesia spent US$7 million for exploration in 2003, virtually unchanged from spending in 2002. In comparison, global spending on new exploration rose to $2.19 billion from $2.05 billion during this period, fueled mainly by surging mineral prices, he said.
The survey did not provide details on Indonesian exploration investment in 2004.
Only five of the 30 largest listed mining companies with global operations currently have operations in Indonesia and even fewer have ongoing exploration programs, he said.
"If positive changes aren't made, Indonesia's mining industry will be smaller (than now) in 15 years time as (current) reserves are depleted and not replaced," Upcroft said without elaborating.
Investors have been staying away from Indonesia since the financial crisis of 1997 mainly because of regulatory uncertainties, poor infrastructure and a lack of familiarity with the local judicial system. Indonesia posted a 26 percent decline in approved foreign direct investment to $10.3 billion in 2004.
Upcroft said investment in new mines and capacity expansion will remain low as in the previous years.
But "if investment climate in the mining sector improves, Indonesia has the potential to become a world class mining country," Upcroft said.
As for production, he said Indonesia would continue to see an upward trend in 2005. But the increase in mining output will come from existing mines and not new mines.
In 2003, Indonesia produced 114.5 million tons of coal, up from 103.4 million tons in 2002.
Indonesia's gold output rose slightly to 4.39 million troy ounces in 2003, up from 4.33 million ounces in 2002. The country's tin output fell to 65,000 tons in 2003, from 67,000 tons in the previous year.
Revenue from mining sector reached $6.09 billion in 2003, up from $5.17 billion in 2002 due to strong mineral prices.
Data for 2004 are not yet available.