Indonesian Mining Sector ‘Burdened by Overlapping Claims’

MANILA ~ Indonesia’s mining sector offers huge potential for growth but must first overcome challenges such as overlapping claims and uncertainty over a pending industry bill, a miners conference heard this week.

The conference was told that no new contracts for mining projects in Indonesia had been issued since 2001 as foreign investors “are waiting for the new (mining) law,” said Raden Sukhyar, assistant to Indonesia’s minister of energy and mineral resources.

Speaking at the 7th Asia Pacific Mining Conference in Manila, he said there was optimism about the sector, citing the growing demand for Indonesia’s mineral resources as well as the prospect of an improved regulatory system.

He said that although no new contracts had been issued since 2001, some 1,200 “mining authorization” permits had been issued for small-scale projects.

This has led to problems with large companies finding their mining areas covered by conflicting claims under the mining authorization permits.

Arif Siregar, director of PT Inco, which operates a mine in Sulawesi, said his company was paying high royalty taxes to both the local and national government.

He said there were “overlaps of power between the central, regional and local governments” that complicated matters.

Siregar said that before 1998, a mining company only had to deal with two departments in the capital.

“Now, instead of two stakeholders, you have hundreds of stakeholders,” he said, citing non-government organizations, the departments of energy and environment and other government agencies.

Sirgar recalled that his company had been “fighting with the Forestry Ministry for two to three years” because of regulations supposedly banning mining in certain forests.

He recalls telling them: “I can create forests but I cannot move minerals.”

Tony Wenas, vice president of PT Freeport Indonesia, a subsidiary of US giant Freeport McMoran, recalled that in their mine in Papua, his company was forced to allocate one percent of its gross revenues to civic projects in order to placate local residents.

Local residents had resorted to demonstrations and two lawsuits, demanding compensation even beyond what they were provided under the law, Wenas said.

Sukhyar said that the pending Indonesian mining bill was supposed to address many of these complaints.

The bill will provide one unified system of claims to avoid the overlapping of mining areas, Sukhyar said.

It is also intended to provide for equal treatment for both local and foreign companies as well as deregulate the licensing system.

The bill will also clearly delineate the powers of the national and local governments in management of the mining sector, he said.

“The message is that firstly the country needs to revitalize mining policy in accord with the common ground of good mining practices,” he said.

Sukhyar also said that tin, gold, copper, nickel and coal mining were all enjoying a surge in Indonesia despite the problems.

He cited coal as an example since the country was shifting from oil-fired power plants to coal-fired plants.

By 2010, coal was projected to provide 71 percent of Indonesia’s electric power compared to 46 percent now, he added.

Filed under:

Comments are closed.