Pay up or pay the consequences is the government's message to the six mining companies whose senior executives and owners have been hit with a travel ban over unpaid coal royalties.

While the mining companies are considering filing for international arbitration, the government is insisting the ban imposed on the 14 executives is in accordance with set procedures and will not be lifted unless they pay up.

"The debtors must pay their debts first. If they have any claims against the state, then they can file those claims," Hadiyanto, director general for the state treasury at the Finance Ministry, said Wednesday.

The Justice and Human Rights Ministry announced Tuesday that 14 people, including tycoon Edwin Soeryadjaya of PT Adaro Indonesia, were not permitted to leave Indonesia, under a travel ban effective until January 2009.

The six companies -- PT Kideco Jaya Agung, PT Kaltim Prima Coal (KPC), PT Kendilo Coal Indonesia, PT Arutmin Indonesia, PT Berau Coal and Adaro -- owe the state a total of US$330.2 million and Rp 864.07 billion ($95.24 million).

KPC, a subsidiary of PT Bumi Resources, owes the most, with a debt of $115.63 million. PT Bumi Resources, Asia's largest coal exporter, is partly owned by PT Bakrie & Brothers and controlled by the family of Coordinating Minister for People's Welfare Aburizal Bakrie.

Hadiyanto said the debts were part of the royalties from coal sales that the companies had failed to pay between 2001 and 2005.

"We (the government and the companies) have a substantially different view on this matter. However, they have to follow the procedures (and pay up). Then we will lift the travel ban," Hadiyanto said.

The mining companies have denied any wrongdoing, saying the royalties have been left unpaid to compensate for tax refunds they claim the government owes.

The trouble began in 2000 when the tax office issued a set of regulations that included listing coal as one of the products exempt from value-added tax (VAT). This meant mining companies could no longer claim a VAT refund from the government for goods and services purchased to produce the coal.

However, the mining companies claim their contract of work, signed long before 2000, entitled them to a reimbursement if they were charged additional tax under future policies.

"Consequently, (after the 2000 tax regulation) coal producers asked for a tax refund, as stipulated in the contract, but the government never paid," Jeffrey Mulyono, Berau Coal president director, said.

Jeffrey, who received a travel ban, is also the president of the Indonesian Coal Mining Association.

He said the government instead assigned the State Debts Affairs Committee (PUPN) to collect the unpaid royalties. In response, coal producers filed a lawsuit in the Jakarta State Administrative Court.

"The court ruled the PUPN's actions fell outside its authority, as matters related to coal contracts come under the authority of international arbitration," he said.

"The government breached the court verdict by imposing travel bans."

The government is appealing the decision.

Jeffrey said the producers might now file for international arbitration in their dispute with the government. -- Abdul Khalik contributed to the story.

Mining executives banned from leaving the country

PT Kaltim Prima Coal

Nalinkant A. Rathod (president commissioner)

Rosan Perkasa Ruslaini (commissioner)

Abdullah Popo Parulian (commissioner)

Ari Saptari Hudaya (president director)

Kenneth P. Farrel (director)

Hannibal S. Anwar (director)

PT Arutmin Indonesia

Kazuya Tanaka (director)

Endang Rukhiyat (director)

Perry Purbaya Wahyu (director)

Edi Junianto Subari (director)

PT Adaro Indonesia

Edwin Soeryadjaya

PT Berau Coal

Jeffrey Mulyono (president director)

PT Liberal Utama Intiwood

Mualin Kantono (personal guarantor)

PT Citra Dwipa Finance

Hendra Tjoa F. (president director)

Source: Justice and Human Rights Ministry

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