After more than three years of deliberation, the mining bill is on the verge of becoming law, with a House of Representatives special committee agreeing Thursday to eliminate a crucial article on contract of works (CoW).

The CoW scheme will be replaced by business licenses   — a move likely to irritate business players, who would have preferred the CoW system, which guarantees the duration of a mining activity.

However, the decision taken by the committee, which groups together representatives from all factions and commissions, means the bill can be endorsed in the next House plenary session on Dec. 16, potentially ending nearly three years of deliberation, which has been exacerbated by quarreling among the members.

“We have sorted everything out to make sure that the new law will serve the nation’s best interests,” head of working committee for the mining law Sony Keraf said after the meeting.

Under the new regulation, mining companies operating in so-called state reserve areas must allocate 10 percent of their net profits to the government, 4 percent of which will go to the central government and 6 percent to local administrations.

A reserve area contains protected strategic mineral reserves, including of tin, coal, gold and nickel.

The new permit system divides licenses into three categories: For strategic mining areas (reserve areas), non-strategic mining areas and small mining areas.

A license for a strategic mining area will be issued by the central government, specifically the energy and mineral resources minister. However, the government must seek approval from legislators to open a strategic mining area for development.

Priyo Pribadi Soemarno, the executive director of the Indonesia Mining Association (IMA), said the new law would jeopardize the mining industry.

“It is not an investor-friendly law. It is impossible to attract big mining companies with those regulations,” he said, adding that the agreement would provide some sort of certainty for the business players who had been waiting for the bill’s endorsement for years.

Under the new mining law, existing CoW holders have one year once their contracts expire to comply with the new system. But for mining companies operating smelters, the allotment is five years.

Key Points:

1. Types of Permits 

a. Licenses for strategic mining operations are issued by the energy and mineral resource minister.

b. Licenses for non-strategic mining operations covering areas in more than one province are issued by the minister, for mines covering areas in more than one regency; issued by the governor.

c. Licenses for small mining operations are issued by a regent.

2. Fines and jail terms for permit issuers who issue permits that are deemed illegal.

3. Imposing a cap on exploration and production periods. 

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