Mining bill nears House approval

Ika Krismantari ,  The Jakarta Post ,  Jakarta   |  Fri, 12/12/2008 7:28 AM  |  Headlines

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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Arief Solihin Nur (not verified) — Sat, 12/13/2008 - 7:49am

Welcome to the new bill! Actually I feel the present regulation of mining is too bad. For example, Licences for small mining operations are issued by a regent (bupati). In many areas especially for coal mining in Kalimantan, some regents issued so many Exploration Licences(sometimes this kind of licences are overlapping) to their cronies and then the cronies sell it to company who has the financial capability to explore with the disguise of "joint exploration". The licence holder get US$4 to US$5 per metric ton royalty fee from the funder.I propose the government should make a regulation to ask the license applicant to show their financial capability before issuing Exploration License to them to avoid such "selling license practices" in future. Now a days, not so many licenses need to be issued by minister or even by governor, because the regent is so clever. If there is say over 5000 Ha of mining area which the license should be issued by governor, the regent just split this area to 2 or 3 even 10 mining licenses enable him to issue these licenses by themselve. I think such authority by regent to issue the Exploration License should be revised or supervised by independent commitee to avoid the abuse of power. Of course the new mining bill is not perfect yet but a step forward to the right direction. People who against this bill only because of their own conflict interest and never think for greater interest of our country. I convince foreign investors will be much more interested to invest in Indonesia once a law is clearly regulated.

Prediction (not verified) — Fri, 12/12/2008 - 4:29pm

Good bye to Indonesia's mining industry! Mining professionals should get ready for a career change. Communities in resource-rich areas can expect no benefits in the near future, with little or no investment coming in. Illegal mining practices will increase, and there'll be huge environmental damage and social impacts. Indonesia's politicians are the best at destroying a country's hopes.

John Ralph (not verified) — Fri, 12/12/2008 - 2:25pm

This mining law will kill investment in Indonesia and increase the level of corruption. The practical issues have not been well thought out by the lawmakers and they have shown a poor understanding of the mining industry and how it works. Why would any person want to investment in an exploration project without the right to mine. The polticians can just give a bankable project to their friends so why would anyone want to explore in Indonesia. A permit for each mineral also shows a massive misunderstanding of mining. All medium to small projects in Indonesia are now uneconomic because of the obligation to refine in Indonesia. Why would anyone want to do this when Indonesia has poor infrastructure and a corrupt Bureaucracy.

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