T

he ongoing legal conflicts between London-listed Churchill Mining Plc. and the East Kutai regency authority in East Kalimantan reflects the weakness of the country’s mining policy, analysts say.

ReforMiner Institute vice director Komaidi Notonegoro said in Jakarta on Friday that poorly-managed regional administrations were the main cause of the emergence of many problems, such as disputes involving overlapping concession areas and unregistered mining activities.

“Due to the poor implementation of regional autonomy, we have tens of thousands of permits being issued by regional administrations, but only a few of them are registered within the central government’s database, which results in the contribution to state revenues being also very constrained,” he said on Friday.

The problem was worsened because Indonesia currently did not have a clear road map for how to develop the minerals and coal mining sector, he said. He added that the government had also not been able to create a map for mining areas across the country, as mandated by the 2009 Mining and Coal Law.

“Judging from past experience, several regional administrations cannot be trusted. The right to issue mining permits has to be given back to the central government,” Komaidi argued.

On May 22, Churchill’s lawyers filed for arbitration at the International Center for Settlement of Investment Disputes in Washington. The mining giant sought US$2 billion in compensation from the government for granting another firm the right to operate in Churchill’s four concessions (locally known as IUPs). Churchill held the IUPs through its subsidiary, Radliatama Group, where the company owned a 75 percent share.

Both the East Kutai regional administration and the central government, however, denied knowledge of any information of Churchill’s presence in the area or its acquisition of shares in the Radliatama Group.

President Susilo Bambang Yudhoyono told relevant ministers to take the necessary steps to prevent such arbitration actions in the future, as the case had personally affected him as head of state. He said that although the case began at the regency level, the first defendant would be the President.

Indonesian Coal Mining Association (APBI) executive director Supriatna Suhala said Churchill’s case would not greatly influence the investment climate in Indonesia. He said disputes over permits happened everywhere.

“What can hamper the investment climate are issues such as the government banning coal exports or applying export taxes. Those issues make investors wait and see,” he told The Jakarta Post.

He argued Churchill had failed to comply with prevailing regulations on foreign investments. Foreign companies that intended to invest in Indonesia should first contact the Investment Coordinating Board (BKPM) and establish a local branch, he said.

The Attorney General’s Office (AGO) was also now studying the dispute between Churchill and the East Kutai regency. It claimed that it was ready to help the administration win the case.

— Rabby Pramudatama contributed to this story