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The reform era gave birth to the Regional Autonomy Law, which mandated the central government to hand over some of its powers to local governments.
Unfortunately, the transfers were recklessly planned and hastily implemented, resulting in handovers that provided no room for the provision of qualified human resources capable of sufficiently handling the authority that came with such autonomy.
Article 33 (3) of the 1945 Constitution stipulates, “The land, waters and natural resources within shall be under the powers of the state and shall be used to the greatest benefit of the people.”
This stipulation has been interpreted to mean that the state can manage resources through state-owned enterprises or other institutions it forms, or the state can delegate such management to other parties deemed capable both in terms of financial or technical capacity.
This understanding led to the issuance of a multitude of contracts and agreements, such as the mineral contract of work and coal contract of work, which grant authority to such parties.
During the transfer of power, however, there emerged a grey area that was caused by, among other things, a lack of understanding of the handover of authority, legal issues and the importance of legal consistency.
On the other hand, the reform has also created political laws, including the election law, which requires direct general and regional head elections.
These legal transformations have led to alarmingly high political costs and, in turn, the commercialization of authority.
The handover of authority to the regions is based on the consideration that local government officials are more knowledgeable about their respective regions and they will exercise their authority to improve public welfare.
However, what has happened is the commercialization of authority for the sake of winning elections and building and sustaining power and wealth, as strongly perceived.
This commercialization of authority is reflected in the mining sector, as evinced by the rampant issuance of mining concessions (KP) by regents and mining permits (IUP) by governors, resulting in the overlapping of permits and concessions.
This phenomenon has created some very murky situations, such as when a regent/governor revokes a mining concession without giving the previous holder an opportunity to meet the requirements to extend it.
Regarding the widespread issuance of mining concessions and permits, the Directorate General of Mineral and Coal at the Energy and Mineral Resources Ministry inventoried almost 9,000 mining permits last year and found only around 4,000 permits had clean and clear status.
Whether the data is valid or not, it goes to shows that something is not right in the process of issuing permits to manage natural resources.
In this murky situation, state-owned enterprises (SOEs) have been greatly affected. SOEs have actually taken advantage of the reform era by slowly and surely transforming their own culture, which includes the prohibition of bribery and the implementation of good corporate governance.
Amid their efforts to be more professional, SOEs in the mining sector have been defenseless against those attempts that are blatantly based on the thirst for money.
State-owned tin producer PT Timah, where I served as president director from 1994-2002, is one among many mining companies that are facing difficulties due to unclear regulations, overlapping permits and poor environmental management.
This situation has ignited legal disputes that have not only resulted in commercial losses, but also a waste of energy that can threaten the business itself.
State-controlled coal miner PT Tambang Batubara Bukit Asam (PTBA) claims to have lost US$2.3 billion in potential revenue after the Lahat regency administration in South Sumatra unilaterally granted 26 firms licenses to mine coal in the company’s concessions in 2005 (The Jakarta Post, May 1, 2012). Perhaps the company would win the legal battle, but it is baffling how state assets can so easily be transferred and allocated to other parties.
State mining company PT Aneka Tambang (Antam), meanwhile, might potentially lose $4.567 billion from the value of minerals in its overlapping working area. The North Konawe regent has caught Antam in a legal dispute following the issuance of permits on Antam’s mining areas in the Southeast
Antam is also facing a similar incident in South Halmahera regency, North Maluku, where the company has had to stop its operations due to a legal dispute and overlapping land allotments.
It is unfortunate because the area is plotted for the establishment of a nickel pig-iron processing plan, which is included in the Master Plan for the Acceleration and Expansion of Indonesian Economic Development (MP3EI) initiated by the President. The company has also paid its dues, including taxes and carried out corporate social responsibility (CSR) activities.
These legal disputes could become more tangled still due to the different interpretations proliferating among the disputed parties. We cannot groundlessly allege that there has been bribery or intervention in the legal process.
The point is, it is troubling to see how SOEs can lose the rights to exploit natural resources due to the abuse of authority, which has included the ability to engineer the law.
These examples strengthen our argument that the central government cannot sit by and do nothing. We certainly welcome reforms, decentralization and regional autonomy. However, they cannot be achieved in the absence of a controlling system.
The central government should put a moratorium in place and, in parallel, advance research into the issuance of unclean and unclear mining concessions and permits.
This is important not only to provide legal certainty for the concession and permit holders, but also to find out whether each issuance is proper and free from irregularities such as bribery.
There should also be efforts taken to revise the mining law. The authority perhaps should not be changed, but the requirements to grant the permits to manage natural resources by a regent/governor must be regulated further.
The executive can propose amendments to the law as long as strong provable cases are available, which they are.
The government must also examine whether the companies that hold mining concessions and permits have fulfilled their obligations, be they tax obligations, royalties or other legal retributions.
We have to get to the bottom of the problem, which is really the high-cost elections that lead to corruption and the commercialization of authority.
How? These are the issues that must be resolved by legislators, political scientists and experts on administrative law.
Let us not forget that even legal, proper and integrated natural resources management can still create an environmental impact that must be controlled; let alone the improper or reckless issuance of mining concessions and permits, which may be granted without the requirement to submit an environmental impact analysis, for instance, or the requirement of strict environmental management.
Regional heads must check the credentials of the parties obtaining mining concessions and permits. The Energy and Mineral Resources Ministry should have more authority beyond technical issues and
The ministry must be given the authority to verify, supervise, monitor and distribute its experts to the regions to assist the regional heads.
The bottom line is natural resources management must be able to improve people’s welfare instead of enriching corrupt individuals or parties.
This has to be the responsibility of the regional heads, and it should be well regulated by law.
The writer was president director of state tin producer PT Timah in 1994-2002 and deputy chief of the Corruption Eradication Commission (KPK) in 2003-2007.