T

he government is pushing for legal reforms in the country’s mining industry to curb the issuance of problematic mining licenses and attract more proficient investors in years to come.

The 2009 Mining Law has been blamed for a misuse of authority under regional autonomy, which grants local administrations the authority to issue licenses even to amateur mining companies.

As a result, the number of mineral and coal mining permits soared to more than 10,000 in the past six years, compared to 900 permits issued within the period of 1967 to 2009, the Energy and Mineral Resources Ministry’s mineral and coal director general Bambang Gatot Ariyono said.

“However, only around 6,000 permits currently have a clean and clear status. This certainly has been a major problem for us,” Bambang said on Monday.

The permit issuance system has long drawn criticism as industry insiders argue that local leaders misuse their authority for personal gain, with the consequence of overlapping concession areas and many firms failing to meet their obligations before the law.

Responding to the increase in illegal practices to obtain mining permits, the Corruption Eradication Commission (KPK) is planning a massive sweep for corruption cases involving firms.

Data from the antigraft body show that since 2002, 30 percent of the 500 suspects named by the KPK are businesspeople. Most of the cases are related to permits, procurement and tax-related bribery.

In September, the KPK named Southeast Sulawesi Governor Nur Alam a suspect in a bribery case linked to the issuance of several dubious mining licenses.

“Therefore, businesspeople are often reluctant to put their trust [in local administrations], Bambang went on, adding that various regional taxes were also a problem. “We have to fix this by providing legal certainty for those businesspeople.”

A 2016 survey by PricewaterhouseCoopers (PwC) found that oil and gas giants were more pessimistic about their operations in Indonesia than elsewhere in the world.

Around 61 percent of the respondents said they would not increase exploration activities in Indonesia in the next three years. Moreover, 91 percent of them believe that employment in the oil and gas sector will continue to decrease this year.

PwC Indonesia lead advisor for energy, utilities and mining Sacha Winzenried said in such an environment, investors sought consistency and certainty in government policies.

In June, President Joko “Jokowi” Widodo said he would scrap 3,000 problematic bylaws issued by regional governments across the country, as they contradicted central government regulations, including those in the mining and oil and gas industries.

According to data from the Indonesian Mining Association (IMA), a mining company in Indonesia must pay government institutions for at least 35 items before it can run operations. In total, those items account for some 30 percent of a company’s gross revenue.

“If this keeps happening, investors will be reluctant to invest in the country, as greenfield exploration, for instance, is a high-risk investment with a very high cost. They need legal certainty before they [invest] money here,” said mining expert Kosim Gandataruna, who is also a former director general of mining at the Energy and Mineral Resources Ministry.