Overlapping regulations hinder investment in mining sector

Andi Haswidi, The Jakarta Post

The lack of coordination among relevant ministries, which in turn leads to overlapping regulations, is primarily to blame for the country's failure to lure investment in the mining sector over the past few years, an official says.

Stronger coordination among such ministries as energy and mineral resources, forestry, environment and agriculture, is therefore the key to luring investors back to the mining sector, Energy and Mineral Resources Ministry director general for minerals, coal and geothermals Simon F. Sembiring told The Jakarta Post on Sunday.

"The effort to improve investment in the mining sector has always been stymied by regulations.

"We have tried our best to promote more investment in the sector to foreign investors, but as long as there are still conflicting regulations within the country, the investment won't come," Simon said.

The use of land for mining is minimal compared to other land usage such as for plantation and logging, Simon said.

"Of the 173 million hectares of forest land, mining exploitation only has used about 7.3 million hectare while there are other uses under the forest concession rights that reach up to 18.3 million hectares."

Another regulation Simon considers to be limiting investment in the mining sector is a 2006 Forestry Ministry Decree on forest land use licensing that requires miners to compensate for the area used for mining by planting an area that is twice as large, which must be completed in two years.

Simon said the requirement was burdensome as they were already under obligation to re-plant the area used for mining after the end of its exploration and exploitation period.

"Failing to comply with that will result in a 1 percent tax from the value of the total mining production of the company. The basis calculation for that 1 percent figure is not clearly founded," he said.

"One percent of total production is tough," he added.

There were many other conflicting regulations that did not just involve the Forestry Ministry, Simon said, suggesting that the only way to curb such miss-coordination was to form a permanent union of the relevant ministries.

"The idea is to integrate all departments related to natural resources such as the Forestry Ministry, Energy and Mineral Resource Ministry, Fishery Ministry, Agriculture Ministry and the Environment Ministry, all under one ministry -- the ministry of natural resources" he said.

"This will surely mellow all the redundancies of regulations and bureaucratic hassles," he added.
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