Mining bill could be delayed for another year

Ika Krismantari, The Jakarta Post, Jakarta

The House of Representatives is set to miss its target of passing the much-awaited mining bill by March 2007 as the committee handling it has only managed to discuss 84 of the total of 414 articles listed in the draft.

"If there are no major obstacles, hopefully we'll be able to pass it into law early next year," committee member Alvin Lie said Monday during a discussion on the bill.

The delay will be seen as another blow to the effort to attract new investment to the mining sector as it will prolong the lack of a firm legal foundation for investors given that the existing 1967 Mining Law is widely regarded as being outdated.

Alvin said the committee had so far only managed to discuss two chapters -- the ones on definitions and licensing procedures. Thus, there was still a long way to go, especially given that the committee still had yet to discuss more controversial matters, such as the securing of concessions and production-sharing contract arrangements.

"The bill is aimed at giving legal assurance to investors and to foster better coordination among government institutions. So, we must be really cautious when discussing the bill," he said, adding that there were frequent lapses in coordination between the relevant ministries, such as the Energy and Mineral Resources Ministry, Forestry Ministry and Finance Ministry.

Energy and Mineral Resources Minister Purnomo Yusgiantoro said recently that Indonesia could significantly boost investment in the mining sector if the bill were to be enacted into law in a timely fashion.

With the new legislation set to provide legal certainty for investors in the fields of licensing, land acquisition and security, investors have been eagerly awaiting the enactment of the bill, which has been before the House since last year.

Critics say that mining firms in Indonesia face undue operational and exploration risks compared to the prospects of the successful discovery of economic deposits. In addition, the process of obtaining the necessary licenses and other permissions is complex and protracted.

The most recent figures show that actual investment in the mineral and coal sectors in 2006 increased to US$1.09 billion from $880.4 million in 2005.

"We hope that the House will go all-out in deliberating the bill as investors want the legislation to be passed before they will invest here," said Soemarno Witoro Soelarno, technical director at the Energy Ministry's Directorate General of Geothermal Energy, Minerals and Coal.

He gave the example of the London-based Rio Tinto Group, which was still awaiting the passage of the legislation before going ahead with its plans to develop a US$2 billion integrated nickel mine in Sulawesi.

One of the provisions of the bill states that investments in the mining sector must now also include the establishment of complete upstream-to-downstream processing plants in order to develop the country's mining sector.

However, as Alvin warned, there many other fundamental problems affecting the industry that needed to be quickly addressed, including coordination between government institutions, as well as between central and local government, in the issuance of permits for exploration and operations.
_________________________ Indonesian Business and Investment News Aggregator