Conflicts with locals discourage mining investment
Wednesday, November 1 2000 - 04:00 AM WIB
Foreign mining companies are being discouraged to invest in Indonesia due to widespread conflicts between locals and mining companies, according to analysts on Monday.
Mining analyst at PricewaterhouseCoopers Bob Parsons said that expenditure on mining explorations was likely to decline this year from US$50 million recorded last year and $75 million in 1998.
"Multinational companies will defer investments in Indonesia until some of the uncertainties have been sorted out," he told The Jakarta Post following a business meeting with the Minister of Energy and Mineral Resources Purnomo Yusgiantoro, jointly held by PT Harvest International Indonesia and the state owned Radio Republik Indonesia (RRI).
He said Indonesia would need to spend at least $300 million per year in exploration investments to replenish resources and sustain the country's mineral production level.
According to him, in the next four years at least three mining firms will close operations because of the depleting reserves.
"The question is, are there new mines to replace those three that are closing down?" he said.
He further said uncertainties on Indonesia's future mining regulations led foreign investors to delay their mining plans in Indonesia.
"The old contract of work (COW) system is in limbo and everybody is waiting for the new mining law; so we don't have a regulatory framework now," he explained.
But he added that Indonesia's mining potentials remained prospective. "Nobody disputes the geological prospectivity of Indonesia."
President of Harvest International, Harvey Goldstein, said that foreign investors were dismayed by the current violent nature of local communities.
"It's really a question of the empowered masses as they demand retribution for the past 30 years of injustice," he said, referring to the three decades under the authoritarian government of former president Soeharto.
He said the upcoming implementation of regional autonomy by Jan. 1 might weaken the legal mining contracts signed by the central government. (*)