FOCUS: Long-waited mining regulations should create legal certainty

Seemingly, the mining industry will have to wait for several more months before the long-waited governmental regulations implementing Mineral and Coal Law No.4/2009 will be issued. Although the government has stated that it is planning to issue the regulations later this month, analysts have predicted that the plan may not be realized until March.

But the long waiting, perhaps, will be less of their concern if compared with what will be the contents of the four implementing regulations on mining zone, mining business operation, mining development and supervision, as well as post mining and reclamation.

Will they finally come up to their expectation that they will enable them do their businesses fairly and profitably and to the general public?s expectation that they will help generate an economic growth benefiting them and the government in a sustainable way?

For many of the industry, especially those now ready to start constructions and exploitations, the waiting game will surely push up their costs and make them disappointed. ?More delay will certainly inflict more costs to the industry. I think it?s better for the government to issue the implementing regulations soon,? Priatna Suhala, director executive of the Association of Indonesian Coal Businessmen (APBI), told Petromindo.Com here on Monday.

But perhaps their disappointment could be compensated once the implementing regulations are issued and meet their expectations.

Priatna said that the industry has especially expected that the implementing regulations would create a legal certainty in the mining business, as many articles in the Law No.4/2009 are not clear.

?For example, an article in the law rules that a mining concession should have a maximum size of 15,000 hectares, while currently there are many with the size of more than that. Another article obliges concessionaires not to subcontract (works) to a company they own, but there is no mention about the percentage of ownership. Is a five percent ownership also subject to this stipulation? Or is it more than 50 percent? I think such articles should be made clear in the implementing regulations,? he said.

The industry hopes that the implementing regulations will also create fair environment for competition among all players, prevent any conflicts over forest lands due to conflicting regulations made by the ministry of energy and mineral resources and the ministry of forestry, and synchronize the overlapping regulations issued by the central government and local administrations in provinces, and regencies. Those kinds of conflicts have caused long delays to several mining activities.

The overlapping regulations issued by the central government and local administrations have also caused conflicts among the industry players as apparently many mining sites have multiple documents. It has been widely known that the mining sites already given by the central government to certain investors are then given by the local administrations to others, resulting in multiple documents of the same sites.

"So certain concessions are licensed in multiple documents. This overlap is made possible because coal mining concessions can be issued by the central government as well as local authorities, although the latter are limited to 5,000-hectare concessions. But they can, for instance, issue five licenses per person, each for 5,000 hectares," a coal trader in Central Kalimantan , who refused to be identified, told Petromindo.Com recently.

"Such problem has been even worsened by the rampant illegal brokers, especially in the sub-sector of coal mining as coal demand has been continuing to rise on the local and the global markets,? he pointed out.

The worsening problem might have been indicated by several legal cases recently in Kalimantan and Sumatra islands, where many unbridled fraud by the illegal brokers-- reportedly only having a bundle of documents as assets -- have been frequently reported. The widespread fraud had claimed local as well as foreign big companies, including the global financial service firm Morgan Stanley and the widely diversified commodities trading firm Glencore .

Such fraud perhaps could also be caused by the fact that the mining concessions could also be subcontracted to multiple investors, thereby putting the latter in a quandary when supplying products to buyers.

Other than that, the Business Monitor International (BMI) recently warned that the corruption problem in Indonesia will remain a serious obstacle in attracting foreign investments, despite the fact that it predicted Indonesia?s mining sector will steadily grow between 10 and 11 percent per year for the next five years. The World Bank estimates that corruption can add up to 20 percent to the costs of doing business, including mining ones, in Indonesia.

All of the above-mentioned problems can be avoided, or at least minimized up to the lowest level, if all of the implementing regulations create a legal certainty and provide no loopholes to be manipulated by unscrupulous people for their own benefits.

Otherwise, the industry?s waiting time will end up causing more disappointment. And the government cannot expect that the implementing regulations will attract many investments to generate an economic growth as Indonesia badly needs, while at the same time prevent any untoward circumstances from occurring in the mining businesses -- end.