FOCUS: Overlapping regulations remain obstacles to mining investment
By: Benget Besalicto Tnb.
Tuesday, March 23 2010 - 01:22 AM WIB
Bambang Setiawan, the director general of mineral, coal, and geothermal at the ministry of energy and mineral resources, has said that investments in the mining sector may increase by around 40 percent to about US$3 billion this year from around $1.8 billion last year.
"If all things are going well as a result of the issuance of the new mining regulations, the mining investment will reach about $3 billion next year (2010),? he told the press at the end of last year.
But so far things are not going well. Investors see that the mining sector is still hampered by the prolonged problems of overlapping regulations and land use rights as a result of the issuance of multiple land use permits over the same lands.
The overlapping regulations are the law on mineral and coal, the law on forestry, the law on environment, the law on spatial planning, and the regulations passed by regional administrations (regents and governors).
Analysts have stated that the overlapping regulations have resulted in overlapping authorities among governmental agencies to decide on potential land sites for investments. It has also resulted into overlapping land sites for investments as one concession may be licensed in multiple documents.
Under the existing laws, the ministry of forestry or the ministry of environment has the authority to stop a mining project if it breaks the law on forestry or environment despite the fact that they have secured a concession from the ministry of energy and mineral resources.
As most of mining sites are located in forested areas then many of mining projects are currently having problems of securing licenses to use forested areas from the ministry of forestry. Also as the regional administrations have the authority to issue mining licenses, many mining companies have seen parts of their concessions are licensed with multiple documents, causing conflict among those having documents for the same sites.
Hatta Rajasa, the Coordinating Minister of the Economy, admitted recently that due to the overlapping regulations issued by the mining and forestry departments, there are about 7 million hectares of mining sites in Indonesia having problems with spatial planning.
?As a result, there had been 400 infrastructure and mining projects that had to be stopped during the last four years. There are other projects now limbo and suffering financial losses due to the owners of the project now in conflict with other businesses or local people,? he told a seminar on investments in Yogyakarta recently.
Arif S. Siregar, the chairman of the Indonesian Mining Association (IMA), said that as long as the government did not solve the overlapping problems, investors would continue to be reluctant to do business mining in the country. ?They?re waiting for a legal certainty that is still absent until now due to the unsolved problems of overlapping regulations,? he told Petromindo.Com over the weekend.
According to him, since last year a total of US$10 billion investments in the mining sector had been shelved due to the absence of legal certainty in the mining sector. Considering that Indonesia is ranked sixth in the world in terms of mining potentials, it should manage to realize its mining investment target.
?But unfortunately, in terms of creating conducive condition for investments it is ranked 200th something,? he said, adding that the postponed investments included those by Dairi Prima (zinc and lead), Rio Tinto (nickel), Weda Bay-Eramet (nickel), Mearest Soputan (gold), BHP Billiton (coal), and Aneka Tambang (gold and nickel).
A survey conducted by PricewaterhouseCoopers last year identified nine problems facing Indonesia that made it not conducive for mining investments. The problems include the overlapping regulations between the forestry and mining sectors, duplication and contradiction of regulations between the central government and regional administrations, unfairness of requirement for divestments, uncertainty of contracts, illegal mining, lack of coordination between the new investment law and the mining regulations.
Arif, who is also the commissioner of PT Inco, Indonesia's largest producer of nickel, noted that thanks to the absence of legal certainty, only the small mining firms would dare to enter into the mining sector. ?The small ones are ready to invest because they can easily corrupt their ways of doing businesses. But big companies will be reluctant to invest as they?re committed to a certain code of conducts ruled by their own companies. They need a legal certainty to do business by their own code of conducts,? he said.
He added that they might have planned to invest in other Asian countries, such as Vietnam , Laos, and the Philippines, whose government are providing a one stop service for mining investments.
According to him, to attract investments, the government should quickly find a solution to the overlapping problems if it is serious in its efforts of increasing mining investments this year. ?They have to synchronize their overlapping regulations in order to create a legal certainty badly required by investments to flourish,? he said.
If only all governmental institutions concerned are able to leave behind their departmental egotism and have the same vision of improving the Indonesian economy, then solving the overlapping problem will not be a difficult task to accomplish.
The writer is an editor at Petromindo.com. He can be contacted at besalicto@petromindo.com