Govt defends decision to raise mining royalties

Ministry of Mines and Energy again defended its recent decision to raise royalties on 39 mineral products, saying the new policy is needed in order to improve efficiency in the country's mining sector.

"Most mining operations in Indonesia are not efficient. I hope the rise in the royalties will encourage the mine operators to improve their efficiency," Director General of General Mining told Bisnis Indonesia on Thursday.

He cited that a mine operator in Australia is still able to survive despite the fact that it is not only required to pay high royalty but it must set aside huge financial resources to enable it to meet the country's strict environment regulations.

The plan to raise the royalties had been prepared for a long time including studies on the negative aspect of the high royalty policy to potential investors, he said.

The Indonesian Mining Association criticized the government's decision to raise the royalties saying the rise in the royalties would further discourage foreign investors from entering the country's mining sector.

The association's chairman B.N. Wahyu said that the high royalty policy could worsen the investment climate in the mining sector where many mining operations are now facing resentment from the local communities. (*)