Govt move to raise mining royalties questioned

The Indonesian Mining Association, a group of mining companies, has called on the government to review the decision to raise royalties from mine operations in the country, criticizing the move as a setback to the industry, Bisnis Indonesia and The Jakarta Post reported on Tuesday.

The association's chairman BN Wahyu said on Monday that the new rates of royalties would discourage investors from entering the country's mining industry because the new policy made Indonesia among the countries with high royalty rates.

Even without the increase, many foreign companies have already been reluctant to invest in Indonesia due to a growing resentment from the local community to mining operations amid the government's inability provide a law and order, he said.

"The new rates will be therefore make the government's task to attract mining investors more difficult," he added.

According to the Presidential decree, the royalty for gold production is increased to 3.75 percent from 1 and 1.5 percent, that for copper and silver, the royalties are raised from 2 percent to 4 percent and 3.25 percent, respectively. The royalties for nickel production is also increased to between 4 percent and five percent, depending the quality, while for coal production is raised to between 2 percent and 7 percent.

Director general of general mining at the Ministry of Mines and Energy Surna Tjahya Djayadiningrat said that the royalty increase affected mining contracts made after the enactment of the regulations last February.

He said Indonesia would remain attractive to foreign mining contractors as long as the country's political climate was stable and showing no uncertainties. "It is the political situation that is fundamental to investors," he added. (*)