Indonesia could face massive mining suits

Mining firms, mostly foreign, could have grounds for suits against the Indonesian government worth $31.5 billion for violation of contracts after ratification of a forestry law in 1999, a top minister said on Wednesday.

"Total estimates of potential litigation by 22 mining companies is $31.5 billion," chief economics minister Dorodjatun Kuntjoro-Jakti said in statement to parliamentary commissions.

In a meeting with commissions on environment and mining, Dorodjatun said the lawmakers should amend 22 mining firms' licences to help boost investment in Indonesia.

"There is no new mining investment in Indonesia. We need to solve this issue. This is not only about current contracts but also for the future of the mining sector in Indonesia," he said.

Director general of natural resources Wimpy S. Tjetjep told reporters: "At the moment there is no firm that has filed suit against the government, but if this continues the companies may think the other way."

The forestry law, ratified in 1999, has banned open-pit mining and forced some firms to suspend projects, even though the statute has generally not been enforced.

The law's defenders say Indonesia is rapidly losing tropical forests from illegal logging and a variety of other factors, including mining, and the legislation is needed to protect the forests.

Affected by the law have been the nickel operations of PT Inco controlled by Canada's Inco Ltd., in South Sulawesi province, along with Freeport McMoRan Copper & Gold Inc and its giant operations in Papua province.

Indonesia nickel and gold producer PT Aneka Tambang Tbk (Antam) was also affected by the law, postponing the development of nickel resources on Gag island, part of Papua.

Mining analysts have said the forestry law was so broad that should it be enforced fully it could apply to virtually all mining operations in Indonesia.

"In this uncertain mining climate, don't expect new investment to come while some existing companies are withdrawn from Indonesia," minister for accelerating development of eastern Indonesia, Manuel Kaisiepo, told reporters.

Indonesia has an abundance of coal, gold, copper, nickel and tin along with natural gas and oil. Most of the metals and some of the energy resources are located in the eastern part of Indonesia.

Industry executives have said it would be highly unlikely long-standing projects would be affected, but that the law was a worry for firms in the early production or exploration stages. (*)