Investors shun Indonesia's mining sector
Monday, June 12 2000 - 04:30 AM WIB
Only a few remaining investors have to gut to spend more money for new investment in Indonesia's mining sector, mile many other investors would not spend even a penny because investing in this sector now carries a high risk.
Executives of mining companies and mining experts shared a view that various problems have continued plaguing Indonesia's mining sector, and discouraged investors. They include illegal mining, unresolved conflicts with locals and the unclear implementation of regional autonomy law.
"The existing investors are waiting for the implementation of the autonomy law, while prospective investors are waiting for improvement of security situation. I think, no one will dare to make a big investment, at least until next year," said state tin miner PT Timah president Erry Riyana Hardjapamekas.
According to the Ministry of Mines and Energy, at least 24 foreign mining companies have halted their activities, mostly in the exploration stage, because of lingering uncertainties in the security front and also in the financing.
An official at the ministry revealed that last year, the value of new investment in the mining sector reached US$327 million. "This year, it must be far lower," he said.
Various parties agreed that the government and local administrations should help mining companies, including in settling conflicts with locals and handling illegal mining activities.
Minister of Mines and Energy Susilo B. Yudhoyono revealed recently that Indonesia lost about 30 million tons of gold ore and 4 million tons of coal last year just because of rampant illegal mining activities.
According to PT Newmont Minahasa Raya president Rick Ness, illegal mining has caused massive environmental destruction, but many times, it was big companies like Newmont which were often blamed for the destruction.
Ness also said that the autonomy law opened the door for new conflicts with locals, because many articles in the law may contradicts with articles in the existing mining contracts between the government and mining companies.
South Sumatra Governor Rosihan Anwar shared Ness' concerns because locals had high expectations from the autonomy law. So, when the realization is far from their expectation, they could force their wills to mining companies.
In addition, the government's recent decision to increase mining royalties would serve as an additional barriers for new investment in this sector. (*)