Local administrations told to be careful in acquiring mining stakes

The Indonesian Mining Association (IMA) has called on local administrations to be careful and not too hasty in buying stakes of mining companies operating in their respective areas.

IMA chairman, Benny Wahyu, said investment in the mining sector actually did not offer better returns than investment in other sectors because of low return on investment in the mining sector.

"So, if local administrations have fund, it's better for them to invest it in other sectors that offer better rate of returns," he said.

His comment is in response to plans of a number of local administrations, including Irian Jaya administration, to buy stakes in local mining companies.

Irian Jaya Governor Jaap Solossa said recently that his administration had wanted to buy stake at gold and copper mining giant PT Freeport Indonesia.

Benny noted that rate of return in the mining sector reached only 13 percent per annum, far below the rate of return in the oil and gas sector that offers 25 percent per annum.

Nevertheless, if local administrations insisted of buying the stake at mining companies, they were suggested to study thoroughly all clauses in the contracts whether they were allowed to own the stakes or not.

"If the contracts allow local administrations to own the stake, why not. That's all legal then," he said.

Meanwhile, Freeport's External General Affairs manager, Siddharta Moersjid, said that the company would not bar the Irian Jaya administration from owning the stakes as long as it was pursued in accordance with the prevailing laws and regulations.

"In our opinion, that's normal, and we will not bar them. But, according to our contract, it is not yet the time for us to divest the stakes," he said. (*)