Miners nervous, confused over regional autonomy

Miners, among the biggest investors in Indonesia's outlying provinces, fear that controversial autonomy laws which took effect at the start of the year could cast them into a new bureaucratic mire.

But such is the muddle surrounding the new laws -- even their frustrated main architect offered to resign on Tuesday -- no-one is quite sure what the impact will be other than confusion.

"We all agree it (autonomy) is the way to go, but the preparations leave a lot to be desired," Noke Kiroyan, president director of Rio Tinto Indonesia, told Reuters.

The government has been accused of rushing through the changes, designed to give the world's largest archipelago greater democracy and end decades of autocratic central rule.

The laws formally took effect on Monday but few of the technical changes needed to implement them are in place.

On Tuesday, Administrative Reform Minister Ryaas Rasyid resigned because of disagreement with President Abdurrahman Wahid on how to make the ambitious changes work.

"What it will mean to mining investors is not clear yet. We haven't seen a lot of regulation which will govern the implementation," Richard Ness, president director of gold miner PT Newmont Minahasa Raya, said.

Newmont Minahasa, a subsidiary of Denver-based Newmont Mining Corp, operates in North Sulawesi.

Most of the biggest mining companies signed their contracts during the despotic rule of former President Suharto who kept all major business interests firmly under the control of the central government.

Now, their ventures are looking to be on shakier ground and miners are wondering whether they will become victims to a new set of vested interests.

Paul Louis Courtier, executive director of the Indonesian Mining Association, said the autonomy laws have created an opportunity for regencies to impose new rules or even cancel the licences they need to operate.

"It means new laws, new levies. They now have the power to get rid of investors they don't like. This has frightened the mining sector," Courtier said.

Looking chaotic

"The whole thing looks chaotic, to put it mildly," Rio Tinto's Kiroyan said.

"I think we should all keep a cool head but let's hope the regional governments are of the same mind," he added.

In the past, the mining companies paid royalties on their output to central state coffers.

Under the new autonomy laws, regions can keep 80 percent of revenue from general mining.

Ness of Newmont said his company was not even sure to whom it would have to pay millions in dollars in mining royalties this year.

"It's very good to see more funds allocated for outlying regions where we operate. But the regulatory framework and the legal obligations are not clear," he said.

Wait and see

The uncertainties surrounding the future of the mining industry is seen hampering new investment in one of the world's most mineral rich territories.

"Mining investors which are already operating here will continue to do mining, but new investors will probably take a wait-and-see stance this year," Ness said.

But he added it was not just autonomy but also because they were waiting for a new mining law which will start being deliberated by parliament sometime this month.

Even administrative reform minister Ryaas, architect of the regional autonomy blueprint, predicts that as it stands regional autonomy would likely be counterproductive because most regions were not sufficiently prepared to run their own affairs.

"I'm pessimistic about regional autonomy's success because with the absence of necessary regulations and presidential decrees to enforce the laws on autonomy...it will only burden the people," he said.

President Wahid has rejected Ryaas' resignation for the moment.

Energy and Mineral Resources Minister Purnomo Yusgiantoro has said regional autonomy will proceed in stages but details are very thin.

Ness said the mining industry hoped Wahid's government could remove the uncertainty by issuing regulations on the scope of mining powers held by local governments.

"Even if the regional government have the ability to govern themselves they have yet to develop their own frameworks," Ness said. (*)