Mining investors eye RI but more work needed

The Indonesian government needs to do more to grapple with issues such as the unreliable legal system, tough labor laws and social unrest even as opportunities abound for mining firms, the Reuters reported on Tuesday.

Indonesia, which is rich in copper, gold, tin and oil, badly needs foreign investment to help propel its economic growth beyond 6 percent so it can tackle chronic unemployment and revive its ailing infrastructure.

?I would feel safe to advise people to invest there.I think they are heading in the right direction. The Indonesians are really making attempts to fix the current problems," said Rick Beckmann, senior foreign legal counsel of Jakarta-based Brigitta I, Rahayoe & Syamsuddin law firm.

The government and parliament are discussing a new mining law which will help reduce uncertainty in mining investment, give regional government more power to give licences and allow companies with exploration licences the right to produce minerals if they find and develop them.

According to a copy of the draft obtained by Reuters, the licences for mining exploration will be eight years and licences for production 23 years.

"Obviously, when you are going in, you need to be aware of what the situation is in terms of the current legal system, the issues with mining laws," said Beckmann on the sidelines of a mining conference.

"But having said, I think at the same time that steps are being taken to rectify this which will make for a good investment environment," he said.

However, Indonesia has seen violent protests against U.S. mining firm Newmont Mining Corp. and Freeport-McMoran Cooper & Gold Inc. in recent weeks, reflecting mounting resentment against foreign mining firms in Southeast Asia's largest economy.

Four policemen and a soldier were killed this month during protests demanding the closure of a giant mine run by Freeport in the remote province of Papua province.

In February, mine operations were halted for four days before protesters, mostly illegal miners, left the site near the town of Timika - about 500 km (311 miles) southwest of the provincial capital of Jayapura.

Defence Minister Juwono Sudarsono said the protests in Papua were instigated by "foreign parties" to draw attention to human rights violations by the authorities and to the Papua issue.

Newmont was forced to shut down its exploration camp on the island of Sumbawa in March after illegal miners went on a rampage near the camp. But the violence had not disrupted mining operations and the company said it remained committed to the exploration.

Newmont has another gold mine on northern Sulawesi island which faces criminal charges in a pollution case on Buyat bay. It agreed to settle a separate civil suit launched by Jakarta by paying $30 million.

Though the government has reiterated its commitment to providing a more investor-friendly environment and accelerating economic reforms, the country is still struggling after the Asian financial crisis of the late 1990s.

"The country has the resources. It has at the upper levels the desire to see these things develop," said Malcolm Baillie, president director of PT Weda Bay Nickel, which operates a nickel mining on the remote island of Halmahera.

But the lack of good public services and growing nationalism towards foreign investors were obstacles, said Baillie. (*)