No new Indonesia mining investment until political issues settled: IMA

No new investment is expected in Indonesia's mining sector until political stability is restored, Indonesian Mining Association (IMA) chairman Beni N Wahju said Tuesday.

"I don't think there will be new investment in mining. Those companies who are already producing will keep producing as much as they can," Wahju said.

"Why should they come to a country like this while there is potential all over, with China opening up, Mongolia and so on ... they are more attractive than Indonesia in the sense of safety," he told AFP's AFX-ASIA financial news subsidiary.

Wahju cited the partial shut down of the PT Kaltim Prima Coal (KPC) mine, owned jointly by Rio Tinto and BP Amoco plc, in East Kalimantan,

The mine has been forced to partially close, affecting about 75 percent of its operations following a blockade by some 60 residents, the latest incident in a string of security-related closures at the mine.

Meanwhile, ExxonMobil has yet to re-open its operations in Aceh, which it closed in March due to security concerns amid fighting between the military and separatist rebels.

Wahju said regional stability was the single most important factor in attracting foreign capital, but leadership squabbles among the political elite also undermined investor confidence.

He said he hoped that the government's drive to give the regions greater autonomy would help protect mining companies from security threats such as blockades and illegal mining.

The new regional autonomy laws delegate supervision of mining activities to district governments.

"As soon as they (the districts) feel that they are part of the whole game, then they will participate even better ... But that's still far from reality," he said.

However, one of the drawbacks of the new laws was that the military cannot get involved in regional security issues unless requested to do so by the police, who do not have the funding to handle such issues, he added.

"We would like to see security come back to the archipelago, and for that reason we would like to see the police and the army to a certain extent be more proactive, realising that this has nothing to do with politics.

"It has a lot of things to do with the economy because if there is no investment there is no business activity and then it is the people who will suffer."

The director general for mines, Wimpy Tjetjep, was not immediately available for comment. (*)