Purnomo says government will transfer mining rights gradually

Minister of Energy and Mineral Resources Purnomo Yusgiantoro reiterated on Tuesday that the central government would transfer mining rights to the regions in phases to ensure legal certainty for foreign mining investment.

Punomo, in an article published on local daily Media Indonesia, said the central government would not fully transfer the mining rights before the regions well understand and were capable to exercise the mining rights in accordance with international practices.

"The presidential decree on the transfer of the (mining) rights is being completed by the ministry of energy and mineral resources," Purnomo wrote in the article.

Purnomo noted that the gradual transfer of the mining rights was necessary given the fact that most of the country's mining operations involved foreign investors.

The government has planned to start decentralization program on Jan. 1, 2001 by implementing the Autonomy Law No. 22/1999 and the Revenue Sharing between Central and Regional Governments Law No. 25/1999.

Under the laws, the regions will hold rights on the management of their natural resources, including their mining resources, and obtain a larger portion of the government's revenue from the development of their natural resources.

Purnomo noted that the regions were not yet prepared to participate in the management of mining industry. There was no guarantee that the regional administrations would well protect the interests of foreign investors as the former mostly focus on how to boost their revenue.

Furthermore, he said, regulations that clearly define the rights of the central and regional governments were still non-existent.

Purnomo further said in the article that regional government would be barred from raising offshore loans until the government issued a regulation on the matter.

He said the government did no want to repeat the mistake made by the Chinese government in implementing its decentralization program. China allowed the regional administrations to look for foreign loans in the early days of the decentralization program but the regions finally failed to repay their debt, forcing the central government to take over the debts.

Purnomo said some provinces, including Riau, Aceh and Irian Jaya, had demanded for a larger portion of the government's revenue from the development of their natural resources development, but the government would stick to the revenue sharing scheme set in the Law No. 25/1999.

Under the law, the regions will receive 15 percent of the government's oil revenue, 30 percent of the government's gas revenue and 80 percent of the government's mining royalty earnings.

Purnomo said as part of the preparation for the decentralization program, the ministry of energy and mineral resources had issued a decree on technical guidelines for the regions to manage mining companies in their respective areas, and sent officials to disseminate information on the decentralization program in 14 areas in the country. (*)