Release: Difficult investment conditions continues for Indonesian mining industry
Wednesday, November 19 2003 - 01:02 AM WIB
?Despite Indonesia being highly prospective for minerals, spending on Greenfield exploration is now fraction of the levels seen in recent years,? said Upcroft. ?The long lead time and success rate from exploration to development means that there will be no significant mine development in Indonesia for several years.?
?If the investment climate for the mining sector improves, Indonesia has the potential to become a world class mining country which will provide substantial benefits to Indonesia. Six issues require immediate attention to improve investment condition, Upcroft noted. ?They are: improving competitiveness of taxation and royalty system; resolving conflicts between the Contracts of Works and The Forestry Law; restoring long-term certainty in the Contract of Work system; minimizing potential for ?over regulation? in the proposed draft mining law on management of natural resources; reducing illegal mining and ensuring fairness in divestment of foreign assets.
According to Beni Wahju, Chairman if the Indonesian Mining Association (IMA),? This report consistent with earlier reports, provides valuable information, and answers topical questions, about the mining industry.? IMA played an important role in initiating and supporting the PwC survey and report.
Employees, suppliers, regional communities and government all share in the wealth created by mining companies. In particular, the mining industry supports development in regional Indonesia.
Upcroft points out that the continued strength of the industry is important to all Indonesians. Over 98 percent of the sector?s employees are Indonesian nationals.Recent studies by University of Indonesia indicate that indirect employment related by mining activities may be as much as 12-35 times the number directly employed by mining companies.
The government?s share of the wealth created by mining sector in 2002 was over US$919 million. ?Mining companies generally pay higher taxes than other industries,? Upcroft stated. ?The sector experienced a 50 percent total effective tax and royalties on their production in 2002.?
On top of this, the government is trying to increase the tax burden further by making coal and gold producers bear the cost of 5-10 percent VAT on most operating cost. ?VAT is refunded to companies in other industries, which makes this change of regulation even more unfair to mining companies,? stated Upcroft.
The PwC report showed an increase in the level of profitability in 2002. ?This was mainly due to higher production of some minerals and improved gold and nickel prices,? Upcroft noted. ?Despite the improvement in prices and profitability, there has been no increase in exploration and mining investment.?
The PwC report is based on a comprehensive survey of the operations of 18 producing companies and 16 exploration companies. As sign of PwC?s commitment to Indonesia?s mining industry, PwC intends to publish its report annually. (end of release)
For further information contact: Marc Upcroft : +62-21-521-2901; Ali Mardi: +62-21-521-2901