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Monday, February 06, 2006

Lawmakers debate new mining bill to install new system

As the deliberation of the mining bill continues at the House of Representatives, legislators are at odds on the pressing issue of licenses versus contracts to be awarded for companies that wish to develop mineral resources and coal in the country.

The Golkar Party will propose that a "mining activity agreement", which basically serves like the current working contract with mining companies, be included in the draft law, the party's legislator Erlangga Hartanto said on Sunday.

Such a proposal was made to answer the demands of investors in the sector, who have responded negatively to the bill, said Erlangga, whose party has 12 members of the 50 comprising the House's special committee to deliberate the draft law.

The government-sponsored bill, intended to supersede Law No. 11/1967 on mining, aims to replace the "contract of work" system with exploration and production licenses, which will be awarded by local administrations in line with the regional autonomy law.

Legislator Alvin Lie from the National Mandate Party (PAN) said that it would support the government on the issue. "We will have better control over the use of land with licenses," said Alvin. PAN, which has five members in the committee, will also suggest that the license period be cut to 15 years, including exploration and production, from a total of 31 years proposed in the bill.

The Indonesian Democratic Party of Struggle (PDI-P), the second biggest party with 10 committee members, is yet to take a stance on the matter.
"We will see the discussions taking place in the committee's sessions," said legislator Ramson Siagian.

PricewaterhouseCoopers' (PwC) report on the mining industry in 2005, released in January, shows that the licensing scheme dissuades investors from exploring mining prospects in Indonesia. Spending on greenfield exploration in the country continued to decline, standing at US$7 million in 2004, which represented less than 0.44 percent of the $1.59 billion spending worldwide, down from 0.67 percent from $1.05 billion a year earlier.

As the government cannot sign contracts directly with investors, Golkar will propose that a legally incorporated state agency be established to deal with contracts. "This is similar to BP Migas (the Oil and Gas Upstream Regulatory Agency) in the oil and gas industry," said Erlangga.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro has previously said that mining industry could not follow the same system as oil and gas, as mineral resources are left in the hands of local administrations according to the regional autonomy law.

Erlangga said that certain "strategic" minerals could be withdrawn into the central government's authority, but declining to elaborate which minerals would be included.

Meanwhile, Alvin said that PAN would also propose that the terms of payment for the license, including that for royalties, be reviewed every five years, to better reflect current conditions.

Another idea that the faction would try to push through is the yearly installment of post-mining period rehabilitation costs. "If a mining company went bankrupt, we'd have savings to conduct the proper rehabilitation measures," he said.

Leony Aurora, The Jakarta Post
February 07, 2006

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