Jakarta – Mining and Mineral Resources Minister Purnomo Yusgiantoro said yesterday that a presidential decree will soon be issued to delay handover of mining autonomy to the provincial administrations across the country for up to five years.
Purnomo told the press in the West Java capital of Bandung that that the duration of five years is to give the regions time to prepare before they are authorized to control their lucrative mineral resources.
A presidential decree will delay the handover to regions for a maximum of five years. But if the regions are ready in one year, they can go ahead, Purnomo told the press.
Although Purnomo did not say that the delay is aimed at calming foreign investors, as well as protests from donor countries, it is believed that it will ease the fears of the countrys remaining foreign investor groups.
Purnomo admitted that many foreign mining companies had expressed concern over the autonomy laws, because the regions were ill- prepared, lacked enabling legislation and the necessary personnel.
We dont want investors to worry. We dont want investors to run away from Indonesia because they are important for our revenues, Purnomo added. And he warned that investors might seek international arbitration if their contracts were threatened by the regional autonomy laws.
New regional autonomy laws, which took effect on January 1, have worried foreign investors who have invested their capital in the countrys mining sectors. They believe that the transfer of authority from the central government to regional administrations will create various problems for them.
What it will mean to mining investors is not clear yet. We havent seen a lot of regulations which will govern the implementation, Richard Ness, president director of gold miner PT Newmont Minahasa Raya, was quoted as saying by Reuters recently. Newmont Minahasa, a subsidiary of Denver-based Newmont Mining Corp, operates in North Sulawesi.
The decision may be good news for investors, but the central government may find difficulty in explaining it to the mineral rich-regions like Irian Jaya, Aceh, and Riau which have urged the government to immediately surrender a large part of their resources.
Purnomo said that a joint team comprising central and local officials along with foreign investors would be established to determine whether or not regions were ready to take control of mining resources. Purnomo also promised that existing contracts with mining companies would be respected.
For the moment, Indonesias huge oil and gas operations will also stay under Jakartas control, although regional authorities will get a cut of the earnings under the new laws which are designed to speed up the transition to democracy in the giant archipelago, long used to autocratic central rule.
These industries represent about the only ones left in Indonesia with any sizable foreign investment. Other investors mostly fled during nearly three years of still-unresolved political and economic mayhem and show no sign of returning anytime soon.
Indonesia had previously said it might need up to five years to give regions increased control over mining operations, but until yesterday nothing concrete had been announced.