Indonesia: Mining amendment may attract investment

A new arrangement in the mining bill which limits land for mining use may not spook potential mining investors, as long as the government provides legal certainty for the future of operations, an association says.

Indonesian Mining Association (IMA) executive director Priyo Pribadi Soemarno told The Jakarta Post on Monday that investors should not see the arrangement as a problem because it was just an amendment of existing practice restrictions.

“What matters for us is that the arrangement is clear-cut, which would attract investors to spend their money here. It should also not hinder any expansion plans of mining companies.”

“We don’t want to see local administrations issuing new mining permits without coordinating with the central government. This could lead to overlapping mining rights,” Priyo said.

Presently, the size of a mining concessions is determined through negotiations between investors and the central government.

In some cases, however, local administrations intervene, which can lead to legal uncertainty.

Under the bill, which is currently being deliberated by lawmakers, the central government is authorized to set up the maximum size of concessions and local governments must comply with the decision.

“The (central) government will be entitled to set the maximum limits of land for use in mining operations,” said Airlangga Hartarto, chairman of the House of Representatives’ Commission VII for energy and mineral resources.

Under the bill, areas for a metal exploration would be limited to a maximum 100,000 hectares, while exploitation would be limited to 25,000 hectares.

For non metals, each company would be entitled to acquire a maximum of 25,000 hectares for exploration and 5,000 hectares for exploitation.

For stone minerals, a companies would be provided with a maximum of 5,000 hectares for exploration and 1,000 hectares for exploitation.

Coal miners would get a maximum of 50,000 hectares and 15,000 hectares for exploration and exploitation respectively.

The arrangement would supposedly help reduce illegal mining as it would limit concession sizes for individual, group and cooperative miners, which would be allocated a maximum of 1, 5 and 10 hectares respectively.

Airlangga said the sizes of concessions could not be amended until mining operations licenses expired.

“Or investors could set up new companies to acquire the additional concessions,” he said, adding that the more firms that did so, the more the government would stand to gain from corporate and value-added taxes.

The new arrangements were part of the government’s move to enhance controlling mechanisms for mining based on an economic scale, Association of Indonesian Mining Professionals chairman Irwandy Arif said .

“The regulations will also differentiate which projects are owned by big mining companies and those owned by individuals or groups,” Irwandy said.

Source