Sunday, 25 May 2014


The Ministry of Energy and Mineral Resources estimated the transition period for developing innovative mining industry might take 5 to 10 years until the business climate turn condusive for exporting processed minery products. After the transition period, the Government and companies might continue to enhance processing of ores and innovative to produce derivatives products. “In the meantime we are still improving our capability to process the primary product first.”The Director General of Mineral Resources, R. Sukhyar disclosed to BusinessNews sometime ago.

The Ministry admitted that implementation of Law No 4/2009 on Mineral and Coal [Minerba] was not easy task. There were piles of homework to be done including the plan to manage Mining Permit. The Ministry responded positively to the plan of Corruption Eradication Commission [KPK] to control. KPK had entered to 12 provinces rich in mining resources. “So far KPK had entered only in 5 Provinces. Many IUP issuance process are corruption prone.”

IUP management was not intended to take over authority from provincial government by central government. The Ministry saw management as an effort of synchronization and effective coordination between the central and local government. “Regencies would improve IUP procedure which was problematic, and report it to the Central Government. We would maintain dialogue with the Regents. We would observe directly afield, but each time there is mining activity, space planning is inadequate.”

Besides the social factor was also affected by height excavation activities. The higher the mineral content, the more potential the production output. Workers from other regions kept coming. Such might create envy. “This must be minimized. When there is mining activity we must anticipate. We must arm the local people with skill, so they can anticipate. We train them, we get them prepared. Local content in labor is most important. We enforce human resources so we can create a productive investment climate.”

Challenges in investment in mineral and coal mining must be responded with improvements such as by issuance of the Ministrial Regulation [PMK] like the export tax incentive etc. Investment must be in the spirit of Article 33 Paragraph 3 1945 Constitution which said: “The earth, water and natural wealth including Minerba is for people’s prosperity.”

The people saw that the value addition principle was not just applicable to the minerba sector. The value addition concept had been pioneered since 20 years ago. In the year 1990 there were worries over forest destruction. “then the Government prohibited export of logs, and wood industry mushroomed. They must cut the log before exporting,”

Besides the wood industry the Government of RI was once insistent about applying value-addition principle on palm and cacao products. Many palm and cacao growers had to stop production. “The principle is: if we want to stay healthy we must swallow bitter medicine, hell bends to glory. If mineral resources ran out someday, we must buy from abroad. Millions of dollars of forex would be drained only to import processed mineral products”

Law No. 11/1967 on mining defined three mining categories as strategic products. The Law also specified implementation of the Value addition principle. So many foreign investors like PT Freeport, PT Vale [Inco] were obliged to build smelters, but the Government had not controlled implementation of Law No 11/1967 well. Thereafter the Government made Law No 4/2009 on mineral-and-coal mining [Minerba] “We made the Law and it took ½ years to complete because anything that related to resources is inseparable from the philosophy of politics, economy, and culture.”

Law No. 4/2009 clearly underscored the importance of value addition while the Central Government would continue to finalize the details. Soon regional leaders [governors, regents] could not issue permit as they please. “There is challenge for us to minimize export of raw materials. Value must be added by infra structure and banking. There is pro and contra to every Regulation including the Minerba Law, but that’s the risk.”

Coal content in Indonesia’s earth was not too big, i.e. 2% - 3% of the entire world’s reserves. Today price of coal in the world’s market was down, so again businessplayers were urging the Government to review the plan to increase royalty. For the most part, around 65% of Indonesia’s coal reserves was of low quality, the rest were of medium and high quality. Export of coal was once the state’s source of income. “The peak of world’s coal price was USD 140,000.- now only USD 70,000. The Government must develop conversion plan, to convert coal into gas. Many companies had set forth proposals for the conversion plan. We must offer fiscal incentive for the plan.” (SS)   

Business New - May 2, 2014

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