Monday, 19 May 2014


Speaking about the new government after the general elections in 2014, the Indonesian Mining As­sociation (IMA) hopes that there will be a strengthen­ing and convergence of mining policy. That is, Article 33 paragraph 3 of the Constitution, which reads "The earth, water and the riches contained therein shall be controlled by the State and shall be used for public welfare" must be clear and unequivocal. The most obvious error in the interpretation of Article 33 para­graph 3 is the imbalance of divestment percentage ratio. Divestment requirement in oil and gas sector is only 10 percent, while mineral and coal 51 percent. "The imbalance is only one of the errors of the appli­cation of Article 33 paragraph 3 of our Constitution," Tony Wenas of IMA told Business News (April 25).

The imbalance and percentage of oil & gas and mineral & coal divestment occurs because there is no standard mining policy. It is the task of the new government. Whoever the president is, this should be a concern of all parties. Both investment and divest­ment activities have a high risk. The involvement of state-owned enterprises and state shareholding in both sectors is equal. Even, state-owned companies in the mineral and coal sector, such as PT Antam, continues to grow and gains profit. "Both of them (oil & gas and mineral & coal) dominates the life of the people. PT Antam also dominates various mineral products. Even now, PT Antam explores coal. But, mineral divestment is up to 51 percent, while oil & gas 10 percent. The difference is huge."

Article 33 paragraph 3 of the 1945 Constitu­tion clearly implies that all sectors, including forestry, oil & gas, and mineral & coal must be controlled by the state. All sectors must also provide benefits for the welfare of the people. But, the mineral & coal sector is distinguished from forestry and oil & gas sectors. Mineral & coal sector leads to power at the provincial/regental/city level. While, forestry and oil & gas sector leads to the central government. "Min­eral & coal licensing is handled by the governors and regents. But, forestry and oil & gas sector licensing is handled by the central government. I suspect that it is because there is a fear of foreign domination for mineral & coal. So, we hope that there is a more as­sertive, clear and focused mining policy."

Instead, IMA hopes that it is not necessary to be "paranoid" with foreigners. Even if there is a threat of foreign parties, such as the case of Churchill Mining Plc lawsuit against the regental government of East Kalimantan, there is always a solution. Invest­ment Law No. 2512007 stated that for a foreign com­pany in dispute, settlement should be done through arbitration. If local companies entered into contract with a foreign party, according to the Law, dispute settlement shall be through arbitration. "The arbitra­tion institution is considered the most neutral. So, we do not need to fear the arbitration institution. All processes, including verification, are the same as the legal system applicable in Indonesia. Party A appoint­ed arbitrator, Party B also appointed arbitrator. Then, both parties appoint an international arbitration which must be agreed upon. In arbitration, there is also an independent arbitrator as the third party."

Secretary General of the Economic Geology Society of Indonesia (MGEI), Arif Zardi Dahlius, ex­pects that the regulation should simultaneously cre­ate a conducive investment climate in the mining sec­tor. Because MGEI has been researching and see the potential of mineral resources which are abundant. "Indonesia is still the best country for mineral explo­ration. This is what we believe in the perspective of economic geology", Arif told Business News (April 25).

Regarding the regulation, all parties now dwell on the problems and the requirements of mineral pro­cessing and refining. The Government, through the Ministry of Energy and Mineral Resources, also issued Government Regulation No. 1/2014 and Regulation of Minister of Energy and Mineral Resources regard­ing follow-up of settlement of IUP (Mining Business Permit). Meanwhile, Regulation of Minister of Trade No. 4/2014 on The Provisions on Exports of Pro­cessed and Refined Mining Products also burdened the business world. Regulation of Finance Minister No. 6/2014 on the Application of Export Goods Sub­ject to Export Duty and Tariff is also similar but not the same. So that various stakeholders, particularly employers and the government, feel the need to keep looking for a solution. "The application of the regula­tions, such as regarding export duty, can be counter­productive for export. We think that this must be a common concern."

The Director for Minerals at the Ministry of Energy and Mineral Resources, Suhendra Dede Ida, said that the Mineral and Coal Law No. 4/2009 is already clear and will provide benefit to the people's welfare. "We provide value added from mining prod­ucts that we cultivated", Dede told Business News.

The company is still allowed to do export if the processing and refining of minerals takes place in the country. Processing and refining will involve local companies, due to the domino effect. "Mining sector continues to transform with its comparative advan­tage. Foreign companies that make investment will also involve the domestic manufacturing industry. So there is always a comparative advantage." (E)

Business New - April 30, 2014

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