MAC: Mines and Communities

Government allows mining firms back into protected areas as investment lure

Published by MAC on 2004-03-12

Government allows mining firms back into protected areas as investment lure

Fabiola Desy Unidjaja/Fitri Wulandari, The Jakarta Post, Jakarta

March 12, 2004

The government has issued a regulation in lieu of law (perpu) that will allow 13 mining companies to resume their operations in protected forests in a bid to provide legal certainty for investors.

The decision was greeted by protests from environmental activists, who said it would open the way for the further destruction of the country's natural resources.

Coordinating Minister of the Economy Dorodjatun Kuntjoro-Jakti said it was decided during a Cabinet meeting on Thursday to issue Perpu No. 1/2004 to address the issue of mining concessions that overlap with protected forests.

"The 13 mining companies will be allowed to resume their mining activities because they have proven reserves and are economically viable," Dorodjatun said after the meeting.

He added that the decision was aimed at providing certainty to investors in a bid to increase the sluggish investment in the mining sector.

President Megawati Soekarnoputri led the meeting, which was also attended by Minister of Law and Human Rights Yusril Ihza Mahendra, Minister of Energy and Mineral Resources Purnomo Yusgiantoro and Minister of Forestry M. Prakosa.

In the country's legal system, a perpu is equal to a law and is normally issued in cases of emergencies in order to avoid the lengthy process of law making, which involves the House of Representatives. A perpu immediately takes effect and remains so until the House approves a law to replace it. The government may also propose the perpu as a bill.

The 13 mining companies to be affected by the perpu are among 22 mining firms that appealed to the government to be allowed to resume their operations in protected forests following the implementation of Law No. 41/1999 on forests banning open-pit mining in protected forests.

The remaining nine companies will not be given licenses to resume their mining activities in protected forests because no proven and economically viable reserves have been found in their areas.

The 22 firms received contracts from the government several years ago before the law on forests came into effect, and their concession areas were not designated as protected forests at the time the contracts were signed.

The names of the 13 mining companies affected by the perpu was not available on Thursday.

Lambock V. Nahattands, deputy state secretary for legal affairs, said the government regulation basically added a new article to Law No. 41/1999 on forests.

"The new article, 83a, says all mining licenses and agreements in forests that were in place prior to the imposition of Law No. 41/1999 will remain in effect until the agreement or license expires," Lambock said.

He said the perpu would be submitted to the House as a bill, and that the government would issue a presidential decree on the 13 mining companies.

Environmental activists who had fought to prevent the issuance of the licenses protested the decision.

Longgena Ginting, executive director of the Indonesian Forum for the Environment (Walhi), said the government not only violated its own law but also the global commitment to stop the destruction of biodiversity.

"We regret the decision. It is the legalization of the destruction of natural resources," Longgena told The Jakarta Post, adding that Walhi would take legal action against the decision and hold an international campaign to protest the move.

Indonesia to issue decree to boost mining sector


March 11 2004

JAKARTA, - Indonesia will issue a government decree allowing 13 mining firms to continue operations despite violating the country's forestry law, government officials said on Thursday.

The move is seen aimed at boosting the mining industry after a controversial forestry law banned open-pit mining in forested areas, forcing some firms to suspend projects even though the statute has generally not been enforced.

Among those affected by the law have been the nickel operations of PT Inco, controlled by Canada's Inco Ltd in South Sulawesi province, and Freeport McMoRan Copper & Gold Inc. and its huge operations in Papua province.

"The cabinet has agreed that the government will issue a decree to revise the forestry law. After the decree, the president will issue a decision on which mining companies will be able to continue operations in Indonesia," chief economics minister Dorodjatun Kuntjoro-Jakti told reporters.

The revised decree would state that mining contracts approved by the government before the forestry law was ratified in 1999 could remain in effect even if they conflicted with forestry rules, Justice Minister Yusril Ihza Mahendra said.

Forestry Minister Muhammad Prakosa said President Megawati Sukarnoputri would announce the decision soon and it would allow 13 mining companies, including Gag Nickel and Nusa Halmahera, to continue their operations.

Nusa Halmahera Minerals, majority owned by Newcrest, had recently suspended gold mining activities in the North Moluccas because the forestry law forbids that area to be mined, an Indonesian mining official has said.

Gag Nickel, on Gag Island in Papua province, has a contract approved before the law, but has yet to start operations.

Indonesia has said mining firms, mostly foreign, could have grounds for suits against the Indonesian government worth $31.5 billion for violation of contracts after ratification of the forestry law.

Mines and energy minister Purnomo Yusgiantoro has said 22 mining firms with Indonesian operations violate the forestry law.

The law's defenders say Indonesia is rapidly losing tropical forests from illegal logging and a variety of other factors, including mining, and the legislation is needed to protect the forests.

Indonesia nickel and gold producer PT Aneka Tambang Tbk (Antam) was also affected by the law, postponing the development of nickel resources on Gag island.

Mining analysts have said the forestry law was so broad that should it be enforced fully it could apply to virtually all mining operations in Indonesia.

Indonesia has an abundance of coal, gold, copper, nickel and tin along with natural gas and oil. Most of the metals and some of the energy resources are located in the eastern part of Indonesia.

Industry executives have said it would be highly unlikely long-standing projects would be affected, but the law was a worry for firms in the early production or exploration stages.

Copyright 2004, Reuters News Service

Indonesia to honour mining contracts

By Shawn Donnan,

March 12 2004

Indonesia has cleared the way for the legal resumption of open-pit mining in the archipelago's protected tropical forests, removing what the mining industry had dubbed a big hindrance to badly needed investment.

Mining in protected forests - those that receive a legal level of protection one level down from national parks and conservation areas - was outlawed by a 1999 forestry law. But in what critics saw as a legislative blunder, the law did not exempt more than 150 mining concessions in, or spilling into, protected forests where contracts were already in place.

That exposed Indonesia to the possibility of being sued for breach of contract and left the operations of local and international mining companies in legal limbo.

It also served as a much-cited example of the kind of inconsistent treatment foreign investors say they often receive in Indonesia. While the country's economic ministers sought to woo investment in the country's resources sector, forestry officials fought against honouring the mining concessions in protected forests.

In a long-awaited move, President Megawati Sukarnoputri and her cabinet on Thursday issued an administrative order allowing companies with contracts in place before 1999 to go ahead with their work.

"We are giving a signal to the mining investors that we are doing the best we can to create a conducive climate," said Purnomo Yusgiantoro, Indonesia's mining and energy minister. The ruling, he said, would in the short-term apply only to 13 companies with operations already in place and a maximum of nine others with exploration contracts.

The minister said he hoped the decision would boost confidence in Indonesia and help turn round a protracted downturn in government mining revenues. According to the government, mining revenues fell to Rp1,070bn ($124m, £69m, €101m) last year, the sixth straight annual fall.

Environmentalists blamed the cabinet's decision on foreign intervention. "The government is undermining and violating its own law. It is legalising deeper forest destruction," said Longgena Ginting, executive director of environmental group Walhi. But Paul Coutrier, executive director of the Indonesian Mining Association, said it would free up some $2.5bn (£1.39bn, €2.04bn) in mining investment, by doing the equivalent of inserting a "transition clause" in the forestry law allowing existing contracts to be respected. Additional reporting by Taufan Hidayat.

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