Paralysed mining sector waits on fresh faces in Jakarta – by Peter Alford (The Australian – June 25, 2014)

ANOTHER large piece of its unfinished business the outgoing Indonesian government will gift to the next administration is the 2009 Mining Law, which five months after implementation has idled most of the non-coal export minerals sector.

Shipping of copper concentrates, zinc ore, bauxite and some other bulk commodities are at a standstill; exploration activity, never robust despite Indonesia’s high prospectivity, has dried; and foreign investor interest is suspended until a new administration clarifies its intentions on the Mining Law.

No significant issue that was in contention when the law was activated in January, four years after the deceptively simple legislation was passed, has been settled.

Both presidential candidates, Prabowo Subianto and Joko Widodo, have endorsed the Yudhoyono administration’s principle of compulsory domestic secondary processing of non-coal mine ­exports. (Coal, which usually ­accounts for more than 85 per cent of Indonesia’s mineral commodity export revenues, was excluded from processing requirements during tortuous negotiations over regulations to give the law teeth.)

The candidates also support renegotiation of contracts of work (CoWs) — the Suharto-era individual agreements under which existing major projects were developed, running 10 to 30 years and renewable, covering corporate taxation, royalties, production leases and foreign divestment timetables — to make the projects comply uniformly with the 2009 Mining Law.

The law’s export provisions are now functional, in the sense regulations are established, but also currently non-functional, in the sense that very little permitted export activity is happening, though ore smuggling is probably a much livelier story.

This stasis has not been for the want of effort by Chairul Tanjung, recently installed as Economics Co-ordinating Minister. His predecessor, Hatta Rajasa, who ­resigned to become Mr Prabowo’s running mate, bears a fair share of responsibility for the law’s bungled implementation.

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