Indonesia's new coal mining law may clear up uncertainties
After three years of wrangling, the Indonesian Parliament is set to ratify its new coal mining law.
Posted: Tuesday , 16 Dec 2008
JAKARTA (Reuters) -
mineweb.com
Indonesia's parliament is set to pass a new law on coal and mining on Tuesday that promises more certainty for investors but may not be enough to attract major new foreign investment to exploit rich mineral resources.
Government officials say the new law would boost revenue from the mining sector as Jakarta is keen to gain greater control of its natural resources.
Factions in a parliamentary panel last week finally resolved differences over the bill, after more than three years of wrangling that created uncertainty for miners looking to invest in Indonesia, such as Newmont (NEM.N) and Rio Tinto (RIO.L).
Tuesday's meeting could, in theory, see a full vote on the bill in parliament, although the head of a panel of lawmakers said he expected the bill to be approved without one.
"I don't think there will be a vote. I think the law will be accepted (by all factions)," Agusman Effendi, chairman of the panel that discussed the bill, told Reuters.
Several leading international mining firms, including Freeport-McMoran Copper & Gold (FCX.N), already have operations in Indonesia, which has some of the world's largest deposits of gold, tin, coal, copper and nickel.
But some investors have questioned whether the new law will do much to help attract fresh investment due to contentious items such as dropping the current licensing via a contract of work to replace it with mining permits running for shorter periods.
"If the new law is indeed passed in the near future, it will remove some uncertainty around what system players in the mining industry will be operating under," said Sacha Winzenried, a mining partner at PricewaterhouseCoopers.
The bill should encourage some small-scale investors to move ahead with projects, Winzenried added.
"However, there will be greater uncertainty around proposed large-scale projects as the new law does not offer the long-term protection of the contract of work system for large, long-life projects which require significant investment."
The new law will require investors to process all mining products into metal locally, whether by setting up their own smelters or by using others, a requirement investors fear would inflate investment costs.
Existing Indonesian mining contracts would be upheld, but contractors would have five years to comply with the new rule, panel chairman Effendi has said.
The new coal-mining law, which replaces a 41-year-old mining law, had been held up as lawmakers battled to decide whether the law should cover existing deals, or just new ones.
(Reporting by Fitri Wulandari and Muklis Ali, Editing by Ed Davies and Clarence Fernandez) |
