Wednesday, January 20, 2010

Indonesian mining sector moots requesting a judicial review of 2009 Law

Indonesia’s mining sector business organisations plan to seek a judicial review of the 2009 Mining Law if they are unable to reach a solution with the government on an implementing decree that would limit the work that mining companies can outsource to companies not approved by the government. In October last year, Susanto Joseph, executive director of the Indonesian Mining Services Association, said the law could lead to a $750 million decline in mining industry revenue in 2010.

“We’re currently studying our options regarding the law,” Priyo Pribadi Soemarno, executive director of the Indonesian Mining Association, told Janeman Latul of The Jakarta Globe. “If our latest discussion with the government doesn’t go anywhere then I think we could ask for a judicial review.”

Article 8 of the implementing decree, states that the mining concession holder is prohibited from using affiliated companies for any service work unless it gets approval from the Department of Energy and Mineral Resources. It could mean an mining giant such as PT Bumi Resources would have to divest its contractor subsidiary, PT Dharma Henwa, if it doesn’t get approval.

Article 10, which states that “the holder of a mining concession or special mining concession must itself perform mining, processing, and refining work,” is regarded as a particularly problem because much of this work is carried out by contractors. Article 5 states that contracting work must be given to domestic companies for a first right of refusal before foreign companies can be involved.

Bob Kamandanu of the Indonesian Coal Mining Association (APBI) said mining companies had found potential loopholes in the decree. “On affiliation, I think it can be arranged as the ownership of the affiliated company could be exchanged on paper but the owner could still be the same.” he said. “It creates a headache for us because we have to think of how to overcome the regulation. I prefer the old regulation and I hope there should be some revision of the decree,” he said.

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