Wednesday, August 8, 2012

Indonesian president authorises provincial role in controlling mining permits by local governments

Indonesia’s president, Susilo Bambang Yudhoyono, has announced a measure to deal with the permitting chaos of minerals exploration and mining throughout the country.

Since the implementation of the regional autonomy law of 2001, local governments (cities and regencies) have had the main responsibility to issue the permits - between January 2001 and January 2009 only to wholly Indonesian-owned entities and since the Mining law of 2009, to foreign-owned companies as well. Provinces were only involved if a tenement crossed over local government borders and the central ministry if the tenement crossed over provincial borders.

The result is about 10,566 permits issued over the period, only about 4,626 of which pass a basic ‘clean and clear’ test on correct documentation and avoidance of overlapping areas.

The president fingers the local governments for the mess, and to a degree this is true. The lack of trained human resources available to local government at the start of the massive 2001 decentralisation process plus endemic institutional corruption have taken their toll.

However the failure of the central government’s ministry of energy and mineral resources to promptly issue suitable post-decentralisation regulations and guidelines and to monitor and supervise the local governments has been documented.

The national parliament has also played a role: delivering a flawed decentralisation law and then failing to make clear adjustments in its 2009 mining law (despite 10-years in the making). Suffice to say, local government leaders, taking advantage of regulatory bottlenecks and lack of supervision, have raised substantial informal fees from exploration and mining and have become a ‘well-resourced’ influence over many members of the national parliament.

The co-coordinating ministry for the economy should also be mentioned. Its inability to deal with competing land-use claims and to ensure alignment of separate ministry laws and regulations has seen the forestry department emerge as a power-broker in key permitting areas of exploration and mining activity -- with resulting opacity and excessive delays in procedures and mounting informal costs.

Provinces’ position and responsibilities to be strengthened

The president’s solution is one that has been presented to him and his predecessor, Megawati Soekarnoputri, for a decade by experts and annually the provincial governors themselves: “give governors, as the heads of each provincial government, broader oversight authority over regents or mayors in the issuance of new mining permits.”

It doesn’t require immediate constitutional or legislative change. Although provincial governors are now directly elected by provincial residents and report to provincial parliaments, they are also the representative of the president in their province. Their dual position is a ‘no-brainer’ for monitoring-supervising-enforcing central government laws and regulations while remaining close to the communities affected by mining.

Implementation requires the president and the central government to authorise the governors to carry-out the required activities on behalf of the central government. It is how decentralisation should have worked – before the central government and parliament felt threatened by the prospect of powerful provinces – and it’s been noticeable that new legislation in other sectors has quietly and gradually begun the claw back of responsibilities to the provincial level.

Provinces advocating and preparing for enhanced role

There is always the danger that provinces will just add a new layer of complexity to the management and cost of exploration and mining, but at least the arrangement will bring Indonesia into international norms for sub-national involvement.

The strengthening of provincial expertise should see a progressive alignment of the provincial governments’ spatial planning powers with the careful delineation of mining and other land-uses necessary to make the proposed tenement tendering process workable. As well, the responsibilities of mine inspectors could be far better and more economically utilised at the provincial rather than local government level.

As always, the devil is in the fine print … but at least the provincial governments have had this concept through and presented collectively by APPSI, the association of provincial governors.

Likewise, the heads of the provincial government mining agencies (kepala dinas pertambangan) have had their ADP-ESDM-PI, the association of provincial energy and mineral resources agencies, active since 2006.

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