A recent survey from Canadian think tank the Fraser Institute, which puts Indonesia among the world’s worst destinations for foreign miners to expand their business, is a clear indicator that it is time for government to fix the country’s mining mess.
The Jakarta-based Regional Autonomy Watch (KPPOD) executive director Robert Endi Jaweng said in Jakarta over the weekend the report should be a major concern to the government.
“Not only are we now the most unattractive country for the mining business, but the trend for the past few years has showed us getting worse and worse,” he said in an interview.
Indonesia may have unsurpassed mineral reserves, but legal uncertainty and other bureaucracy-related troubles could trigger a mass departure of foreign investors. Last year, the world’s largest thermal coal exporter and biggest tin and nickel ore producer, was “the worst” among the 10 least attractive countries for the mining industry, according to a survey by the Fraser Institute released on Feb. 28 this year.
Overall, from 96 countries examined by the Vancouver-based think tank, Indonesia was ranked 96th, down from 85th last year, 70th out of 79 countries in 2010 and 62nd out of 72 in 2009.
The decentralization policy is the central irritant to mining companies attempting to do business in Indonesia, with most local government figures out of control in issuing mining permits. Of 10,566 permits issued by regional administrations during the 10 years of decentralization, 5,940 (more than half) turned out not to be clear-and-clean, Robert claims.
“This kind of activity is a major problem for investors and gives a bad impression of our national investment climate,” said Robert.
The survey was distributed to approximately 4,100 managers and executives around the world with key questions including “political stability, uncertainty concerning environmental regulations and uncertainty concerning the administration and interpretation or enforcement of existing regulations”.
Other countries ranked at the bottom of the annual 2012 Fraser Institute’s survey of mining companies include Vietnam, Venezuela, Congo, Kyrgyzstan, Zimbabwe, Bolivia, Guatemala, the Philippines and Greece.
Indonesia continues to be rated the worst among investors — only better than countries such as Congo and Zimbabwe — when the correspondents were asked questions on uncertainty concerning the administration and the enforcement of current regulations.
Deputy Energy and Mineral Resources Minister Susilo Siswoutomo said the government would not back down from its 2014 aspirations on the basis of the report but would definitely examine the study. Exports of raw mineral ores will be banned from 2014 as part of a policy to strengthen the downstream
“Everyone is entitled to make their own survey but the respondents [at the Fraser’s survey] are foreign-based investors and their interests differ from our interests,” he said. “We will keep the results in mind and improve some of the shortcomings of the regulations but we will not erase the big idea to promote the added-value of our mining sector.”
Another policy to push foreign mining companies to divest a majority of their shares to local entities is also another factor in the worsening investment climate. US-based PT Freeport Indonesia and PT Newmont Nusa Tenggara (NNT) are reluctant to follow the rule.
Newly elected chair of the Indonesian Mining Experts Association Achmad Ardianto said that while Indonesia was the worst place for the mining business, it was ranked third for mineral potential.
“The government must take the bull by the horns and start listing the problems ahead of the 2014 full-ban on raw mineral exports,” he said.