Forest mining permits better, but far from perfect

Anggi M. Lubis, The Jakarta Post, Jakarta | Business | Mon, June 10 2013, 11:36 AM

It has been easier for miners to dig up minerals in forests since the 2011 Forestry Ministerial Regulation came into force because the ministry is required to issue forest permits within a strict time horizon.

Miners, according to their associations, had to deal with a “lengthy, unclear procedure” before the 2011 regulation, which was revised twice last year and in February this year. Theoretically, the regulation accommodates miners, while protecting forests.

Among the important aspects of the regulation are its timeframes: 155 working days for an exploration permit and 245 working days for exploitation permit. Before 2011, there was no time limit.

“Everything runs smoothly now,” Indonesian Mining Association (IMA) executive director Syahrir Abubakar recently said.

“We rarely hear complaints from members over permit procedures now. The last one came from Kalimantan Surya Kencana [KSK] but I think the problem is settled now.”

According to media reports, gold and copper mining company KSK in Central Kalimantan received an exploitation permit in March after a three-year wait.

Acquiring a permit used to take two to five years due to the absence of a time limit, leaving permit proposals stuck in the ministry, “probably untouched”, for sempiternity.

“Should there be any problems now, it is the task of the ministries — particularly the Forestry Ministry and the Energy and Mineral Resources Ministry — to work together to solve them because miners have to obtain permits from both ministries to start operations,” he said.

Likewise, Indonesian Coal Mining Association (APBI) executive director Supriatna Sahala believes the regulations have been helpful.

“We used to find it hard to locate land to compensate for the [denuded forest] areas used for mining, but the ministry now helps us by choosing which land we need to obtain,” Supriatna said.

However, not all miners are similarly enamored with the upgraded procedure.

An executive director of a major nickel mining company told The Jakarta Post recently that he had been going back-and-forth to the Forestry Ministry to renegotiate a permit since last year, often having to deal with “petty procedures, like the company’s name”.

Hanif Rusjdi, head of an oil and gas working party at the upstream regulatory body (SKKMigas), also said an obstacle still facing investors was the requirement to provide investment compensation for existing forest concessionaires. This is mandatory for a company to acquire an exploitation permit.

He cited the example of a gas company in Riau denied a permit after exceeding its two-year principal agreement because it failed to make a deal with PT Riau Andalan Pulp and Paper.

Any company that proposes exploitation is subject to a principal agreement that has to be met in two years and can be reapplied. The agreement includes a commitment to reforest the land once the contract is terminated, to
pay for any ecosystem damage, to reforest another area outside a company’s mining operation coverage as compensation and to pay a compensation to forest concessionaires in the area.

“In the end, it still takes years for a company to secure a permit despite the time limit,” Hanif said.

Forestry Ministry secretary general Hadi Daryanto said separate permits from the two ministries were necessary to ensure environmentally friendly mining activities in protected forests belonging to the state.

“We realize that we need to improve our system to manage the conflict between economic growth and sustainable economic development and the environment,” he said.

The 2013 Doing Business report from the World Bank ranks Indonesia 128 out of 185 countries, only slightly up from 130 in the previous year, thanks to poor governance.

A survey by Canadian think tank Fraser Institute in February made Indonesia the worst out of the 96 least attractive countries for the mining industry, largely because of legal uncertainty and red-tape involved in permits, sliding down from 85th last year.

The Forestry Ministry has issued over 500 exploration permits on a total of 2.7 million hectares of forest and almost 400 exploitation permits on 386,000 hectares. The ministry issued 152 and 114 exploration permits in 2012 and 2011, compared to only 51 permits in 2010.

Mining contributed the most foreign investment to Indonesia: 17.3 percent of a total Rp 221 trillion (US$22.5 billion) foreign investment in 2012.


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