Indonesian Update

Indonesia Update

8th June 2006

Mining group objects to new forest guidelines

The Jakarta Post, Jakarta

31st May 2006

The debate over whether to protect the country's forests or promote investment in the mining sector has reemerged, with mining firms now up in arms over Forestry Ministry guidelines that they claim are hampering their operations.

Association of Indonesian Coal Producers chairman Jeffrey Mulyono said the guidelines -- issued through Forestry Minister Regulation No. 14/2006 -- only caused unnecessary problems for mining firms, and could deter future investment in the sector.

Jeffrey, who also chairs the Indonesian Mining Association, slammed the requirement that a mining firm intending to operate in a forest would have to provide a "compensatory site" twice as large as the mining concession they intended to lease. Those failing to comply with the requirement within two years would be subject to an additional royalty of 1 percent of production value.

It is this additional royalty that the mining firms particularly object to, with an executive of coal miner PT Interex Sacra Raya, Frans Nongka, saying it could amount to "thousands of times the land and building taxes imposed by the Finance Ministry, and the annual royalties that mining firms have to pay to the Energy and Mineral Resources Ministry."

Central Kalimantan Governor Teras Narang agreed with the mining firms, arguing that the regulation would only add to the cost and risk of investing in the mining sector, which many regions depended on for their development. "The regions are currently trying to pay for their own development by strengthening local revenues from business and investment. Thus, all relevant regulations need to support these efforts," he said.

Commenting on the dispute, the Energy and Mineral Resources Ministry's director general for mineral, coal and geothermal resources, Simon Felix Sembiring, said his ministry would soon discuss the matter with Forestry Minister M.S. Kaban. He said he hoped the talks would also make a distinction between production forests and protected forests that required stricter conservation guidelines.

The bitter controversy over whether mining should be allowed in the country's protected forests erupted in 2004 after the government issued Government Regulation in lieu of Law No. 1/2004, overruling the 1999 Forestry Law, which prohibited open-pit mining in protected forests. The regulation in lieu of law, which the government argued was necessary to provide legal certainty in respect of mining contracts signed before the 1999 Forestry Law was enacted, was later confirmed as the 2004 Forestry (Amendment) Law, thus allowing 13 mining firms to resume their operations within protected forests.

A challenge to the law brought by environmentalists was turned down by the Constitutional Court, although the court did ban six of the firms from operating in protected forests and ordered the rest to comply with the relevant Forestry Ministry regulations.

Indonesia's forestry and environment ministries face a tough task in conserving the country's remaining 40 million hectares of forest, the world's third largest forest area, with 2.6 million hectares being deforested each year, mostly as the result of illegal logging.

Tribes reject Freeport talks in U.S.

Tb. Arie Rukmantara, The Jakarta Post, Jakarta,

8th June 2006

Papuan tribal leaders oppose a plan by local councillors to meet PT Freeport Indonesia bosses in the United States city of New Orleans to renegotiate the company's much-criticized working contract.

Any negotiation with the executives of parent company Freeport McMoran Copper and Gold Inc. should take place in Papua, where it operates the world's largest gold mine, they said.

Environmentalists here and abroad have said Freeport Indonesia's have caused extensive damage to ecosystems in the area.

Speaking in Jakarta on Wednesday at a conference hosted by national environmental group Walhi, Amungme tribal leader Yosepha "Mama" Alomang said a meeting with the company in Papua must take place sometime this year.

The Amungme tribe holds the traditional ulayat rights in the area where Freeport's Grasberg mine operates. Representatives from seven tribes living near the Grasberg mine also attended the meeting.

"I urge the councillors not to go abroad to lobby or negotiate with Freeport bosses. I stress to everybody that every dialog should be held in Papua and involve locals who are suffering from the company's operations," Yosepha said.

"Or else, the likelihood of the company's operations being shut down will only become greater."

Yosepha won the American Goldman Environmental Prize in 2001 for her efforts to save Papua's rain forests from mining and logging.

Human rights group Elsam Papua director Aloysius Renwarin said 15 members of the Papua legislative council's special committee on Freeport planned to visit Freeport McMoran headquarters in New Orleans to convey Papuans' concerns about the company's operations.

They would also demand a fairer share of the firm's profits.

Some Rp 5 billion (about US$535,000) had been allotted from the provincial budget to fund the trip, he said.

Weynand Wattory, a member of the special committee, could not be reached for comment.

However, the secretary of the House of Representatives' working committee on Freeport, Tjatur Sapta Edy, confirmed he had been informed of the plan by Papuan councillors.

"However, every effort to renegotiate the working contract should go through us, the parliament," he told The Jakarta Post.

Renwarin said that should the councillors go ahead with the visit, "we (the House) would reject any results of the negotiations held in the U.S."

Peter Yanwarin, leader of the Komoro tribe, which claims ulayat rights over the land used by Freeport to dispose billions of tons of its mine tailings, and Timika church leader Father John Djonga said the visit would be undignified.

"They (Freeport) are the guests and we are the hosts. They are the one who should respect us by coming here and having an equal and honorable dialog," John said.

The House's working committee has expressed its desire to renegotiate the 1991 working contract signed between Freeport and the government to increase the state's shares in the company from the present 10 percent to 50 percent.

The government, meanwhile, is looking for only a 10-20 percent increase.

Freeport has repeatedly denied its operations have neglected environmental management and development objectives, saying it spent $84 million on the two areas last year.

The miner says a renegotiation of the working contract could only take place if the government and company management agreed to it.