MARKET DEVELOPMENT
Jakarta May Make Mines
Jakarta May Make Mines
6/6/07 (The Wall Street Journal) JAKARTA, Indonesia -- The government may require mining companies to put aside part of their production for the domestic market to ensure supply at affordable prices, said Robert Tambunan, an official at Indonesia's Ministry of Energy and Mineral Resources.
The requirement would ensure that Indonesia has enough mineral deposits for domestic use and that soaring metal prices in global markets won't put metals such as nickel, copper and tin out of reach of ordinary consumers, he said.
"Mining companies may be required to allocate a percentage of their [production] for the local market as a means of preventing local prices from skyrocketing," said Mr. Tambunan, who is in charge of drafting contracts for mining investments.
A similar system is already in place for Indonesia's crude-palm-oil market to quell inflation fears as soaring palm-oil prices have threatened to raise the price of staple cooking oil.
Under the system, palm-oil producers have to allocate part of their crude-palm-oil output for the local market while a government-set price has been imposed on cooking oil to prevent the staple from being priced outside the means of most Indonesians.
The regulating system for the mining industry is being debated in Parliament and will likely be part of the country's new mining laws, Mr. Tambunan said.
Indonesia's proposed new mining laws, which have yet to be endorsed by Parliament, have caused some controversy as mining companies have complained the laws may work against them.
They fear that the mining-license system mandated under the proposed legislation will put control over their investments in the hands of largely inexperienced provincial governments.
They want the current system, regulated by the central government, to continue.
Mining companies have also complained that the content of the new mining law lacks clarity, saying they prefer to wait until the legislation is passed before committing themselves to any major investment in Indonesia.
Mr. Tambunan denied that the new mining law would hand back mining concessions to the state as part of the drive to ensure supply.
Indonesia, which is rich in copper, gold and nickel, has lagged behind other mineral-rich countries in luring foreign investment and has mostly missed out on the current commodity boom as prices of metals such as nickel and tin scale new highs.
Although it has sizable mineral resources -- estimated at 6.7 billion metric tons -- the country has developed no new major mines since the 1997-98 economic crisis.
Indonesia hopes to attract $22 billion a year in mining investments, but research by PricewaterhouseCoopers showed that mining companies spent only $7 million exploring new Indonesian deposits in 2005, that figure remaining unchanged for the past five years.
The requirement would ensure that Indonesia has enough mineral deposits for domestic use and that soaring metal prices in global markets won't put metals such as nickel, copper and tin out of reach of ordinary consumers, he said.
"Mining companies may be required to allocate a percentage of their [production] for the local market as a means of preventing local prices from skyrocketing," said Mr. Tambunan, who is in charge of drafting contracts for mining investments.
A similar system is already in place for Indonesia's crude-palm-oil market to quell inflation fears as soaring palm-oil prices have threatened to raise the price of staple cooking oil.
Under the system, palm-oil producers have to allocate part of their crude-palm-oil output for the local market while a government-set price has been imposed on cooking oil to prevent the staple from being priced outside the means of most Indonesians.
The regulating system for the mining industry is being debated in Parliament and will likely be part of the country's new mining laws, Mr. Tambunan said.
Indonesia's proposed new mining laws, which have yet to be endorsed by Parliament, have caused some controversy as mining companies have complained the laws may work against them.
They fear that the mining-license system mandated under the proposed legislation will put control over their investments in the hands of largely inexperienced provincial governments.
They want the current system, regulated by the central government, to continue.
Mining companies have also complained that the content of the new mining law lacks clarity, saying they prefer to wait until the legislation is passed before committing themselves to any major investment in Indonesia.
Mr. Tambunan denied that the new mining law would hand back mining concessions to the state as part of the drive to ensure supply.
Indonesia, which is rich in copper, gold and nickel, has lagged behind other mineral-rich countries in luring foreign investment and has mostly missed out on the current commodity boom as prices of metals such as nickel and tin scale new highs.
Although it has sizable mineral resources -- estimated at 6.7 billion metric tons -- the country has developed no new major mines since the 1997-98 economic crisis.
Indonesia hopes to attract $22 billion a year in mining investments, but research by PricewaterhouseCoopers showed that mining companies spent only $7 million exploring new Indonesian deposits in 2005, that figure remaining unchanged for the past five years.