Indonesia Passes Controversial Mining Law

Indonesian legislators during December ended years of deliberation to endorse a contentious mining bill that includes provisions on revising the permit system and advocating a review of all existing contracts, according to the Jakarta Post. Under the bill, the permit system will take the form of a license to replace the current contract of work (COW) scheme—something business interests have objected to, saying licenses were more easily revoked than a binding contract.

It also stipulates that, while the government will honor the sanctity of all existing contracts, their terms and conditions will be subject to a review to bring them in line with the new rules within a year of the law’s enactment by the president. The Indonesian Mining Association, a group of mining firms operating in the country, and the Association of Indonesian Mining Professionals (Perhapi) said the bill is unfriendly to businesses and could hinder investment in the sector.

The new law, which takes effect within three months, gives greater power to local governments and requires mine operators to process raw materials locally or set up smelters within five years. The new mining law reverses a contract system put in place by former Indonesian president Suharto, which favored multinational mining companies with long-term mining contracts.

As featured in Womp 09 Vol 01 -