[Kabar-indonesia] 2 of 2: Business Briefing: Indonesian Mining 2006

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-2 of 2-

Business Briefing: Indonesian Mining 2006
continues...

Restrictions on personnel  

19. What restrictions and limitations are imposed on
the use of domestic and foreign employees in
connection with mining activities?  

There are no restrictions or limitations imposed on
the use of domestic employees for mining activities in
Indonesia. Companies holding and exercising mining
rights may employ foreigners (expatriates) except for
personnel work (see Presidential Decree No. 75 of
1995). Employers must obtain a number of approvals to
employ expatriates. The expatriates must obtain the
requisite visas, residence and work permits in order
to work in Indonesia.

Restrictions on processing  

20. What restrictions or limitations are imposed on
the processing, export or sale of metallic minerals?  

There are presently no mandatory restrictions to or
limits on the processing, export or sale of metallic
minerals mined in Indonesia by KP holders although
exploitation KPs may, and certain COWs do, require
contractors to process minerals within Indonesia if
economically feasible. Mining rights holders normally
produce concentrates from minerals mined. Regional and
local development obligations of COW contractors
impose the need to maximise employment of Indonesian
nationals and otherwise enhance development and this
can be a factor in determining the extent to which
minerals will be processed in Indonesia.

Restrictions on funding  

21. What restrictions or limitations are imposed on
the import of funds for mining activities or the use
of the proceeds from the export or sale of metallic
minerals?  

Indonesia does not have any foreign exchange controls.
There are no restrictions or limitations on the import
of funds for mining purposes (except that foreign
loans must be reported to Bank Indonesia). COWs and
other laws may require that imported funds be
deposited into special PMA accounts.

There are no restrictions or limitations on the use of
proceeds from the sale or export of metallic minerals.
There are no obligations to repatriate or use export
or sale proceeds in Indonesia.

COW contractors have specific rights to transfer funds
abroad entrenched within their COWs. The standard
article 15 of a COW permits COW contractors to
transfer abroad net operating profits, repayments of
loan principal and payments of interest on foreign
loans, allowances for depreciation of capital assets
generally applicable to PMA companies under the
Foreign Investment Law, proceeds from the sale of
shares to Indonesians, expenses for employed
expatriates and the training of Indonesians abroad,
technical assistance and licence fees.

Health and safety  

22. What are the principal environmental, health and
safety laws applicable to the mining industry? What
are the principal regulatory bodies that administer
those laws?  
 
The principal environmental laws are:

Law No. 23/1997 on Environmental Management

GR No. 27/1999 on Analyses on Environmental Impact (in
Indonesia known as AMDAL)

Minister of the Environment Decree No. 17/2001 on
Types of Business/Activities Plans Which Must Be
Accompanied with Analyses on Environmental Impact See
also MEMR Decree No. 103.K/008/M.PE/1994 for the role
of the Inspector from the DGMCG in supervising
Environment Management Plans (RKLs) and Environment
Monitoring Plans (RPLs); GR No. 82/2001 on prohibition
on discharging solids (including muds and slurries)
into water or water sources; and GR No. 18/1999 which
may apply to all tailings disposals.

The principal health and safety laws specifically
applicable to the mining industry are:

GR No. 19/1973 on Regulation and Supervision of Work
Health and Safety in Mining

MEMR Regulation No. 01/PM/Pertamb/1978 on Supervision
of Mine Dredging Work

MEMR No. 2555.K/201/MPE/1993 on Implementation of
Mines Inspection in General Mining

Joint Decree of MEMR and the minister of manpower No.
1245.K/26/DDJP/1993 on Supervision Implementation of
Work Health and Safety and Mining Environment

Environmental review  

23. What is the environmental review and permitting
process for a mining project? How long does it
normally take to obtain the necessary permits?  
 
Mining companies must prepare AMDAL documents
(Reference Outline, Environmental Impact Analysis
(ANDAL), RKL and RPL) (see MEMR Decree No.
389.K/0088/M.PE/95).

AMDAL documents are open to the public. Review of
AMDAL documents is carried out by either a central
review team (located in Jakarta) or a regional review
team (ie, a team designated in the relevant province).
Central review teams report to the minister and
regional review teams report to the provincial
governor for their respective approvals.

A first step is the conduct and completion of baseline
studies. This is the collection and analysis of data
on all physical aspects and issues, including climate,
flora, fauna, soils, river flows, tides, waves,
topography (land and sea), social studies on
population, health, education, employment and
religion. Community consultation is required. For a
substantial mine project, this could take at least one
year.

This is followed by submission of the Terms of
Reference for the ANDAL for approval (a process
normally requiring no less than three months),
preparation and submission of the ANDAL, RKL and RPL
(six to nine months), and approval of the ANDAL (three
months). The entire process can take between 18 and 30
months.

Closure and remediation  

24. What is the closure and remediation process for a
mining project? What performance bonds/guarantees and
other financial assurances are required?  

Reclamation obligations are defined by MEMR Decree No.
1211.K/008/M.PE/1995; minister of forestry and
plantation Decree No. 146/Kpts-II/1999 and Regulation
No. P-12/Menhut- II/2004; and DGGMR Decision No.
336.K/271/DDJP/1996. Holders of mining rights are
required to submit annual plans for environmental
management that include a reclamation plan before
commencing exploitation. Reclamation must be conducted
in accordance with reclamation plans and applicable
laws. Completion of reclamation must be confirmed by a
DEMR decision.

Before commencing exploitation, a KP holder and a COW
company must deposit a reclamation fund in a bank
appointed by the relevant government authority (ie,
central or regional). The amount of the reclamation
fund is based on estimated reclamation costs under the
relevant AMDAL.

International treaties 

25. What international treaties apply to the mining
industry or an investment in the mining industry?  
 
Indonesia is not a party to any international
conventions or treaties specifically applicable to the
mining industry. Indonesia is a party to a number of
bilateral treaties on foreign investment

Updates & Trends  

26. Have their been any updates or are there any
trends?  

Indonesia is experiencing increased interest in mining
given high commodity prices. However, the existing
legal regime imposes difficulties and delays in
obtaining mining rights. A bill to amend the Mining
Law as brought before parliament would, if enacted in
its present form, result in greater uncertainties. 

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Joyo Indonesia News Service
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