February 12, 2020 / 8:54 AM / 6 days ago

Mining-reliant Indonesia targets red tape with new law

JAKARTA (Reuters) - Indonesia will take control of new mining permit issuance under a proposed new law which is part of government efforts to boost investment by removing red tape and reducing regulations.

FILE PHOTO: A truck passes through a tin mining area of Indonesia's PT Timah in Pemali, Bangka island, Indonesia, July 25, 2019. REUTERS/Fransiska Nangoy/File Photo

The Southeast Asian country, the world’s biggest thermal coal and tin exporter as well as a top producer of minerals such as nickel and copper, has been trying to squeeze more out of mining to boost economic growth and jobs.

Local governments control some licences at present, which some experts and investors say can complicate mining.The government is also seeking to remove a 15,000-hectare (37,000 acres) limit for special mining licences, known as IUPKs, for coal. The size of the area for coal, as well as other minerals, will be decided by the government based on a miner’s work plan, a copy of the draft bill seen by Reuters shows.

The “Job Creation” bill also proposes removing an obligation on miners to supply the domestic market and royalty charges if they create downstream value by processing mineral ore and coal.

It is one of several of President Joko Widodo’s “omnibus laws” which group together changes in unrelated legislation to allow parliament to vote on them in a single swoop.

Widodo has asked lawmakers to finish debating the bill and another omnibus law on taxation within 100 days. His ruling coalition controls nearly 75% of the seats in parliament.

The bill will also loosen politically sensitive labor laws and cut maximum severance pay to 17 from 32 months, while ordering firms to give cash benefits upfront to appease unions.

Foreign investors often cite regulatory uncertainty, bureaucratic hurdles and strict labor rules among their top concerns about Indonesia.

Details of the bill had up to now mostly been kept under wraps, but trade unions have already criticized it and hundreds of workers rallied at the front gate of the parliament building on Wednesday in protest.

The bill proposes opening investment in all business sectors except for six, such as chemical weapons and narcotics, though this would be covered by under another government regulation.

Airlangga Hartarto, coordinating minister for economic affairs, on Wednesday vowed “to promote the bill across Indonesia ... so that society knows what is being discussed, decided and the impact for the national economy.”

Economists say Widodo’s laws could boost growth in the second half of 2020, assuming timely approval by parliament.

Growth slipped to its slowest in three years in 2019, at 5.02%, and is likely to be pressured further by an economic slowdown in China due to the coronavirus outbreak.

Additional reporting by Maikel Jefriando; Writing by Gayatri Suroyo and Ed Davies; Editing by Kim Coghill and Alexander Smith

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