January 13, 2012 / 11:24 AM / in 8 years

REFILE-UPDATE 2-Indonesia's president orders mining permits review

(Refiles to add dropped word “resources” in 4th paragraph)

JAKARTA, Jan 13 (Reuters) - Indonesia’s President Susilo Bambang Yudhoyono has ordered a review of all mining permits issued by local governments in an attempt to improve transparency and accountability in the sector, the cabinet secretary office said on Friday.

The president set a December 2012 deadline for the energy ministry to complete the task, working with the domestic affairs ministry, the justice and human rights ministry and all local governments.

“President (Yudhoyono) has ... ordered improved monitoring of operations in the mining sector so that it is accountable,” said a statement by the cabinet secretary’s office. The order was signed Dec. 19 but only made public on Friday.

Indonesia contains some of the world’s richest mineral deposits and the fast-growing mining sector contributes 11.2 percent to the country’s gross domestic product. But ownership of natural resources is an increasingly sensitive political issue, especially foreign ownership.

“The government clearly regards foreign investors as having excessive influence, interests and rights in the local mining sector,” said Jakarta-based lawyer Bill Sullivan, an expert on mining regulations in Indonesia.

The Indonesian energy and minerals ministry has been drafting a rule that would by 2014 require miners to carry out minimum processing on minerals before export.

Any regulation would be part of a mining and coal law introduced in 2009 that requires miners to process coal and minerals into higher-value products before exporting them, as Southeast Asia’s largest economy seeks to boost revenue from the mining sector.

There are currently more than 100 unresolved disputes involving mine ownership or licences at the energy ministry, according to analyst estimates.

The primary motivation for the order is to ensure greater tax income from the sector and to battle illegal miners, said UBS analyst Andreas Bokkenheuser, who added the review has already started in the coal mining sector.

Indonesian coal mining association chairman Bob Kamandanu said that the review was necessary because many licensed miners are not exploring their working areas or reporting their findings. (Reporting by Olivia Rondonuwu and Michael Taylor; Writing by Reza Thaher; Editing by Matthew Bigg)

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