Decentralization of Mining Policy

However, central government has the right to overrule local government in the case of incompatible with the national and local spatial planning or overlap with mining permits already in place.

The Court actually made no significant change to the disputed Article 6 (1) of the mining law and therefore there will be little impact at the local level. The ultimate authority over WP and WUP remains in the hands of central government. The difference only lies in the process.

Previously the government decided on mining zones after consulting the local administration. Now local administrations will propose the mining zones to the central government for endorsement.

The judicial review puts the emphasis on decentralization of public policy in the mining industry. Although central government has the final say, the process comes from the bottom. Central government cannot now make any decision without involving the local government and without recommendations from local governments.

The verdict has changed the procedure from top-down (mining zones determined by central government after consulting local administrations) to bottom-up (the central government approves mining zones chosen by local administrations).

Centralization and decentralization of mining authority has always been contentious. In the New Order era, centralization was the policy choice. Jakarta held authority over mining for strategic commodities, while provincial governments held the authority over non-strategic commodities and regencies/municipalities did not have any authority at all. Since the inception of regional autonomy, policymaking and implementation has shifted to the local level.

This power shift can be seen in Mining Law No. 4/2009, in which the signing of contracts of work, mining concessions and coal contracts of work is no longer monopolized by the central government. The law attempts to keep a balance between the principles of national interest, benefits to society, business certainty and decentralized management.

The law strengthens state authority to regulate and monitor the mining businesses. The law changes the contract regime to a licensing regime. WP emerge as the basis of permit issuance. The central government sets WP, and permits in the regions need to comply. Local governments will be closely monitored when awarding licenses this way.

The permit regime is simpler. Previously, there were six different types of mining concessions, but now, there are only two: exploration and production. Business players--domestic and foreign--have equal opportunities in the licensing process through the open auction mechanism.

This new policy gives much more clear directions for mining decentralization compared with previous one (Law No. 11/1967). Under Law No. 4/2009, local governments have more space and the line of authority becomes clearer.

The central government only has control over: (a) national policies, (b) rulemaking, (c) standard setting/ guidelines, (d) national licensing system, (e) decision over WP.

Beyond that, the authority (over licensing) between the central and local government has the same substance and only differs in the scale of areas covered.

Regencies/municipalities issue licenses if the mining area falls entirely into their own jurisdiction and sea areas up until 4 miles from the shore.

Provinces are the authority if the area crosses regencies or municipalities and/or sea areas four to 12 miles from the shoreline. Central government deals with areas which cross provinces or those more distant from the shoreline.

What must succeed is that the above mentioned change in the mining law works at the implementation level.

Horizontal coordination across sectors and the involvement of local governments in implementation regulations needs to start now. Local governments have to work harder to be ready to manage licenses and monitor activities in the field.

For me, implementation is more important than policy changes. Local governments cannot be allowed to arbitrarily assign thousands of licenses that violate good mining practices. According to government data, 5,940 out of 10,566 permits (56 percent) issued by local governments in the last 10 years are not clear-and-clean.

Central government previously mapped WP and WUP as the basis for regions to issue permits. With the recent court decision, the process is reversed. It is local government which is required to map WP and WUP. Central government only has to respond with verification and giving approval/ rejection of the recommendation.

We need consistency in issuing regulations and effective coordination between the central and local governments. If we don’t have that, regardless of judicial reviews, we will continue to face a myriad of classic problems in mining: Bad practices, power struggles between the central and local governments and overlapping legal permits or illegal permits, etc.

Writer Robert Endi Jaweng
Executive Director of Regional Autonomy Watch (KPPOD), Jakarta.

---  (Source The Jakarta Post – Thursday, December 06, 2012  - Opinion) ---