Sub-National Mining Licensing Framework Paper and Application to Two Kabupaten (Districts) in Indonesia- Bangka and Kutai Kartanegara (Kukar)

Preliminary Draft

for Comment and Discussion

Sub-National Mining Licensing Framework Paper and Application to Two Kabupaten (Districts) In Indonesia- Bangka and Kutai Kartanegara (Kukar)

Preliminary Draft for Comment and Discussion1

May 22, 2012 Background and Purpose

While in most countries “mineral rights”, that is the rights to explore for and/or extract

minerals from the ground are vested in the national government, there are a small number

of countries where the mineral rights are vested in sub-national government authorities.

Such countries include Argentina which has a long established system of decentralized

government and Indonesia which has introduced decentralization since 1999.

The purpose of this of this Sub-National Mining Licensing Framework Paper is:

first, to develop a framework for examining the potential benefits and vulnerabilities

of mineral licensing taking place at the sub-national rather than the national level;

second; to apply the framework to two districts in Indonesia; and

third: to propose possible policy recommendations for Indonesia.

The proposed framework consists of three main building blocks, namely the Performance of

the Mining Industry; the Performance of the Government Mining Institutions that oversee

the mining industry; and the Mining Regulatory Framework. These are now described in

detail.

A: The Proposed Framework For Examining Sub-National Mineral Licensing

First Building Block - Performance of the Mining Industry

The Framework starts by examining the performance of the mining industry looking at three

main criteria of a well-functioning mining industry. The first criterion is how much of the

industry is operating legally and how much new investment is being attracted? The second

criterion is whether the industry is operating in line with good international health, safety,

environmental and social practices and in compliance with all relevant laws and regulations.

The third criterion is whether the industry is paying mining fees, taxes and royalties or not.

A well-functioning mining industry will have mining operations and activities that are

properly licensed, environmentally and socially responsible and tax and fee paying. This is

generally the case for medium and large-scale operations but may not be the case for

smaller-scale and artisanal operations. It will also attract investment from a range of good

quality mining companies.

1 A draft paper prepared for Revenue Watch by John Strongman and Ambasari DC for the RWI Jakarta Seminar

May 22-23 2012

The potential benefits of sub-national licensing are that local officials should know the local

area better than national officials and be able to processes licenses more promptly than a

local licensing office that is part of a national agency. However, a major vulnerability of sub-

national licensing compared with national licensing is that illegal mining may flourish. A

second vulnerability is that mining may take place with more harmful environmental and

social impacts, including mining in protected areas. A third vulnerability is that mining may

cause unresolved conflict with nearby communities due to conflicting land uses, loss of land

and livelihoods and/or damage to culture –especially in the case of Indigenous Peoples.

While it is possible that illegal or unacceptable mining may take place because of

inadequacies in the mining law and regulations (for example no provision for artisanal

mining licenses) more often than not it is because either mining operations are evading the

authorities due to a lack of enforcement capacity or because they are flouting the law with

the complicity of local authorities.

Generally speaking most medium and large-scale legally licensed operations will be in

compliance, or working towards compliance, with licensing, safeguard and fiscal laws and

regulations. The question is whether or not this will also be the case for licensed small-scale

and artisanal operations. Almost certainly any illegal operations will be polluting, unsafe and

avoiding paying mining related fees and taxes.

Second Building Block - Performance of the Government Mining Institutions

After examining the performance of the mining industry, the next building block examines

the performance of the government mining institutions in overseeing and administering the

industry and implementing the mineral licensing system. There are four main authorities to

consider as follows:

a Mineral Licensing Office which is responsible for overseeing and administering mining rights and collecting industry production and performance data

a Granting Authority which grants and signs the mining right in the form of a license or contract

a Mining License Cadastre (record keeping) Office which is the repository of all exploration and mining licenses and is responsible for ensuring that licenses do not overlap and for making license and licensing information available to interested parties

a Mines Inspection Agency which supervises mining activities at the mine sites including compliance with license conditions and obligations such as occupational health and safety requirements.

Other agencies include the Geological Survey which holds the geological information for the

country and which may also undertake geological survey work; and other units within a

Mining Ministry or Mines Department which may include an Artisanal and Small-scale

Mining (ASM) Unit, an Environmental Unit; a Social/Community/Gender Unit; a Policy Unit;

an Economics Unit; and an Investment Promotion Unit.

Well-functioning mining agencies will process licenses and undertake site inspections in a

competent, efficient, non-corrupt and timely manner, with stable and predictable

operations and a willingness and capacity to engage with stakeholders. They will be

adequately resourced with modern information management systems and equipment;

sufficient, well experienced and well skilled staff; and an adequate budget including the

recurrent funding needed for a strong on site presence.

Well governed licensing application and approval procedures will be fully transparent and

secure with all license data and information including license applications protected from

tampering. Licensing records will be kept up to date, secure and accurate and readily

available to any interested parties. This can be best accomplished by license applications

and decisions being registered electronically with public access through an internet-based

web site. They will also have effective grievance or dispute resolution mechanisms that are

accessible, affordable, timely, impartial and effective.

Along with well-functioning mining agencies, there should also be well functioning environmental institutions that oversee environmental protection compliance, a social agency that is responsible for oversight of mining-related social impacts such as involuntary resettlement procedures and compensation and, where applicable, an agency that is responsible for the protection of Indigenous Peoples rights. There should also be taxation and possibly other authorities with the capacity to assess, audit and collect taxes, fees and royalties.2 Corruption and inadequate capacity are two of the most significant vulnerabilities associated with sub-national licensing authorities. First, sub-national agencies are more likely to be prone to corruption than national authorities because there may be less transparency and scrutiny of sub-national licensing practices and signing authorities compared with national agencies and because the larger number of sub-national mining signing authorities increases the probability that one or more may be corrupt. Sub-national officials are also likely to be more prone to complicity with illegal mining operators. Second, is that given a potentially large number of sub-national authorities3, the weaker sub national authorities may lack the capacity to strictly follow the licensing procedures and maintain reliable licensing records with the result that they become prone to issuing licenses that overlap with other licenses. A third vulnerability is that it may not be possible to maintain a national mining cadastre either because accurate licensing data is not available or because sub national authorities do not update the national authority in an accurate and timely manner. This can be part of a larger sector wide vulnerability that sub-national licensing offices do not share license, production and performance data with other

2In Indonesia profits taxes are collected by the Directorate General of Tax but royalties which are considered a non-tax

charge are collected by the Directorate General of Minerals and Energy 3 Indonesia has about 400 Kabupatens (Districts)

arms of government such as environmental, social and taxation authorities including those authorities collecting royalties or fees as opposed to profits taxes.

Third Building Block - The Mining Regulatory Framework

Having examined the performance of the mining institutions, the third and final building

block is to examine the underlying mining framework of laws and regulations that provides

the legal basis for the licensing procedures and the authorities and responsibilities of the

mining institutions in implementing the licensing system.

A well-designed mining regulatory framework will have laws, regulations and procedures

that are uniform, clear, stable, predictable and non-discretionary and that not only define

the government authority and responsibilities but also the rights and obligations of license

holders.

While the main focus is on exploration and mining, a well-designed licensing system will

cover all stages of the mining life cycle – from initial prospecting to mine closure, mine

reclamation and rehabilitation, and, if needed, post closure protection and monitoring.

Well-designed mining laws and regulations will provide licensing procedures that are

transparent and clearly specify license holder qualifications or, in the case of competitive

processes, evaluation criteria along with licenses or contracts that specify the term, area

size, geographical coordinates and minerals covered.

Well-designed mining laws and regulations will clearly specify Government authority to

process, issue, renew and cancel licenses that are “criteria-based” and non-discretionary i.e.

the legal provisions should be that “licenses shall be granted” subject to meeting given

criteria, not “may be granted”. They will also outline the main responsibilities of

government which should include the responsibility to ensure transparency and accurate

license record keeping and data bases as well as responsibility for timely and accurate

information transmission between different agencies and levels of government.

Well-designed mining laws and regulations will also specify the license holder rights which

should include security of tenure; exclusivity of license area; license renewals; license

assignment; and conversion of exploration licenses to mining licenses. They will also detail

the main obligations of the license holder which should include fulfilling any specified work

requirements including minimum expenditure requirements, complying with any and all

license conditions including mine closure requirements and information disclosure and

reporting obligations, undertaking community consultations, paying taxes and fees and

putting aside funding as required for mine closure and possibly post closure.

A well designed and implemented mining licensing system is necessary, but not sufficient, to

achieve sustainable mining development. In addition, environmental and social laws and

regulations and institutional roles, authorities and responsibilities are needed that ensure

that exploration and mining (including mine closure) take place in an environmentally and

socially acceptable manner and, where applicable, that the rights of Indigenous Peoples are

fully respected. Well-designed environmental and social laws and regulations will include

environmental and social impact assessments and environmental management, social risk

mitigation and community engagement plans.

In addition, there should be a profits taxation system that provides a fair distribution of the

economic rent (profitability over and above a normal risk-adjusted rate of return) of a

mining operation between the government (as owner of the resource) and the license

holder (as developer and operator of the mining operation). Many countries also have

mining royalties based on production volumes or values. The overall mining taxation system

including royalties and other charges should be progressive and efficient.

There are few if any easily identifiable benefits of sub-national mining legislation and

regulations. But there can be substantial vulnerabilities when sub-national authorities have

the legal authority to set their own licensing rules. This will then result in different licensing

rules in different sub-national jurisdictions. A first vulnerability is that different sub-national

legislatures may not have the capacity and resources to prepare well-designed licensing or

safeguard regulations and rules. The greater the number of jurisdictions, the greater is the

risk that some will have poor quality rules and regulations. A second vulnerability is sub

national regulations may be highly discretionary and opaque – with associated risks of

corrupt practices. A third vulnerability is that licensing agencies may not be obligated to

disclose license, production and performance data with other authorities such as taxation,

environmental, social, health, safety, and lands authorities as well as agencies responsible

for protecting Indigenous Peoples.

Other vulnerabilities are that there may be a lack of consistency between sub-national

licensing rules in different jurisdictions and other related laws and regulations, including at

the national level. One example would be sub-national licensing rules that are not

consistent with the national mining law. A related vulnerability is that different licensing

procedures, systems, and cadastre data codification will result in a lack of compatibility for

coordinating the activities and data bases of different sub national authorities. These

various vulnerabilities can create substantial barriers to attracting large investments from

good quality investors, especially international investors.

B. Applying The Framework to Two Districts In Indonesia - Bangka and Kutai Kartanegara (Kukar)

This section describes the application of the Framework to two districts in Indonesia, namely

Bangka and Kutai Kartanegara (Kukar) and also gives examples from some other districts.

These two districts were selected because both have issued a large number of licenses (see

Annex 1) and are considered to be important mining districts. The application follows the

three building blocks. In considering the performance of the mining industry it should be

noted that following the enactment of a new Mining Law (Law 4/2009) the national

government has placed a moratorium on new mining operation permits licenses (IUPs)

being issued and has undertaken an audit of 10,235 mining licenses and found that only

4,151 (about 41%) of the licenses are considered to have “Clean and Clear” (CNC) title.

First Building Block - Performance of the Mining Industry – Bangka and Kukar

The research found that there is a major illegal mining vulnerability in Bangka, which is a tin

mining district, where as much as half of tin mining may be illegal, all of which is artisanal or

smaller-scale mining. Small-scale miners have swamped old mining areas and are illegally

producing tin – with a reportedly massive local “mafia” of vested interests financing and

controlling much of the illegal mining. The ambiguity and inconsistency of regulations

between the local and national levels, as well as lack of law enforcement, have contributed

significantly to illegal mining flourishing. In particular, the district government has issued

and legalized mining licenses that do not comply with regulations at national level.

Needless to say the illegally mined tin avoids production-related taxes. Illegally produced tin

is sold to legal miners and tin buyers who add it to their stocks when selling to smelters. It is

also sold to directly to smelters who include it as legal feedstock or it is simply exported

illegally. As illegal mining practices have become rampant, environmental damage has

increased substantially and is now bordering on devastation of some areas in Bangka. As of

May 2012, only 17 IUPs out of 283 issued by the Bangka district authority received Clean

and Clear (CNC) status. Livelihoods are shifting from agriculture (pepper farm) to illegal

artisanal tin mining and there are reportedly also many outsiders who have gone to Bangka,

attracted by the tin mining earnings.

While problems with illegal mining may not be as great in Kukar as Bangka, the research

found that there are considerable vulnerabilities in Kukar associated with over-lapping

licenses with only 240 IUPs out of 485 IUPs issued by the district government receiving CNC

status as of May 2012. The main vulnerabilities are associated with smaller-scale and

possibly also medium-scale mining. New licenses are often issued that overlap with existing

licenses so overlapping licenses is a growing problem. License overlaps can result in

production not being reported and being traded outside the legal system. 4 Kukar has a large

4Examples of over lapping licenses in other districts include IUPs owned by PT. Bukit Asam (the coal state-owned company) being overlapped by 16 other IUPs in South Sumatra, In South Sulawesi, IUPshave been issued that overlap with IUPs owned by PT. Aneka Tambang (another mining state-owned company). In Central Sulawesi, Rio Tinto is in a dispute with 14 other IUP holders that overlap the Rio Tinto IUPs and PT. Inco is also in a dispute due to overlapping licenses. The biggest dispute caused by overlapping is experienced by Churchill Mining, an Australia company which will possibly go to international arbitration. There are also examples of IUPs being issued by districts that overlap with forest and conservation areas. These include the district of Kolaka in Southeast Sulawesi, some districts in the Province of Jambi, and the district of In Bengkulu

amount of coal production and environmental impacts are poorly managed, for example

polluted water waste and pollution from coal stockpiles. There are also reportedly frequent

conflicts between the mining operations and the people living in the area in both Kukar and

Bangka.

Second Building Block - Performance of Bangka and Kukar Government Mining Institutions

The research found that according to media reports and investigations as well as interviews

with stakeholders, there are many reported concerns and vulnerabilities regarding poor

governance and corruption. Civil society representatives report concerns about the award

and trading of licenses in both Bangka and Kukar are not transparent and are prone to

corruption. There are also reports that the mining sector mafia in Bangka reportedly has

close links to some of the public officials. In Kukar license approvals are reported to

normally take nine months or more but some applicants are able to get special treatment

with licenses issued in just a few days. Some applicants in Kukar are reportedly allowed to

apply for adjacent license areas of less than 100 ha each and thereby avoid environmental

protection requirements which are required for licenses for areas over that size. In both

Bangka and Kukar, the Energy and Mining Office budget and staffing are relatively small to

oversee mining activities. For example, Kukar had an occupational safety and health

inspection budget of only Rp 375,000 (USD 41,700) in 20115 which was sufficient for

inspections to be undertaken at only 65 out of 285 operations in Kukar. There are only 16

officials in Kukar that have mining, geology, and environmental qualifications in their

educational background. Kukar has a complaints mechanism for environmental issues that is

only partially effective and no such mechanism for communities for conflict resolution with

mining operators. Bangka has neither mechanism.

Until 2010, mining companies were making their royalty payments to the national government without any reporting to the local governments. The national government subsequently transferred the royalties to the local governments under the scheme of revenue sharing fund (DBH). But not knowing precisely how much money was being paid by the mining sector and by which companies, the local governments were unable to verify if the full amounts were being paid to them by the national government. They were also unable to verify if the mining companies were paying royalties on their full production. Starting in 2010 the mining companies have been required to provide local governments with copies of the proof of the amount of royalties being paid to the national government. Thus, local government including Bangka and Kukar can now hold the national government

5Out of a budget of Rp 1,300 million for mining activities; by comparison Banka’s total budget for mining activities was about

Rp 2,200 million in 2011. Both budgets are very small to undertake monitoring and oversight activities to the very large number of mining companies in each district.

accountable if the amount transferred to the local account does not match with amount they calculate from copies of the proof of royalty payments.

Third Building Block - The Mining Regulatory Framework - Bangka and Kukar

Underlying the poor performance of both the mining industry and the government offices in

Bangka and Kukar6 is a mining regulatory framework in which licensing procedures and

regulations are set by each district. This creates vulnerabilities in terms of how well the

regulations are designed in terms of detail and linkages to other related laws and

regulations (such as environmental and social safeguards). The national government has

stepped in to revoke sub-national mining laws which have not been consistent with national

laws including in the case of Kukar where the 2001 mining regulation was been revoked in

2008 due to not being in line with tax law

The disparities between mining rules in different jurisdictions are well illustrated between

Bangka and Kukar. In both cases the regulations were issued in 2001. First, Bangka has three

types of licenses, the IUP (general mining license), a PUP7 (mining operation agreement) and

an IUPR (people mining license) whereas Kukar just issues an IUP. Second, Bangka issues

licenses for two mining stages in line with the new 2009 mining law – exploration and

production. Kukar issues licenses for six stages - general investigation; exploration;

exploitation; processing and refining; transport; and selling which is in line with the 1967

Mining Law. Third, Bangka’s licensing procedures are considered to have appropriate detail

and to be understandable whereas Kukar’s lack specificity and are not related to other

regulations. Annex 2 provides a comparison of some of the features of mining regulations in

six different districts which illustrates that the differences are greater than the similarities.

However, the situation should improve with the application of the 2009 Mining Law.

However, neither requires transparency of licensing procedures and information or

obligates licensing offices to make data available to other government offices, in particular,

taxation authorities. Most importantly both give complete discretion to the Regent in the

issuing of licenses. In the case of Kukar, many legitimate investors may simply not apply for

licenses for fear of graft or fear of the licenses area being awarded on a preferential basis to

a local vested interest, relative or crony of the issuing authority because of the high degree

of discretionary power regarding licenses being issued. But equally, in the case of Bangka

legitimate investors may not apply because of the influence of the mafia.

Summary

6Kukar mining regulation has been revoked in 2008 due to not in line with tax law.

7 This is an agreement for holder of exploration license to apply for license of exploitation and production. PUP must be approved before the holder carry out production.

In summary, the main conclusions of applying the framework to Bangka and Kukar based on

information received are as follows

Mining Industry Performance:

Extensive illegal mining and smuggling including mining in protected areas

Unacceptable, non-compliant environmental and social impacts

Tax avoidance by illegal mining operations

Government Mining Institutions

Considerable corruption – licensing graft, bribery and cronyism Inadequate mining licensing records Newly issued licenses that overlap other licenses or protected areas Insufficient mine site inspections and lack of oversight of illegal mining

Mining Regulatory Framework

Inconsistent and inadequate sub-national licensing rules and procedures and

environmental and social safeguards including conflict resolution

Excessive discretionary power to license offices and Mayors/Governors

Inadequate release of licensing information and environmental performance and

social impact data

C. Preliminary Policy Recommendations for Indonesia.

Having presented the application of the framework to Bangka and Kukar, this section

provides some preliminary policy recommendations that might point a way forward to

reducing the vulnerabilities and improving the situation.

Building Blocks 1 and 2: Improving the Performance of Mining Operators and Government

Institutions

Because the performance of mining operators and government institutions are closely inter-

linked this section considers ways to address not only the mining companies’ vulnerabilities

of illegal mining, harmful environmental and social impacts and tax avoidance but also the

mining institutions’ vulnerabilities of corruption, inadequate licensing record keeping,

overlapping licenses and insufficient inspections.

The national government has set the stage for improvements by enacting the new Mining

Law (number 4 of 2009) and also issuing the implementing regulations. With this

background, improving the situation has two main elements.

First, is effective implementation of the new 2009 Mining Law which will require

time and a sub-national government commitment to reducing and eliminating illegal

mining, over lapping licenses and harmful mining environmental and social

performance.

Second, is the provision of greater resources to sub-national Energy and Mining

Offices to put in place professional leadership and build better management and

information systems and more competent and qualified staff to reduce these

vulnerabilities.

A greater sub-national government commitment will likely involve for some authorities a

shift away from corrupt practices. Greater openness and transparency regarding licensing

information and improved reporting to national government are preconditions for improved

mining sector governance.

The situation in Bangka is especially difficult given the strong and entrenched mafia who will

likely oppose any improvements. If the situation is to be improved and the vulnerabilities

reduced, it will require some combination of identifying practical ways to:

legalize presently illegal mining operations that are willing to report their tin

production, pay taxes and improve their environmental performance and

Close those operations that persist in smuggling their tin and refuse to improve their

environmental practices.

On Bangka, it will require both the commitment and the capacity to put in place closer

scrutiny of licensed miners and smelters who may take possession of or process illegally

mined materials. It will also require a forceful engagement with the mafia who will likely not

cede their control of much of the industry willingly. Such a change will not come easily and if

it is to happen will likely require strong national government support and oversight.

In the case of Kukar, there is a need for greater oversight and policing of illegal mining, in

particular, unreported production from overlapping license areas. But the greater

vulnerability may relate to graft and corruption in issuing licenses, including issuing licenses

that overlap with existing licenses. This also becomes an issue of political will to reduce

corruption and build greater capacity to follow licensing rules, keep accurate and up to date

licensing records and inspect all mining operations on a regular basis.

The national government has made a very substantial start to improving the licensing

situation through its Clean and Clear program, but the issue remains as to what will happen

regarding the licenses that are not clean and clear, including license overlaps. License

overlaps should be eliminated in favor of the first license holder.

Greater scrutiny by national government including increased and regular auditing of licenses

would be an important measure to reduce and eventually prevent over lapping licenses

being issued in future. But to be fully successful, each district would need to maintain an

accurate record of the geographical coordinates, term and other conditions of licenses that

have been issued.

The underlying vulnerability of sub-national Energy and Mining Offices lacking sufficient

budgets and staff is a common occurrence in many countries. The reality is that the

likelihood of sub-national governments allocating sufficient resources for their licensing

offices to operate efficiently and effectively is very small. If sufficient funding is to be made

available then most likely it would need to be provided by allocating part of the mining-

related payments to government as dedicated funds to increase the number of staff, to

provide training and incentives to improve staff abilities and incentives to retain them; and

to fund investment in improved management and information systems.

Improving the dialogue with civil society can also contribute to reducing vulnerabilities in

both Bangka and Kukar, but this is also in large part a matter of political will and leadership

as much as mandatory national regulatory requirements.

Building Block 3: Improving the Regulatory Framework

The 2009 Mining Law has made an important step towards improving inconsistent and

inadequate sub-national licensing rules, but even so the other two regulatory vulnerabilities

of excessive discretionary power and inadequate disclosure and release of information and

data still need to be addressed through further changes to laws and regulations. Legal

measures can mandate such improvements.

Ideally the 2009 Mining Law should be modified to make the issuing of licenses mandatory,

not discretionary, providing that the licensing criteria have been satisfied.Equally and most

importantly, the laws and regulations should mandate full transparency regarding licensing

applications, evaluation, approvals and records including mandatory disclosure of licensing

information and production, environmental and social performance data Full transparency

is a regulatory change that would considerably improve governance and reduce corruption.

Full transparency is a regulatory change that has the potential to considerably reduce

corruption. Improved transparency with regard to making all the details of license

applications and approvals readily and publically available is a corner stone to

improvements which would reduce the vulnerability to corruption. Transparency should be

legislated and regulated and supported by funding for standardized licensing systems at

each license office.

Just as EITI has established the principle of transparency for extractive industries tax

payments and collections, so there should also be licensing transparency

Indonesia has the potential for many more large-scale mines that could bring significant

employment at the local level and wealth to both national and sub national governments

through tax payments and induced growth. But, large-scale investments are no longer

taking place due to the uncertain investment environment, largely created by sub-national

licensing. There is much at stake which would warrant the national government considering

measures to address the present vulnerabilities and improve the licensing system.

But what if sub-national authorities do not follow the new Mining Law or the regulatory

requirements proposed here for greater transparency and information disclosure. The

national government may have to both reward and coerce improved sub national

government performance through legal measures regarding “carrots and sticks”. These

could include

• a moratorium on issuing licenses for non-performing governments and

• adjusting transfers of mineral-related payments to sub-national governments

according to their needs and performance

Finally, the dialogue with and role of civil society can also be enhanced by mandatory

requirements for disclosure of information and consultation with local communities.

Annex 1

Districts/Municipalities in Indonesia Issuing Most Licenses in Indonesia

District/ Municipality

Number of License

Commodities Provinces

Bangka 283 Tin Bangka Belitung

Tanah Laut 197 gold, chrome, coal, iron ore, nickel ore, manganese

South Kalimantan

Tanah Bumbu 185 coal, iron ore South Kalimantan

Kutai kartanegara

153 Coal East Kalimantan

Belitung Timur 150 Tin, bauxite, hematite, iron, Kaolin, quartz

Bangka Belitung

Ketapang 149 Zircon, tin, iron ore, bauxite, gold, granite, kaolin, barite, galena.

West Kalimantan

Bangka Barat 143 Tin Bangka Belitung

Barito Utara 139 Coal South Kalimantan

Kutai Barat 135 coal (132 licenses), gold (3 licenses)

East Kalimantan

Kutai Timur 133 coal, gold (2 licenses) East Kalimantan

Kotabaru 132 coals, iron ore, limestone South Kalimantan

Kapuas 106 coals, gold South Kalimantan

Barito Timur 105 coals, iron ore South Kalimantan

Konawe Utara 102 nickel (majority), gold, chrome, limestone

Southeast Sulawesi

Morowali 100 nickel, chrome, gold, iron ore

Central Sulawesi

Islands of Sula 98 iron ore North Maluku

Source: own table

Annex 2

Comparison of Mining Licensing Regulations in Different Districts Description Bangka Tanah Bumbu Kutai

Kartanegara West Kutai East Barito South Kalimantan Central

Kalimantan Year of Issue 2001 2007 2001 2003 2004 2009 2002 Name and type of license

- IUP - PUP - IUPR

- KP is used to refer the mining license but not clearly defined in article 1.

- SIPR - SIPD

- IUP - IUPUD - KP

IUP refer to: - KP - CoW - CCoW

KP - IUP

Stage of licensing for mining activity

2 (exploration and exploitation)

6 (general investigation; exploration; exploitation; processing and refining; transport; and selling)

6 (general investigation; exploration; exploitation; processing and refining; transport; and selling)

6 (general investigation; exploration; exploitation; processing and refining; transport; and selling)

Complicated and mixed between procedures and stages.

5 (general investigation; exploration; exploitation; processing and refining; transport and selling)

5 (general investigation; exploration; exploitation; processing and refining; transport and selling) + IUP for service

Are CoW and CCoW regulated?

No No No No Yes Yes No

Procedures/ Requirements

IUP: Detailed and easy to understand. IUPR: to be regulated by Regent

Not detailed and must refer to Regent Regulation and in annex (unable to be accessed)

Not detailed and no other regulation as reference

Not detailed for IUPUD but not specify other regulation as reference. Not detailed in KP and must refer to Decision of Regent

Very detailed of procedures to apply 13 types licensing related to KP; and 37 types licensing related to CoW and CCoW.

The licensing procedures regulated under Decision of Governor

The licensing procedures regulated under Governor Regulation

If more than one applicant for the same area.

Not regulated First come first served.

First priority is decided by Regent,

IUPUD: first priority for first applicant KP: not specified

Not regulated First applicant, first priority

Not regulated

Source: own table