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Bureau of Mines / Minerals yearbook: Area reports: international 1971
Year 1971, Volume 3 (1971)

Pajalich, Walter
Indonesia,   pp. 393-403 ff. PDF (1.2 MB)


Page 393

  ~93The Mineral Industry of Indonesia 
By Walter Pajalich1 
 Persistent efforts towards political stabilization and consolidation of
social affairs in 1971 resulted in acceleration of economic activities. The
economic reform program initiated by the Government in 1966 has been markedly
successful in curbing the annual inflation rate from 650 to 9 percent. The
strongest force behind the economy's growth was the rapid increase of fixed
investments and development expenditures. 
 Liberalization of national laws governing foreign investments, among which
was the Foreign Capital Investment Law (Law No. I) and Mining Law (Law No.
11), paved the way for this growth. Under the new mining law, foreign companies
may obtain exclusive rights to conduct mineral exploration and exploitation
on the basis of a "Contract of Work" agreement with the Government. Foreign
companies may also act as mining operators or contractors for State-owned
mining enterprises. In the case of petroleum and natural gas, extraction
may only be undertaken by a State enterprise. Consequently, all foreign participation
in~ the oil and gas industry of Indonesia has to be based on a "production
sharing" or "development" contract with the State oil enterprise Pertambangan
Minjak Dan Gas Bumi Nasional (P. N. Pertamina). These contracts which call
for a 65/35 profit split in favor of the Government have been generally used
with all the international petroleum developers; P. N. Pertamina has reserved
the inland areas for itself and contracted the offshore areas to foreign
developers. 
 The interests of foreign oil companies in Indonesia are immense and increasing.
There are over 50 foreign companies with equity interests in the oil operations
of the country. At least 35 companies were exploring for oil, 18 of which
were United States companies. 
 Significant legislation affecting the State enterprise, P. N. Pertamina,
was scheduled 
to be implemented in January 1972. Government Regulation No; 72::and Presidential
Decree No. 127-M stipulated that P. N. Pertamina will become Perussahaan
Per. tambangan Minjak Dan G~s Bumi Negara (Pertamina). Under these new regulations
the central government will exercise greater control over the operationn
of this State enterprise. 
 Foreign nonoil investments approved by the Government between January 1967
and December 1971 totaled 444k projects with capital commitments up t0 $1.6
billion. Some of the largest pro~├ęcts deal with mineral exploration
and development. So far about 180 companies have made applications for permits
to look for minerals. At yearend, 14 foreign companies had signed agreements
with the* Indonesian Government to develop and exploit minerals, and six
others were in the process of negotiating contracts. The following foreign
companies have agreements for mineral development: 
 1. Freeport Indonesia Inc. (subsidiary of Freeport Sulphur Co. U.S.A.).
 2. N. V. Billiton Maatschappij (The Netherlands). 
 3. P. T. International Nickel Indonesia (subsidiary of International Nickel
Company of Canada:Ltd. (Inco)). 
 4. P. T. Pacific.. Nickel Indonesia (Consortium of United States Steel Corp.,
U.S.A., Koninklijke Nederlandsche Hoogovens en Staalfabrieken, N. V., William
H. Muller & Co., N. V., the Netherlands; Newmont Mining Corp., U.S.A.;
Sherritt Gordon Mines, Ltd., Canada). 
 5. Aluminum Company of America (Alcoa, U.S.A.). 
 &. Indonesian Nickel Development Co., 
Ltd~ (consortium of Fuji Iron and Steel 
Co., Ltd.; Mitsubishi Shoji Kaisha, Ltd.; 
Mitsui & Co. Ltd.; Nippon Mining Co. 
Ltd.; Nippon Yakin Kogyo Co. Ltd.; Pacific 
 1 Mining engineer, Division of Nonmetallic Minerals. 


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