License Bottleneck Crimps Indonesian Mining Boom

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"Permit applicants face growing government bureaucracy."

A severe bottleneck in mining license issuance threatens the development of Indonesia's resources, despite revamped mining laws aimed at increasing efficiency.

Indonesia's government issued two regulations earlier this year, including one aimed at speeding up the issuance of mining permits, but so far few new permits have been granted.

As the island nation further decentralizes government power following the long rule of former President Suharto, permit applicants face growing government bureaucracy at local levels, and layers of new red tape imposed by agencies operating on islands far from the main halls of power in Jakarta.

"Our main obstacle is getting the permits for exploration, particularly from the forestry ministry," Hendra Sinadia, a manager at PT Vale Eksplorasi Indonesia, said at the 9th Asia Pacific Mining Conference & Exhibition in Jakarta.

"It took us 18 months to get the permit to start exploration."

Indonesia has struggled to lure foreign investment into mining in recent years because of rampant corruption as well as uncertainties about a mining law passed in 2008.

The government stopped issuing new permits ahead of the introduction of the new regulations, and has not said when it will resume doing so. Under the new regulations, miners who had applied for permits before the new mining law was passed in December 2008 will be able to continue their applications.

But few signs exist that the bottleneck problem will be solved in the near-term, blocking hopes metals will join other sectors seeing renewed investment in a country with growing consumer wealth and a stock market at record highs.

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