The History of Mining Act in Indonesia

From some sources of books  written  by  Indonesian writer concerning The History of Mining Act in Indonesia,  we understand that in  1899 : The (East) Indies Mining Act was passed which laid  down the ground rules under which mining operations, including those by private concerns might be conducted.

• One of the basic principle which was laid down in the Indische Minjwet of 1899  was that rights over land (Surface rights) is separated from the rights over the Mineral resources, these being vest to the the Governor

Prospecting for minerals was controlled by licenses issued by the Bureau of Mines or the Provincial administrations, and mining concessions were granted on application by the Governor General.

During these period, prospecting Licenses & Concessions could only be granted to  : Dutch Subjects, residents of the Netherlands Indies, and to Companies registered in the Netherlands or the Indies.

• In 1904 :   An Amendment was passed which froze the granting of concessions in an attempt to keep out new firms.

In 1918 : a New Amendment was passed under which the granting of new concession were resumed, which provides  more favorable terms to the Government.

Under the pre - 1904 concession contracts concessions were granted for a term of 75 years with the Government receiving a percentage of any oil produced plus a fixed price per acre of the concession area. 

We observed that under the concession contracts made after the 1918 amendment the concessionaire was required to pay the Netherland East Indies :

• 4% excise on the value of crude shipped,
• a 20% tax on oil profits, and
• a general tax on corporate profits of 20%.

According to the writer, these provisions was similar to the provisions in Middle East concession contracts on the same period.

by 1940 : 5 International companies was active in Indonesia. :

1912 : the Standard Oil Company of New Jersey began operations in Indonesia, latter merging operations with Mobil to form Stanvac.

In the 1930’s Standard Oil of California entered the scene, latter merging with Texaco to form Caltex.

In this book it is said that together with the Royal Dutch/Shell Company which at that time was the largest producers in Indonesia, these major companies was known as the Big Three..

In 1942, when the Japanese occupied Indonesia, the Indische Minwet of 1899 was rendered in operative, and in anticipation,  it appears that  the Dutch destroyed many of their oil facilities.

•  When the Japanese entered Indonesia, they put the oil operations under the regional military command and tried to rehabilitate the fields and oil facilities. With the Dutch gone, the Japanese forced to rely on experience Indonesian for help - a fact which strengthened Indonesian’ s confidence in their own ability to run the oil industry.

After the Japanese surrendered and the Indonesian declared its  independence in 1945 , and after taking  4(four) years  of war, a final agreement  was reached at the Round Table Conference in the Hague, which transfered the Netherlands East Indies(with exception of West Irian) to the Federal Republic of Indonesia.

In 1951 : The Indonesian Parlement passed a motion to create a commission to inquire in the problems of Oil & Mining Law, which urged the Government to form within 1 month a State Commission of Mining Affairs.

a) investigating asap problems of oil extraction, & of tin, coal, gold, silver & other mining In Indonesia.

b) Drafting an Indonesian Mining Law in harmony with present conditions.

c) Urges the Government to postpone all granting of concession & exploitation permits, pending the results of the work of the State Commission on Mining Affairs.

The Commission took 5 years to submit its Draft to the parliament.

• Not until 1960 did the Parliament adopt a New Mining Law (Law no 37/Prp 1960) and Oil and Gas Law (Law No.44/Prp 1960) both promulgated in the form of Emergence Acts to replace the 1988 Mining Law of the East Indies.

The New Statutes not only retained the State‘s Exclusive right to Mineral Resources contained in the colonial legislation but further make it more stronger  it by stipulating that * Only State is authorized to exploit the Mineral resources.

• The Ideas of Concessions, i.e. , the Grant by the State to a private party of rights to develop Mineral Resources in a certain area of Land  was abandoned. INDONESIA - Indonesian Exports, Marketing & Pricing.: An article from: APS Review Oil Market Trends

Only the State, as the custodian of the Indonesian people, or on its behalf  a state enterprise can have Mining Rights called an “ Authority to Mine” or Mining Authorization.”

Well, these are some interesting back grounds which was taken from the above interesting book;