06/11/2007 - 22:00

Indonesian growth potential

06/11/2007 - 22:00

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Indonesia should be firmly in the sights of Western Australia’s mining industry, with the country’s economic growth rate approaching those of China and India, according to Austrade senior trade commissioner, Rod Morehouse.

Indonesian growth potential

Indonesia should be firmly in the sights of Western Australia’s mining industry, with the country’s economic growth rate approaching those of China and India, according to Austrade senior trade commissioner, Rod Morehouse.

Indonesia’s economy grew by 6.2 per cent last year, and is expected to post a rate of 7 per cent next year.

Mr Morehouse, who addressed an industry forum in Perth last week, said the growth could be partly attributed to reforms in Indonesia’s financial sector following the Asian financial crisis.

He said Indonesia’s expanding middle class was driving growth, with property ownership becoming more common due to bank lending practices.

“Highly regulated, modern international banks have moved in and the banking community is now offering a line of credit,” Mr Morehouse said.

However, corruption remains a problem, with Indonesia struggling to attract foreign direct investment.

Currently, much of Indonesia’s mining-related investment is drawn from China and India, where companies are more inclined to take risks on a market that currently has a logjam of project approvals worth $7.5 billion.

Perth-based tin and nickel miner Stonehenge Metals Ltd is one company with operations in the region, having last month acquired an 85 per cent stake in an Indonesian nickel project.

The company’s managing director, Todd Hibberd, said navigating Indonesian law was challenging.

“At the moment, (the Indonesian government) is completely redrafting its mining legislation. It’s very unlikely anyone in government is going to sign-off on a contract of work,” Mr Hibberd said.

“The only way you can move forward is through mining services, where you don’t own the mineral rights but you do the extraction, or by listing on the Jakarta stock exchange.”

Currently, only Indonesian or Indonesian-controlled companies can own the right to extract minerals.

Mr Hibberd said while there was uncertainty around the legislative changes, regulation was an issue in many countries, including Australia.

“I would say that it’s no worse or better than WA. The environmental clearances here can be quite onerous,” he told the forum.

“The hardest thing about our operations is the language barrier, followed by the ability to locate appropriate information.”

While mining companies face ownership restrictions in Indonesia, the oil and gas sector is comparatively free of regulation.

West Perth-based oil and gas company Cooper Energy has two projects in Indonesia and is in the process of developing a third.

The company’s managing director, Mike Scott, said the oil and gas sector had an advantage over mining.

“Oil and gas infrastructure, in terms of government and the approvals process, is well defined and developed,” Mr Scott told WA Business News.

“It’s a big industry – there are a lot of expats and Indonesian locals trained in the industry now. Access to land is our biggest issue.”

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