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A spectroscopy of

mineral Cuprite



REFORMATION OF THE MINING INDUSTRY IN THE ASIA'S REGION

INTRODUCTION

CURRENT STATUS IN MAJOR ASIAN COUNTRIES

Indonesia

Philippines

Malaysia

Thailand

Vietnam

China

India

South Korea

Japan

CONCLUSION


1.0 INTRODUCTION

1.1 Most if not all of the major mining countries in Asia have today reformed or are in the process of reforming their mining laws and policies. The reason why they are doing this is simply good economic, business and commercial sense. The reformation allows them to reposition themselves to attract and generate increased foreign investments in their mining industries. This will result in making available adequate supply of mineral resources to the world. Ultimately, the whole exercise will not only spur further growth in the economies of the mineral producing countries but also those countries reliant on their mineral resources many of whom have established co-operative mining ventures with these producing countries.

1.2 Those countries with a head start and having already in place conducive mineral laws and policies will necessarily experience a high level of investor interest. There is no doubt that investments and laws are interlinked. A highly geologically prospective country without favourable mining laws and policies will necessarily find difficulty in attracting investments into their minerals sector. Countries having established meaningful inter-relationship in exploration and exploitation with their host nations will certainly benefit as a reciprocity for their mining investment contribution and technological support.

1.3 Despite recent significant negative developments such as the Busang gold mine fiasco in Indonesia, the gold price collapse, over capacity in most mineral commodities, it is generally believed that there will continue to be keen interests for mineral sector investments particularly in mineral rich countries in the Asian region with sound mineral sector legislative policy frameworks. The underlying reason is simply that the whole world continues to require adequate and ready supply of mineral raw materials at all times to meet the needs of industries.

2.0 CURRENT STATUS IN MAJOR ASIAN COUNTRIES

2.1 The following discussions will deliberate on some of the major Asian countries with regard to the status of their mining industries and their mineral resources availability and requirements, and the efforts in reforming their respective mining laws and policies.

(i) Indonesia

Indonesia is one of the earliest Asian country to have implemented a reformed mining policy of allowing foreign companies to develop its abundant mineral resources in an equitable manner with the interests of both the government and the investors being protected in a transparent form.

Its pro-active mining policy started when the Contract of Work (COW) system was introduced in 1967. It was later followed by the Coal Contract of Work (CCOW) which was introduced in 1981. These COWs are mineral agreements entered into between the government of Indonesia and foreign companies to co-operate in developing the country's mineral resources in accordance with Indonesia's Mining Laws and Regulations. The COW does not grant the foreign company any proprietary rights or interests over land or minerals. It merely appoints the investor as an exclusive contractor for a designated area. The COW specifies a process whereby such rights may be obtained by the company acting on behalf of the government as its contractor.

The COW's principal provisions are fairly standard and are non-negotiable. It contains among others tax provisions and financial obligations, security deposits and the mandatory minimum expenditure requirements.

The COW is now in its seventh generation having gone through changes in contract terms resulting from evolution of time and circumstances. The Coal COW, however, is now in its third generation. Despite the changes, two basic principles remain unchanged, namely;

(a) They guarantee the contractor the right to develop and to mine when commercial deposits are discovered.

(b) They protect the contractor from future changes in the mining legislation and policies throughout the contract life.

Altogether 197 COWs have been approved thus far and some 276 of the 7th generation COW are being processed and pending approval.

The COW system has no doubt provided Indonesia with the opportunity to develop its vast rural economies through the injection of foreign capital investments into the mining industry. Despite the changes and requirements which may be perceived as necessary due to changed circumstances such as the recent Busang gold fraud, nonetheless, the COW system has placed Indonesia as one of the top mining country in Asia, and its mining regulatory framework and policies are envied and copied by many of its neighbours.

(ii) Philippines

Philippines is rich in mineral resources. It is one of the major world producer of base and precious metals such as copper, gold, chromite and nickel. The mining industry in the Philippines is a major contributor to the country's Gross Domestic Product (GDP) and generates high employment particularly in the rural areas.

Although the need to have a successful industry supported by a stable legislative and fiscal regime and an efficient administrative system was realised years earlier, however, it was not until 1994 when a major policy reform came about in the country with the lowering of excise taxes for mineral products. This was further spurred by the passing of a landmark legislation called the Philippine Mining Act of 1995 and its Implementing Rules and Regulations (IRR). The IRR was later revised and approved in 1997 to take care of changed circumstances due to several mining related environmental incidents in 1996. The 1995 Act and its revised IRR introduced the concept of sustainable mining under a new regime of mineral resource development which is pro-people and pro-environment. The Act and the IRR contain such provisions relating to mining rights, incentives, taxes, social, financial and environmental responsibilities and administrative support. A major new provision is the grant to foreign companies full ownership in large scale exploration development and utilisation of the country's mineral resources, a plus factor in the revival of the Philippines mining industry.

Resulting from these changes to the mining policies and regulatory framework in the country, many international mining companies are now involved or are in the process of exploring for opportunities in investing in the country's mining industry. This no doubt indicates that the reformed mining laws and legislations in the Philippines have created a conducive investment climate and have provided much investor confidence that helps return the Philippines back to the global mining investment map. To the same extent, it has also helped the country to spur economic growth to be in line with its other Southeast Asian neighbours.




(iii) Malaysia

Malaysia's mineral industry is presently undergoing a period of transition. For a long time, the thrust of development in the industry was predominated by tin. During the heyday of tin mining, the industry had played an important role in the Malaysian economy, contributing to about 14% of the country's GDP. Today, however, the industry is being overshadowed by the other more glamorus economic sectors. It's contribution to GDP is now less than 1.5%. The continued closure of tin mines, the fall in mineral production, decrease in mineral exports, decline in mineral sector employment and the drastic drop in mineral sector contribution to GDP have been variously quoted to support the notion that mining is a sunset industry. The above perception may be true for tin mining but not for the mining of a host of other minerals.

Although Malaysia has led the world in the development of alluvial mining technologies for the recovery of tin deposits, its search for primary hard rock minerals has been largely neglected. This has, therefore, resulted in the Malaysian mineral industry being left out in the mainstream of development. Studies also revealed that Malaysia's mineral legislations were outdated as they were specifically designed for the regulation of alluvial deposits and thus, not well suited for the efficient management of large scale exploration and mining of primary hard-rock minerals.

In 1989, Malaysia embarked on a major review of its fiscal and regulatory framework for the mineral industry with expert assistance from the UNDP, government officials and the industry. As a consequence, a National Mineral Policy has been formulated and a comprehensive set of harmonised model mineral legislation introduced that contain the necessary ingredients for increased investment and expansion in the country's mineral industry.

The National Mineral Policy provides the foundation for the effective, efficient and competitive development and management of Malaysia's mineral resources. While the thrust of the Policy is to expand and diversify the mineral industry through optimum exploration, exploitation and utilisation of Malaysia's resources, maximum use of research and development (R&D) and modern technology, emphasis is also given to environmental protection and sustainable development, as well as the management of social impact. The salient features of the Policy include security of tenure, favourable equity participation and fiscal regimes, high priority land use for mining, uniform and efficient legal framework and transparent guidelines and regulations.

In order to cater for the changing trends and focus of the mineral industry, the institutional structure of the various relevant mining organisations is also being looked into by the government towards modernising them in ensuring their capacity and capability of undertaking the successful implementation of the National Mineral Policy. Efforts are currently in progress to integrate, restructure and streamline all existing departments and agencies related to mineral development in order to gear them up for the new role.

With the legal, fiscal and institutional frameworks almost in place, coupled with a fairly rich endowment of mineral resources and Malaysia's positive stand on private sector participation, the mineral industry provides ample opportunities for investors, both domestic and foreign, in not only the upstream but also the downstream value-adding activities. It is anticipated that the minerals industry will play a pivotal role in helping Malaysia move forward towards becoming a fully industrialised nation by the next century as envisaged under its Vision 2020 agenda.

(iv) Thailand

The mining industry of Thailand which has been dominated for centuries by the tin mining sector has made considerable contribution to the country's economy. However, with the collapse of the international tin market in the late 1985, Thailand's mining industry faced a serious crisis. The annual contribution of the tin mining sector, as a result, declined by more than 60 per cent.

Today, the mining industry in Thailand has overcome that crisis. Thanks to the efforts of the authorities, namely the Department of Mineral Resources, the Mining Industry Council of Thailand, and the Thai miners who themselves have painfully brought the mining industry back on-track and to move forward in the right direction. The industry made a major structural change in emphasis from dependance on metallic to industrial minerals. This shift resulted in a major success in turning around the ailing mining industry.

Thailand produces some 45 mineral commodities from various regions of the country. Tin which once was the predominant mineral produced has now to be imported for increasing domestic consumption, the same as in the case of Malaysia. Industrial minerals today accounts for 92% of the country's overall mineral production.

To boost mineral industry development, a high level committee was formed in the last several years to reformulate the country's mineral policies, and to coordinate the activities of the various governmental agencies entrusted with the task of overseeing the industry. At the same time, the Mining Industry Council of Thailand, the national private sector body representing the industry's interest, has proposed to the Government to revise the taxation system, institute environmental requirements, and introduce deregulation measures. Thailand's Mining Law which was promulgated in 1962 and governs the mining industry is currently being reviewed.

All these efforts are aimed to strengthen the position of the minerals industry as an important raw material contributor towards the country's industrial development. As amplified in the country's economic blueprint, namely the Industrial Master Plan of Thailand covering the period 1996 to 2012, emphasis has been given to the minerals industry to play an important role in enhancing the nation's economic and industrial development process.

(v) Vietnam

Notable mining policy and regulatory advances have been made in recent years in Vietnam. The Ordinance on Mineral Resources was enacted in 1989 and was followed by a series of regulations, decrees and circulars. These were important first steps toward promoting mineral development and to some extent in governing mineral resources development effectively in the country.

Within the provisions of the Ordinance, there exists many limitations with regard to the implementing terms and requirements. Although a Foreign Investment Law was in place with attractive provisions for foreign investment, it does not, however, fully address the peculiar characteristics and the needs of the mining industry.

The aforesaid obstacles and limitations were removed when a new Mineral Law was enacted in 1996. The Law provides the necessary legislative framework to properly manage and develop the mining and processing of minerals to play an important role in the country's socio-economic development. The Mineral Law also ensures that all mineral activities must be directed and carried out in accordance with its provisions to ensure economic and rational utilisation of mineral resources, labour, safety, sanitation and environmental protection and social order on the basis of mutual benefit to the investors, the government and community as a whole.

The new Mineral Law reflects the salient features of the country's new economic policies for the mining industry. It protects mining rights in a fair and reasonable manner so as to encourage domestic and foreign investments in the mining and mineral processing sectors. Preferential treatment is being given by the government to mineral projects that are carried out in the remote rural areas.

High priority is also given to those mineral projects using advanced technology in mining and mineral processing. Mineral processing is much encouraged but exporting of mineral raw materials is restricted. Domestic investors are given top priority for projects of a small and medium size. Foreign investors are encouraged to invest in large scale projects which require high capital investment, employ modern methods of mining and environmental protection as well as to provide stable markets and to undertake marketing.

Although some basic issues such as rights to mine upon discovery are still unclear, however, some 20 foreign companies are now working in Vietnam exploring and prospecting for mineral resources.

(vi) China

China has a long history in the development and utilisation of its mineral resources. However, the mining industry became prominent only in 1949. China has some 151 minerals with proven reserves located within some 20,000 mineral occurrences and is believed to have one of the world's largest mineral reserves.

The mining industry in China is governed by the Mineral Resources Law of 1986 which is the basic law overseeing the exploration and mining of mineral resources in the country. In addition, various accompanying regulations have been formulated covering matters such as mineral exploration rights, mine inspection, mineral royalty collection and the implementing rules for the Mineral Resources Law.

In 1996, the Mineral Resources Law was amended. The amendments took effect from January 1997. The amendments strengthened the state-ownership of China's mineral resources and allow the local governments the responsibility for guaranteeing exploration and exploitation of mineral resources. The amendments also allow private enterprises and Sino-foreign joint venture companies to participate in the exploration and exploitation of mineral resources in China under state supervision.

Also in 1996, the Coal Law was approved and became effective on 1 December that year. The Coal Law provides that all coal resources are owned by the state and that it will not be affected by any changes in the surface land ownership or the right of use of the land where the coal resources are located. The state protects lawful exploration and mining rights from any encroachment and ensures the operation against any interference and disruption in mining areas and exploration sites. Mining rights cannot be sold or leased. The Ministry of Coal Industry is responsible for administrating and enforcing the Coal Law.

China encourages foreign investment in new technological renovation projects that could improve the industrial infrastructure, increase productivity, and better utilise mineral resources. Potential investment projects usually go through a multi-tiered screening process. In 1996, the government abolished the preference tax and tariffs on imports of capital equipment for companies having foreign partners. The elimination of these taxes reflects its interest to reduce labour-intensive and small-scale projects that dominated the early years and to shift to fewer and bigger, technology-intensive projects. Also, these changes are made to unify the tariff rate structure in line with that of the World Trade Organisation (WTO) and to ensure competition in a social market economy.

(vii) India

India announced a new National Mining Policy in 1993 which partially opens up its minerals sector. Applications for foreign investment in the mining industry are given automatic approval up to a limit of 50% in a particular project or company. The industries in which 51% automatic clearance will be given are: mining of iron ore, metallic ores including manganese, chromite, bauxite, copper, lead and zinc ores (but excluding uranium) and the mining of non-metallic minerals. As for the issue of large prospecting licences, it has been laid down that recommendations of state governments should not exceed 5,000 km2 for a single licence and the total area held by a single company should not exceed 10,000 km2. Automatic approval of foreign equity up to 74% will be allowed for services incidental to mining such as drilling shaft sinking and surveys.

(viii) South Korea

South Korea has poor natural resources and hence its domestic mining industry is relatively small. In 1996, its mineral production increased by 11.3% to US$1.89 billion with the non-metallic minerals sector contributing the single largest output totalling US$1.02 billion. South Korea, however, consumes large amounts of mineral resources which have to be imported.


The mining industry in South Korea is governed by the Mining Act which was overhauled in 1994 to make available idle mining areas, to simplify administrative procedures, to promote foreign investment in the mining industry and to strengthen environmental protection requirements. In promoting foreign mining investment in South Korea, foreigners are allowed to own mining leases without any restrictions.

In order to ensure that South Korea continues to enjoy a stable supply of mineral resources for her economic and industrial requirements, the country has adopted a two-prong mining promotion and development strategy. In one instance, it has a domestic mining promotion policy which encourages the expansion of its local mineral resources production base to ensure that it provides the strategic supply sources of minerals in times of emergency. Under this policy, the government supports geological prospecting, subsidises drilling and tunnellings, assists in modernising mining facilities, provides scholarships and supports R&D.

Under the second policy, which is the overseas minerals development policy, South Korea aims to raise the mineral resources supply availability through active participation in overseas minerals development projects. Through this policy, South Korea has been able to obtain a secure and stable supply of mineral resources for the long-term, and which at the same time consolidates its economic co-operation with the host countries.

  1. Japan

Like South Korea, Japan is also relatively poor in mineral resources but consumes large amounts for its industries. Although Japan is one of the world's largest producers of non-ferrous metals, however, almost all of its mineral raw material requirements are imported.

Although the domestic Japanese mining industry played a strategic role in the country's economic recovery in the 1940's and 1950's, however, the economic prosperity that resulted brought about a lack of cost competitiveness in the domestic mining industry. As a result, the local mining industry has substantially declined and Japan has to direct its attention towards greater participation in mining ventures overseas. The Japanese mineral resources policy today aims to secure stable supply of mineral raw materials not only for the country but also for the world as a whole.

Through the Metal Mining Agency of Japan (MMAJ), efforts have been vigorously undertaken by the Japanese Government to promote overseas exploration directly and also to support Japanese private mining companies operating globally.

The thrust of the Japanese mineral policy is based on the following premises, namely:

(i) Strengthening international competitives of its domestic non-ferrous metal smelters.

(ii) Encouraging the development of overseas mines.

(iii) Developing overseas smelting businesses.

The Japanese government has also established a national stockpile of rare metals which are essential for the high technology industries and which are, in turn, a major contributor to the Japanese economy. The stockpile includes nickel, chrome, tungsten, cobalt, molybdenum, manganese and vanadium. None of these metals are produced in Japan and, in the judgment of the government, are particularly vulnerable to instability of supply, hence the need for the stockpile.

Through the work of the MMAJ, several important mineral deposits have been discovered and mines successfully opened-up, both in Japan and overseas. The minerals produced include,gold, zinc, lead and copper. In the agency's collaborative effort with the private sector, other mineral resources have also been discovered, a recent example being the opening of a uranium mine in Canada, which is expected to be in production from the year 2000.

3.0 CONCLUSION

3.1 From the foregoing, it is apparent that most of the major mining countries in Asia have reformed and adopted new mining policies and regulations that aim to generate economic growth and industrial development in their respective countries through ensuring stable and secure supply of minerals resources. Others like Mongolia, Myanmar, Cambodia and Laos have also follow suit. The majority of the reformation in most of these countries have focused on creating a more liberal investment climate and proactive strategies characterised by providing political and legal stability, security of tenure, repatriation of profits, management and equity control and progressive, stable and internationally competitive fiscal regime, better access to financial and technological support.

3.2 As a result of these structural reformation in their mineral policies and legislations, the mining industry in Asia will be seeing substantial changes and transformation in the years ahead. This in turn poses many challenges and opportunities.

3.3 With the liberalisation of the mining industries in the Asian countries through the reformation of their mining laws and policies, it can be expected that mineral investments in these countries will be enhanced which ultimately will result in not only increased economic wealth for themselves but also for those other developed countries which require these mineral resources to sustain their economies and industries.

3.4 In conclusion, it can be said that these efforts by the developing and developed countries of Asia in reforming their mining policies and regulatory frameworks and in working together in co-operative mining ventures are a form of synergistic partnership to better utilise the God-given mineral wealth for the benefit of mankind in line with the new international economic realm of trade liberalisation and globalisation.

Bibliography

1. Mining Legislative Framework in Indonesia by Nursaleh Adiwinata and Khairin, Directorate General of Mines, Indonesia.

2. The Philippines Mining Act of 1995 by H.C. Ramos and G.M.C. Noble, Mines and Geosciences Bureau, Philippines.

3. Opportunities and Challenges in Malaysia's Mineral Sector by Mohamed Nor Abd. Aziz, Ministry of Primary Industries, Malaysia

4. Current Status of the Malaysian Minerals Industry by Malaysian Chamber of Mines.

5. An Overview of Mining Industry in Thailand by Akanit Suwanasing, Mining Industry Council of Thailand.

6. Mineral Law - State Policies For Mining Industry Development, Mineral Processing in Vietnam by Nguyen Tien Phuong and Nguyen Thi Dzung, State Department for Management of Mineral Resources, Vietnam.

7. Brief Introduction on China's Legal System Regarding Mineral Resources by Li Hongguang, Department of Policy and Legislation, Ministry of Geology and Mineral Resources, China.

8. Legal Infrastructure for Mining Industry in Korea by Dr. Chun Kahp-chin, Korea Institute of Geology, Mining and Materials.

9. Japan's Non-Ferrous Metal Policy and the Role of the Metal Mining Agency of Japan, by Shigeki Sakurai, Metal Mining Agency of Japan (MMAJ), Canberra.

10. Mining Annual Review 1997, Mining Journal Ltd., United Kingdom.



























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