Development and Empowerment of Communities through Activities of the Mineral and Coal Mining Sector

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by Alfons Emanuel Moller

On December 8, 2016, the Minister of Energy and Mineral Resources enacted the Ministerial Regulation No. 41 of 2016 concerning the Development and Empowerment of Communities through Activities of the Mineral and Coal Mining Sector (“Permen ESDM No. 41/2016”). The enactment was deemed necessary to complement the implementation of Article 109 and Article 111 of Government Regulation No. 23 of 2010 concerning the Implementation of Mineral and Coal Mining Business Activities (“PP No. 23/2010”), which stipulates the requirement of further ancillary provisions regarding the development and empowerment of communities (“PPM”) surrounding Mining Permit Areas and Special Mining Permit Areas along with the procedures for the imposition of administrative sanctions.

Permen ESDM No. 41/2016 regulates the guidelines for PPM blueprints, PPM programs including the master plan and annual plan, along with the obligation to report to the Minister of Energy and Mineral Resources through the Director General of Mineral and Coal (“Director General”), as well as the administrative sanctions for non-compliance. The PPM blueprint is defined under Article 1 point 3 of the Permen ESDM No. 41/2016 as a document that elaborates the strategic planning of integrated development containing the directives of the PPM policy in the provincial regions. Any governor of a province where mining activities take place is required to draft a PPM blueprint to be implemented in that particular area, in a fair and accountable manner according to the local norms. The governor shall also involve relevant regents/mayors by means of consultation and consider the national and regional mid-term development and spatial plans as the basis of drafting the PPM blueprint. The aforementioned blueprint shall contain at least the following:

1. Improvement of the human development index in the particular province/regency/city;
2. Economic development for the communities surrounding the mining areas, including post-mining activities;
3. Sustainable socio-cultural and environment development within the communities surrounding the mining areas;
4. Institutional development of the communities surrounding the mining areas; and
5. Development of infrastructures to support PPM.

The governor shall only enact the blueprint after securing an approval from the Director General, and the blueprint may be evaluated and amended once every 5 (five) years. The third chapter of Permen ESDM No. 41/2016 regulates the PPM Program, which includes the necessary PPM Master Plan and Annual PPM Program, to be drafted by mining companies in accordance with the PPM blueprint while simultaneously preparing the feasibility studies and environmental documents. The communities surrounding the mining areas are allowed to propose their own PPM programs to be included in the PPM Master Plan and Annual PPM Program to the mining companies in question, through the respective governor. The PPM Master Plan must be based on the results of social mapping to respond appropriately to the current conditions of the relevant communities and shall, at least, include health and education, socio-cultural and environment of the communities, infrastructure, financial independence, and institutional communities in support of financial independence. The PPM Master Plan shall be evaluated and/or amended once every 5 (five) years, or whenever the PPM blueprint, feasibility study, or environmental document is amended. Otherwise, drafting of the Annual PPM Program as part of Work Plan and Budget, shall refer to the PPM Master Plan and includes:

1. Details of the annual PPM plans;

2. Annual PPM plan’s timeline;

3. Financing of the annual PPM plans;

4. Success criteria;

5. Implementation of the previous annual PPM plan including the obstructions and solutions.

Subsequent to acquiring the approval of the Director General, the mining company shall conduct their own Annual PPM Program by establishing a working unit and drafting a standard operating procedure that shall be submitted to the Director General. Permen No. 41/2016 also regulates the obligation of mining companies to report to the Minister of Energy and Mineral Resources through the Director General (with a copy sent to the relevant mayor/regent) on the implementation of the Annual PPM Program every 6 (six) months, no later than the 30^th day after the six-month period ends. Failure to comply with the provisions under this regulation shall be subject to administrative sanctions in the form of written warnings, suspensions of business activity, and/or revocations in mining business licenses.

Article supplied by BUDIARTO Law Partnership