Mineral is non-renewable resource and is therefore its development only deliver yields for certain period.(1) The availability of mineral resources is limited to the amount of reserves that lies underground. Once the reserve depletes the ore cannot be produced anymore. This fact brings two kinds of consequence.

Firstly, mineral resources become strategic commodity because they’re not always abundant. Not to mention is the significance of this commodity in the fulfillment of demand in technology, industry, construction and electricity nowadays. Countries endowed with mineral richness have potential to pursue advancement and wealth for its citizen. However, poor management of mineral resources could lead to control and extraction of a country’s mineral reserve by foreign countries and companies.

The second is recognition that mining is a business that will not sustain for all time. The economy of mineral extraction is short term economy so that needs to be replaced once it comes to closure. Relying national economy on mining industry isn’t good choice. The economy will collapse when mining is over and no replacement is already put in place as economic foundation.

It is therefore, mineral-endowed country shall consider doing the followings:

1.      Allocation of mineral to be used for export and domestic supply as well as reserve for future generation. This shall be made based on the calculation of total reserve available throughout the country.

2.      In relation with point number one, the government shall develop the other economic sector rather than just mining and ensure that development of mining sector doesn’t harm promotion of other sectors.

The opposite of the two mentioned above is the export-oriented mineral extraction policy. Export orientation will create more and more foreign demand to the country’s mineral resources that later leads to unending exploitation under foreign control. While, the amount of revenues generated from royalty and tax usually inconsiderable compared to loss of biodiversity, local population’s livelihood, and environment destruction the country will also lose its future mineral reserve and chance to pursue industrialization.

With regard to the analysis guidance presented above, several issues discussed in this paper i.e. ownership, management and implementation of mining resources, the relation between government, company, and national and foreign interest.

1. The Ownership and Management of Mineral Resources

There are 9 articles in total discussing the ownership and management of mining resources as presented in the following table.

Table 1. Provisions on ownership and management of mineral resources

	Articles	General content
1.	Article 3: Ownership of Mineral Resources	Statement on the ownership of country’s mineral resources by state
2.	Article 4: the promotion, preservation, and development of mineral resources	State’s authority in promotion of person and organization for development and preservation of mineral resources
3.	Article 8: Basic Geological Survey	The authority responsible for conducting Basic Geological Survey
4.	Article 12: Preservation of Sources of Mineral Resources	The authority responsible for conducting Preservation of Mineral Sources
5.	Article 14: Mining Concession	Affirmation that mining concession can be issued by the government
6.	Article 21: Investment in Mining Activities	Type of investments form that can be carried for the development of country’s mineral resources
7.	Article 10. Protected or Restricted Minerals	The classification of minerals that are allowed and restricted for export and import
8	Article 49 – 54	Rights and Tasks of Government Organizations in the Management and Control of Mining Operation
9	Article 55: Arbitration	Settlement of dispute between parties in mining contract

The stipulation on who owns the country’s mineral resources is found in Article 3 Ownership of Mineral Resources;

“ All mineral resources above, under land and water within the territory of the Lao PDR are the property of the national community and under centralized and unified management by the State ”

This provision affirms that mineral resources within the territory of the Lao PDR are the property of the whole citizen throughout the country. However, this right is limited only as property right not the management and utilization right. Therefore, citizen were not allowed to conduct mining operation by themselves despite they’re the true owner of the state’s richness.

It is then stipulated that management of mineral resources is conducted centrally and unified by the state which is then represented by the central government. This provision gives the government an ultimate power to develop the mining resources, including area surrounding the mine. Article 14 re mining concession which says “Mineral concessions are areas determined by the Government as areas where mineral operations may take place“ again re-affirms the government’s single authority in the designation of mining concession.

To some extent this provision has its justification in order to ensure that important natural resources controlled by the state and not by the private parties. On the other hand, this provision has its negative side as well. Since the government has very strong and key position, it has the right to make any decision re mineral resources management, including issuing any concession for mineral processing and extraction without obligation to conduct any consultation with adequate stakeholders.

Very often, such provision translated by the government it can do anything with mineral resources and the surrounding environment at any cost. The rights and participation of the citizen, esp. local communities are then disregarded because the law doesn’t rule. This absolute position often leads to wrongdoing by the government and companies that resulted in the destruction of environment and illegal occupancy of community’s lands. The impacts to local population will be worse as very lack provisions protecting their rights available under this law. No articles in this law mentions consultation or community’s consent prior to mining operation take place. The rights of local population is only limited to receiving compensation and resettlement if impacted by mining project.

 

2. Implementation of Mining Activities via Concession

As normally found in some countries there are several types of mining permits in Lao PDR. The government itself can operate a mining project, as well as private company be it domestic or foreign owned. In case of foreign companies they must form a joint investment (joint venture) and to sign contract with the government of Lao PDR. Article 21 re Investment in Mining Activities discussed this matter.

While in the establishment of mining area the government is the single powerful authority, it doesn’t seem to have the similar standing in the implementation of mining concession. In Paragraph (2) of Article 21 the government of Lao PDR acknowledges the right of actors other than state to conduct mining operation by permission of the government. This article acknowledges the private companies (including foreign) to operate mining project within Lao PDR jurisdiction by forming joint venture with the government.

To some extent, this provision will help government of Lao PDR in providing fund for financing the mining projects since it will share the cost of operation with investment partner. However, this term will weaken the position of Lao PDR government because as parties bound by contract the position of the government will be equal with the company. If there is dispute among them, the government cannot sue the company for breaking the law because company will consider this as breach of contract and therefore will sue back the government via arbitration as ruled by this law (Article 55 Arbitration). Usually, government will drop its intention to sue the company once company state they will use arbitration which always said as long, tiring and costly procedure. The case of civil lawsuit of Government of Indonesia against Newmont Minahasa Raya Ltd. is a good example for this context. Newmont was able to force the government to enter agreement otherwise they bring the dispute into arbitration for breaching the contract item.

On the contrary, this type of license regime is very much favored by foreign companies because this gives them strong position equal with central government. In many cases, companies hold such contract have done everything they want and not to listen to any objection because it has position equal with central government.

This provision gives disincentive to people because their government cannot protect and fulfill their rights if it goes opposite way with the willingness of company. Company will sue government if it wants to protect the right of the people. In case they become victims of mining the government cannot defend them in the court.

The best position for the government should be standing as regulator, not party in contract. As regulator, government issues mining permit, supervise the operation, and it has power to revoke the permit anytime for considerable reasons. Under the contract regime, government’s position will be ambivalent because it cannot supervise the company that has the equal position with it while the other law (e.g. environmental protection law) rule that government must monitor the impacts resulted by any business activities. It is important to keep in mind that contract is a law to parties bound with it.

 

3. Whose resources?

Article 10. Protected or Restricted Minerals:

“ For efficient and sustainable use, the Government shall issue a periodical list of protected or restricted minerals from export, import or for which export under the form of raw material is limited.”

This article is regarded well from the national interest point of view. This provision provides strong liability for the government to ensure the long term availability of mineral resources for domestic use by keeping some of the reserves out from exploitation. It reflects the awareness among the drafters that mineral is non-renewable resource that needs to be used efficiently and to be reserved for future generation needs. However, without presence of implementing regulation that explains the amount of mineral for exploitation and for reserve, this provision will never be effective.

Very often, the decision up on which mineral reserves to be exploited or not is pushed by external actors such like investors and donor countries rather than the country’s government itself. Therefore, from the perspective of investors this provision will not be favored because it will reduce their possible investment expansion. This provision is good for the country but will face many hurdles once the government wants to use this.

It should also be taken into account the foreign multilateral agencies’ role like World Bank, ADB, or WTO that will not like this provision because it is regarded as barrier for investment proliferation. These institutions have established social and environmental safeguards for its projects to ensure that no barriers should hamper private investment although in many projects between the policy safeguard and its implementation are contradictive.

The integration of Indochina countries (Laos, Cambodia, Vietnam, Thailand, and China) into one free trade and economic region shall cause considerable increase of investment in extractive sector including mining. The agreement facilitated by ADB since 1992 and further supported by WB as well as other agencies aimed at facilitating the transfer of power, goods, service, and labors between countries in region which regarded as signal to dynamic regional market and industry growth. Since industrialization is impossible without supply on raw materials, there will be transfer of raw materials from the non-industrialized countries to industrialized countries. It won’t be easy anymore for Laos to prioritize its national agenda for mineral preservation while it has been bound with regional pact on trade and investment. Failure to meet demand for raw materials from the region can be regarded as impeding regional market growth. Laos can be alleged as breaching the multilateral agreement that could lead to political tension among countries.

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* policy research paper by Adi Widyanto (1) However this term might not right for this context because Mining Law classifies water which is renewable resources as mineral. See Article 9 Categories of Minerals