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Formulation of National Mineral Policy, Legislation and Regulatory Framework for the Democratic Republic of East Timor by J.A Garnett, Ph.D., P. Eng. |
 | National mineral development policy |
| Draft mining legislation |
| Basic legal, regulatory and environmental framework necessary to implement a Mining Law |
| National mineral and energy resources licensing arrangements |
| Participation in a National Workshop on Policy and Development Strategy of Natural and Mineral Resources. (TOR, Appendix 1) |
Of these five tasks, three immediate priorities were quickly identified:
Participation in National Workshop, which took place on June 5-6, 2002,
Preparation of a first technical draft “Mining Law” for priority submission to the Minister and Cabinet, and
Establishment of a mineral and energy license registration and control system.
In focusing on these priorities, it was clearly necessary to address and integrate issues emerging from the other two tasks into the analysis and recommendations. Therefore, all tasks will be addressed in the following sections, with the three identified priorities receiving more concentrated attention.
The National Development Plan (NDP) published by the Planning Commission in May 2002 (Reference 1) admirably documents a “national vision” for the new country. Its Development Strategy outlines the following set of tasks to begin over the early transition stage:
The NDP specifies two phases of development. Legislation and institutional capabilities along with progress in infrastructure, education and health are to be addressed in the short-term. Growth in development is to be accelerated and properly managed on the basis of more fully functioning institutions over the longer term. The Plan’s Development Strategy is to be pursued concurrently with a Poverty Reduction strategy, subject to periodic Monitoring, Evaluation and Review.
In summary, the numerous UNTAET and GOET Planning Commission deliberations over the past two years have produced an internationally credible national vision and plan based on the balanced principles of sustainable development. Sections (a) Agriculture, Fisheries and Forestry; (b) Natural Resources and Environment; (c) Industry, Trade and the Private Sector and (d) Infrastructure; further document the capacity building policies, goals and institutional action plans for these sectors. With respect to this mission’s first TOR advisory task, it was now necessary to further clarify the role of “mineral development” within this well-stated national commitment to balanced economically and environmentally sustainable development.
The first step was to define a new term - sustainable mining. The most accepted definition of the now ubiquitous term “sustainable development” has been adopted in all of East Timor’s conferences and reports, namely;
“Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs”.
Since this term’s formal introduction in 1987 (Reference 2), many variations of its intent have been generated to fit various more narrow development or environmental agendas. The East Timor – State of the Nation Report addresses one of the more contentious issues; (i.e.) the “sustainability” of non-renewable resource development. It states, in a very fair manner:
“Therefore, the proceeds from the exploitation of such resources must be managed in such a way that they continue to provide opportunities for future generations ------in other words one kind of capital is replaced by another” (Section 8.3, Reference 3).
In keeping with this interpretation, the following definition of “sustainable mining” was introduced at the June 5-6 National Workshop and then included as an integral provision in the draft Mines and Minerals Management Law submitted to Secretary of State Egidio de Jesus on 22 June, 2002;
“sustainable mining” shall be the planned balancing of site-specific, profitable extraction of a non-renewable mineral deposit with a formal Government/community/registered holder-operator management partnership that allocates resources and stimulates the development of locally viable, diversified economic, environmental and cultural enterprises designed to continue beyond the life of the mine.
The next step was to reiterate the clear separation between “mineral resources”, meaning the construction materials, industrial minerals, base metals and precious metals and stones known to occur primarily in and on the land surface of East Timor; and “energy resources” meaning the natural oil and gas known to occur in and on the land surface, the territorial waters, the continental shelf and the exclusive economic zone of East Timor. These two distinct natural resources categories have been combined under the term “mineral resources” in certain East Timor development documents. Clarification of this distinction was considered necessary, since each category requires significantly different enabling legislation and, to a lesser but still important extent, different implementing institutional capabilities.
The third and most difficult task was to address the apparent absence of any specific reference in any national development document to the employment and revenue potential of the historically documented land-based mineral and petroleum resources.
To be fair, the focus of “key development indicators” for this sector was on
It was also noted, however, that, along with the high expectation development potential of offshore natural oil and gas, a variety of land-based Crops and Livestock, Forestry and Fisheries products were mentioned (e.g.) coffee, rice, maize, cassava, livestock, sandalwood, candlenut, tuna, reef fish. The only mention of onshore mineral products dealt with the now expired permits for marble, limestone, gold and manganese issued under Indonesian authority over the period 1992-1997. (Section 8.3, Reference 3).
(Note: A few sand and gravel permits for the Dili area have been extended to December 2002, but will not be renewed under existing laws beyond that date).
One preliminary draft policy proposal on the establishment of a legal regime for mining noted only the negative aspects of “current illegal and hazardous activities (exploitation)” being conducted in many districts, and the particular problems with sand and gravel extraction (Reference 5). Also, surprisingly, no mention was found of possible reactivation and /or development of numerous known onshore “oil seeps”.
It is a basic premise of this analysis that local employment and Government revenue potential for regulated commercial operation of known construction materials and industrial minerals, especially sand and gravel, limestone, marble, gypsum, phosphate rock ceramic and refractory clays, has been neglected in the overall national development planning process. These are products that readily lend themselves to organized entrepreneurial private sector investment. Some large-scale projects in this mineral sub-sector can be envisaged, but these commodities can also be promoted and controlled by a small administrative team as opportunities for small and medium scale enterprises in the short term.
Given the enactment of the balanced sustainable mining legislation described in detail in Section 4.0, and attached as Appendix 4, it is the opinion of this observer that development in this sub-sector could begin well in advance of the anticipated up-stream and down-stream employment opportunities and revenues from East Timor’s offshore. A similar scenario can be expected from some known onshore oil and gas localities.
Clearly, local employment and revenue expectations from these land-based mineral and oil and gas resources will be tiny compared to Timor Sea petroleum expectations. But it can generate short-term local, semi-skilled employment early in this critical nation-building transition period. And it can make an important import substitution contribution to infrastructure reconstruction.
This sustainable mining legislation is also designed to attract credible domestic and international investors to begin modern exploration programs for copper, gold, silver and other base and precious metals. The local community provisions in the draft Law reinforce the community education and direct involvement principles of both the Constitution and the NDP. The sooner that this communication process is begun, the sooner that the base and precious metal endowment of East Timor will be better documented, better understood, and properly developed.
The national development planning process should be reviewed and revised to reflect these more immediate land-based mining and exploration opportunities.
The workshop, attended by twenty (20) participants from GOET, UNDP and UN/ESCAP, took place over a two day period at National University of East Timor (05 June) and United Nations House/UNDP (06 June) (Appendix 2).
The key technical presentations on the first day were given by staff members Lourenso Petro and Amandio Gusmao Soares from the office of the Secretary of State for Natural and Mineral Resources, and by UN/ESCAP consultants Jon Rau and Pieter Bakker.
These presentations outlined the current status of geoscientific research in East Timor, and most importantly, the consolidation and confirmation of known mineral occurrences, localities and references into a geology and mineral data-base. Priority mineral targets and the policy and legal considerations necessary to attract mining companies were also outlined. Bakker’s conclusion was that numerous known mineral commodities could play an important role in attracting new investment, generating employment, improving local infrastructure and contributing revenues to Government. This conclusion was a major factor in elevating the production of a first draft of a “mining law” to top mission priority. The details of these important contributions are the subject of ESCAP reports in preparation by Messrs. Rau and Bakker.
On Day 2, Mr.Barid Manna, Advisor to the Secretary of State, framed the Sustainable Development principles that were essential in establishing acceptable mining policies and strategies for East Timor. Following that presentation, this advisor made a presentation on the basic policy, legislative and administrative principles necessary to implement an “international best practices “framework for the management of East Timor’s mineral and energy resources. The necessity to draft two separate laws, a “Mining Law” for the primarily land-based inorganic minerals and construction materials, and a “Petroleum Law” for the natural oil and gas hydrocarbons occurring both onshore and offshore, was first emphasized here.
Three administrative essentials for a successful regulatory regime were also outlined:
The role of the private sector as competitive players in the risky and expensive exploration / mining sequence, and the clearly separated role of government as neutral creators and referees of the “rules of the game”, were also emphasized. The functions of a Geological Survey, a Mines (and Petroleum) Department, a Mining Cadaster/Registry unit and a mineral (and petroleum) investment / mineral (and petroleum) planning unit within this ideal private sector /government matrix was also outlined. (Slides 11,12 – Appendix 3)
At the conclusion of this Workshop, a list of Recommendations was adopted through the direction of Workshop Convener Dr. Dulip Jayawardena of the UN/ESCAP Secretariat. The priority Policy Session recommendations directly affecting the focus of this mission were:
The first recommendation will require further work on the mineral and geological database to allow more accurate analysis and promotion of those commodities having the highest development potential.
The second recommendation should be initiated in parallel with the third. (i.e.) during Cabinet and Parliamentary consideration of the draft mining law. In many more mature mining jurisdictions, the drafting of updated mining legislation is greatly impeded by historically ingrained administrative conflicts. A short list of such difficult problems includes:
| Contradictory Ministry mandates and responsibilities. |
| Overlapping jurisdictional controls |
| Misuse of political and legislated discretion |
| Conflict of interest with private sector by state-owned enterprises |
| Lack of formal inter-ministry communication links |
| Ineffective public education / involvement |
These corroding influences do not yet exist at this incipient, transitional stage of East Timor’s government management evolution. They should be recognized and neutralized by establishing innovative coordinating protocols endorsed by the highest levels of GOET.
The third Recommendation became the main focus of the mission and its preparation and submission is detailed in Section 4.0.
To be effective, the design of any mining legislation must now seriously address three 21st century universal principles:
| Increased international competition for mineral investment capital |
| Increased national and international pressure to protect the environment |
| Increased demands from local communities for greater involvement in decision-making and greater direct revenue sharing |
These principles are not confined to the mineral sector alone. They are some of the universally applicable consequences of the “globalization”, “sustainable development” and “people power” concepts that have grown simultaneously and exponentially over the past two decades. The importance of this new paradigm is clearly identified in the specific reference to each of these principles in Section 5 (Decentralization), Section 61 (Environment) and Section 140 (Investments) of the Constitution of the Democratic Republic of East Timor adopted in May 2002.
The incorporation of the three principles into a first draft Mines and Minerals Management Law (MMML), attached as Appendix 4, was the overriding premise in its preparation. The choice of the law’s title is intended to reflect this new paradigm as contrasted with the traditional “mining law” nomenclature. The three principles are specifically addressed in MMML Part III – Investment Stabilization Agreements; Part V- Protection of the Environment; and Part VI - Local Community Sustainable Mining Partnerships. It was also necessary to incorporate numerous well-established “international best practices” from other currently successful mining laws. In this context, two competitively successful provisions first established for foreign investors in Indonesian Mining Law No.11, 1967, namely, conjunctive mineral title and fixed term tax stabilization, have been included in a modified and non-discriminatory manner better fitting current international norms. In fact, the most successful mining jurisdictions have refined these two original Indonesian inventions into investor-attractive provisions in their present laws.
The attached draft is intended to be a unique “made-in-East Timor” document reflecting the best standards present in existing successful laws, within an innovative sustainable development framework. Its contents present a legal framework for socially acceptable private sector mining development within a socially respected government regulatory system. It is hoped that GOET will agree that it represents a new approach for a new nation at the beginning of this new century.
This transparent “first come-first served” system of mining license administration is legally established and outlined in some detail in Part II of the draft MMML (Sections 2 through 7). The two core elements of the system are (i) the Mining License Registration Book and (ii) the License Area Map Control Series.
It may appear to some observers that a manually maintained license registration ledger is archaic or even redundant in this increasingly computer controlled world. However, regardless of the sophistication of any electronic system, the Registration Book remains the most reliable and most secure official chronological record of all accepted applications and priority of approvals, and the final legal determinant of mineral license security of tenure. The meticulous and timely input of basic data into this permanent record ledger is the top priority first-step in ensuring a credible license control system.
The first column in the Registration Book is a series of consecutive numbers that will be the official Registration No. of Pending Applications. This number will be entered on each application that has been accepted, time-date stamped and confirmed by a time-date stamped receipt to the applicant. This number can never be repeated, regardless of whether the accepted application is ultimately approved or rejected. It is important to note that Registration staff do not approve or reject applications. They may only accept or not accept applications determined by receipt of a completed application form with the specified attachments and pre-payment of registration and land rental fees (Form 1, Appendix 5). Authorized officers then check this package for accuracy of the submitted data. The application is then transmitted to the Minister for approval or rejection within the MMML specified 30-day period.
It is beyond the scope of this initial analysis to further detail the important and clerically intricate procedures necessary to establish and maintain this official register and appropriate cross-indexed files. In the near future, it would be useful to enlist the short-term consulting services of an active Registrar from a mature mining jurisdiction. For the purpose of establishing such a ledger, however, a listing of the columns in a typical Mining License Registration Book is provided below:
Column 1 Pending Application No.
Column 2 Time/Date Application Accepted
Column 3 Mining License No. (* to be left blank until approved or if rejected)
Column 4 Name of Applicant
Column 5 No. of 1 sq. km. UTM units requested
Column 6 Reference Map-Sheet Location
Column 7 Total Fees Paid
Column 8 Date Mining License Approved / Rejected (*)
An essential pre-requisite for the establishment of the land-based computer-processible mineral/petroleum licensing system recommended here is the availability of reasonably accurate topographic maps at a scale appropriate for both field use and office tabulation. East Timor has full coverage of excellent maps perfectly suited for this purpose.
Two sets of topographic maps, one at 1:25000 scale and one at 1:50000 scale, provide detailed topographic contours and useful infrastructure detail on buildings and installations, religious and jurisdictional boundaries, historical sites, transportation arteries and facilities, and agricultural and forestry land use priorities. These maps are derived from maps produced by the National Coordination Agency for Surveys and Mapping for Indonesia (BAKOSURTANAL), using the World Geodetic Reference System 1984 (WGS 84). The Australian Directorate of Strategic Military Geographic Information produced the East Timor extension of this series in 1999 for use in the multi-national rehabilitation efforts coordinated by UNTAET.
Both sets have two superimposed grid systems, the most important of which for the purpose of implementing NMRRS is the 1984/1000 Meter UTM Grid clearly defining north-south/ east-west blocks of one square kilometer. These blocks represent the basic metric unit for land-based mining license area applications, as specified in Section 7 of the draft MMML.
Although the approximately 120 map-sheets covering East Timor at 1:25000 may have less GPS ground truth distortion, the 38 map-sheets covering this nation at 1: 50000 are considered to have satisfactory geodetic control and be a more manageable index map series for mining license area monitoring and control. NMRRS is envisioned here as an initial manual system that can easily be adapted to a fully computerized system in future. In any event, it will remain critical to the integrity and transparency of NMRRS to always maintain the publicly accessible hard-copy Registration Book and Map File.
This specified task of the TOR was initially dealt with in the mineral policy presentation given at the June 06/02 National Workshop. The essential attributes of a successful regulatory agency were documented and an idealized organizational structure for GOET mineral sector management was superimposed on an international best practice private sector operation / government regulation functional matrix (Slides 8 through 12, Appendix 3). As the Next Steps slide concluding this presentation indicated, the building of such an agency was a long-term goal to be preceded by the short-term drafting of mining and petroleum laws and regulations. Government endorsement and enactment of this legislation would then determine the detailed organizational framework and administrative capabilities best suited to implement and maintain a fully functional “Department of Mines and Energy” in East Timor.
As stated previously, the main TOR task for this mission became, not to “review the draft mining law”, but to create a comprehensive first technical draft. Some mining laws contain provisions that legally enshrine certain organizational units mandated to be responsible for administering the law – the Geological Survey, the Mines Department - as well as the legal establishment of certain senior officers - Director of the Geological Survey, Director of Mines, Chief Inspector of Mines, Registrar of Mineral Rights. In designing this new mining law for this new nation in this early transition period, it was considered to be too soon for such organizational specificity. An acceptable alternative format was applied, namely, the designation of “authorized officers” to be appointed by the Minister to perform the functions necessary to implement the provisions of the law and regulations. This format facilitates the ad hoc utilization of the limited core staff currently available to focus on the key duties required to begin the process of implementation. It also allows the legal flexibility to establish more accurately evaluated units, functions and management positions in the future.
The two exceptions to this approach in the draft MMML are:
In all mining jurisdictions, the legally binding registration of mineral rights and transactions is the critical foundation on which all other regulatory responsibilities and mineral rights holders obligations are based. Immediately subsequent to the legal establishment of NMRRS, as stipulated in Section 2, the client credibility of this “first door” administrative unit is essential. It is for this reason that the recruitment and legal appointment of a Registrar of Mineral Rights is given special status in this draft law. Regardless of future organizational considerations, this position must be maintained as an important mining license control officer and regulatory advisor to senior management.
The ideal Registrar should have an interest in and some understanding of the geography and geology of East Timor. He/she should be proficient in basic computer processing of information, but especially should have an aptitude for meticulous, accurate and scrupulously honest attention to detail. He/she should have an open personality able to interact courteously but firmly with the public.
The Registrar of Mineral Rights should be recognized within the Government Public Service as an important middle manager’s position, and within the “Department of Mines and Energy” as the resident expert on all licensing control aspects of the MMML, implementing regulations and all other legislation impacting on mining license activities. Within the new MMML/NMRRS framework, the Registrar will be a key first contact official for the Ministry with members of the local and international mining community.
The first assignment of the new Registrar shall be to carefully study all legislation affecting mining and its environmental and land access / land use impacts. This research shall incorporate the establishment of formal administrative linkages with relevant officials in other Ministries and Agencies. The Registrar, with the assistance of at least one qualified clerk, shall also establish the official Registration Book and License Area Map Control Series as stipulated in MMML Sections 3 and 6. He/she must be given full cooperation and assistance in preparing a separate office and necessary facilities and equipment to begin accepting, processing and registering mining license applications upon the enactment of MMML.
The Minerals Advisory Board, although not such an immediate priority, has been stipulated in MMML Section 14 because it involves responsibilities and recommendations that go beyond the normal mandate of a mining law. Its legal establishment therefore requires much pre-emptive inter-Ministry and Cabinet deliberations prior to its inclusion in any final draft. It is envisioned that the Board would be activated to consider investment stabilization agreement requests only on a periodic ad hoc basis.
At the direction of the UNMISET Advisor to the Secretary of State, a first draft of a Policy Submission to Council of Ministers/Cabinet was prepared to conform to the established format for such proposals. The draft was forwarded to Mr. Barid Manna on 19 June 2002 and is reproduced here:
1. Recommendation
That the Council of Ministers approve the preparation of a draft Law and key Implementing Regulations on the management of mines and minerals as set out in this Policy Proposal.
2. Background
This law will deal with the nation’s known, mainly land-based and seriously underdeveloped, mineral resources. It will be designed to allow controlled, transparent application, processing and approval of a new generation of mining licenses to authorize the initiation of economically, socially, environmentally and culturally sustainable mining projects.
The nation’s considerable offshore and on-shore oil and gas energy resource endowment will be the subject of separate policy considerations and legislation.
East Timor has numerous occurrences and deposits of a wide spectrum of industrial minerals, construction materials, base metals and precious metals and stones. All of these offer present and future opportunities for strengthening employment, infrastructure and government revenue.
Some of the industrial minerals and construction materials have been exploited inefficiently in the past. If managed utilizing new sustainable mining rules and regulations, they can be restructured to provide maximum benefit to the people and socially acceptable mine-site environmental management, reclamation and rehabilitation.
The metallic mineral potential of East Timor (e.g.) gold, silver, copper, chromite, etc., has yet to be investigated with modern, sophisticated exploration techniques. Given a stable, favorable fiscal and investment climate, both domestic and foreign companies can be attracted to explore for these minerals in this untested terrain.
A concise, clear and effective “mining law” containing internationally recognized fundamental principles and appropriate best practices would facilitate the management of this sector in a socially responsible manner. Complementary regulatory details regarding mineral title management and license-holder operating and reporting requirements can also be prepared simultaneously to clarify proper form, content and procedures for initial implementation.
It will be necessary to draft other Regulations and establish formal inter-Ministry and inter-jurisdictional protocols in the intermediate term as growth in this sector evolves.
3. Comment on Current Mining Legislation
Indonesian Law No. 11 of 1967 and its supplementary regulations and contracts contained many attractive provisions for both domestic and foreign investors in Indonesia. Over the thirty years of its successful implementation, its strengths were in the areas of security of mineral title and “nailed down” sector-specific tax and incentives stability for foreign investors. Its weaknesses were in the areas of contract secrecy and discrimination, and lack of environmental controls and guarantees, local community impact mitigation, and regional revenue-sharing provisions. The Government of Indonesia is currently in the process of drafting a new Mining Law that is more transparent, less discriminatory to domestic investors and much stronger in sector-specific social, environmental and regional autonomy provisions.
Certain attractive provisions from the Indonesian experience should be emulated, but Indonesian mining law is not a suitable model for the innovative legislation required to implement a new sustainable mining management structure for East Timor.
In the past decade, all mining nations have been forced to address three universal mineral policy imperatives:
a. Increased global competition for foreign direct investment in mineral exploration and development projects,
b. Increased pressure to meet new national and international social and environmental standards,
c. Increased demand from impacted regional, local and traditional communities for more involvement in national decision-making that directly affects them, and a much greater share of the revenues generated from activities in their jurisdictions.
These issues along with other sustainable development principles must be incorporated into the proposed legislative package.
4. Outline of Proposed Legislation
Objective
The objective of the Law is to open up the land-based mineral resources of East Timor to credible, properly regulated investigation and sustainable mining activities.
One Official Registration System for all Mineral Rights Transactions
A National Mineral Rights Registration System shall be established in the office of the Registrar of Mineral Rights in Dili. All applications and subsequent mineral license transactions shall be systematically entered in a Registration Book and recorded on License Area Control maps updated daily and open to the public.
Applications will be approved by the Minister in a timely fashion based on receipt of registration and land rental fees and submission of detailed work reports.
One Secure Mineral Right
Only one formal document, a Mining License, is recommended for a successful applicant to secure the right to conduct exploration and mining activities as specified in the Law. Monitoring, control and oversight of such activities shall be accomplished through the annual submission of progressive work programs, payment of escalating land rental fees, and by inspection and enforcement of specified obligations by authorized officers.
Investment Stabilization Agreement
The provision for this possible attachment to a mining license has become a common element of many internationally competitive mining laws. It has many variations, but its main function in all legislation is to negotiate the “freezing” of certain tax, fiscal and legal provisions over fixed periods of time for large-scale mining projects.
It is recommended that this Law provide for the voluntary request by a registered license holder for Government consideration to cap certain prevailing tax rates and legal requirements for projects of “national importance’ that will require large capital investment and significant debt financing.
Protection of the Environment
The Law will specify five social responsibility imperatives as an integral part of work programs to be registered annually by mineral license holders.
During the exploration stage, registered holders will be required to conduct an ecological base-line survey prior to initiating any significant ground disturbance activities. They will also be required to subsequently conduct an Environmental Impact Assessment Study as prescribed in prevailing environmental legislation where mine pre-feasibility investigations are considered to warrant such action.
During the commercial mining operation stage, all work programs must incorporate an environmental management plan, a mine decommissioning and rehabilitation plan, and the creation of a Government/operator joint signatory trust account for the purpose of guaranteeing adequate funding for proper mine-site reclamation before, at and subsequent to mine closure.
Local Community Sustainable Mining Partnership
This innovative recommendation is designed to initially address the critical issues of local awareness, education and decision-making involvement of the rural and traditional communities where mineral license activity is more often to be directed.
Where exploration activity identifies a commercially viable mining operation, provisions are made for the creation of a formally constituted Sustainable Mining Development Authority. This cooperative partnership will be chaired by a Government appointee and made up of representatives of the local community, the district and the mineral license holder’s mine management team. Funding is to be allocated by the Government for the use of SMDA from the anticipated revenues accruing from the mining operation.
The objective of this partnership is to stimulate and support skills training and educational and entrepreneurial initiatives for long-term sustainable enterprises that reinforce local economic, environmental and cultural traditions designed to continue beyond the inevitable closure of the mine.
Regulations
A Section of this Law must be drafted to allow the Minister to make regulations for the sustainable management of mines and minerals and for the purpose of giving effect to the provisions of the Law.
It is acceptable, and in fact is common practice in many mining jurisdictions, to prepare Regulations prescribed by a law subsequent to its enactment. In order to allow for rapid implementation of this legislation, it is recommended that certain administrative framework regulations accompany the final draft law, specifically;
a. A regulation prescribing the official procedures for accepting, processing, approving and registering transactions relating to mineral license activities.
b. A regulation prescribing the format of work programs and reports required by applicants and registered holders to document all exploration, mine feasibility and mining activities.
Additional detailed regulations will be needed in future. Many of those should specify integrated regulatory coordination with other impacted agencies, Ministries and jurisdictions, especially where forestry, agriculture, ecological and religious land overlaps and restrictions occur. Similarly, landowner negotiation / compensation / appeal, social and cultural impacts, environmental rules and compliance all are best managed through inter-Ministry and inter-jurisdictional protocols and cooperative application of uniform national standards and procedures.
5. Financial Implications
The law assigns “authorized officers” appointed by the Minister to perform professional and administrative functions necessary to implement this legislation. In the initial implementation of the Law, these functions can be carried out by a small number of such officers. They do, however, represent the nucleus of the future organizational structure of a fully functional “Department of Mines and Minerals” incorporating a Mines Division, a Geological Survey Division, a Mineral Rights Registration Unit, a Mineral Investment Promotion Unit as essential core agencies.
It is anticipated that the enactment of the Law as set out in this Policy Proposal, namely one containing “international best practice” principles and transparent, objective administrative procedures, will attract both domestic and foreign investors in the short term. This investor interest is expected to stimulate much needed short-term employment opportunities for East Timorese workers.
The fee schedule for mineral license application and maintenance charges should be designed to cover the cost of administering the National Mineral Rights Registration System.
Significant long-term donor support will be necessary to build the professional and management capability for a fully functional Mines and Minerals Department. This capability can be routinely strengthened based on the perceived attractiveness of the Law, the successful implementation of its initial regulation, and the anticipated rapid growth in the development of this sub-sector.
6. Necessary Consultation
This proposal must be vetted by a wide spectrum of relevant stakeholders in order to seek consensus on this new legal framework, to ensure an acceptable contribution to the socio-economic growth of the nation from its currently under-utilized mineral sector. This consultation process should be accelerated to quickly facilitate the enactment of this Law. The rationale for this priority treatment is as follows:
a. The employment and revenue potential of these known land-based minerals has been surprisingly neglected in the National Development Plan. Contrary to this oversight, they represent the most easily activated and controlled natural resources sub-sector, especially amenable in the short term to small and medium scale enterprises.
b. The orderly evaluation, mining, processing, marketing and sales potential for the industrial mineral and construction materials mineral category, as defined and controlled in this Law, can immediately begin to contribute more effectively to the important infrastructure improvement of the nation.
c. With an attractive mineral sector investment regime and clearly stated social and environmental obligations, credible foreign direct investment interest will be forthcoming to investigate the known but still largely untested base and precious metal potential of East Timor.
Funding was requested and approved by UN/ESCAP to translate this Policy Submission and the draft MMML into the official languages of Tetum and Portuguese to enable further action by the Minister prior to his approval to formally submit this package to Cabinet.
A power-point presentation summarizing this Policy Submission and outlining the principles and integrated economic, social and environmental sustainability provisions contained in the draft MMML was given to the Secretary of State and his senior staff on June 22 2002. It was repeated for UNDP senior staff on June 27, and for UN/ESCAP Water and Mineral Resources Section officials in Bangkok on July 3, 2002. The presentation is attached as Appendix 5.
As stipulated in Section 27 of the draft MMML, the Minister shall be called upon to approve many regulations for the purpose of giving effect to the provisions of the law. It is not within the TOR or the timeframe of this mission to draft a complete set of Implementing Regulations with appropriate schedules and forms to accompany the draft MMML. Nor is it essential to have a complete set of regulations finished prior to the enactment and initial implementation of this Law. Assistance in the establishment of many regulatory mining cadastre and mining license administration sub-components - mine-site environmental management and reclamation funding, mine worker health and safety, mine feasibility analysis, investment stabilization agreement negotiation, royalty and revenue auditing – is best provided by international specialists in these disciplines working directly with designated host-country counterparts. This process must wait for the activation of donor funding, consultancies, counterpart staffing and institutional strengthening action plans.
It is considered essential at this time, however, to generate certain initial implementation regulations and forms for the education and use of those “authorized officers” that will be required to begin the process of “Mining License Administration” as stipulated in MMML Part II. As documented in the final slide of the Appendix 5 presentation, the top priority implementation regulations necessary to be prepared prior to the official opening of the office of the Registrar of Mineral Rights and the NMRRS (Section 3 of MMML) are those detailing rules and procedures for:
| The manner and form of acceptable applications |
| The manner and form of work programs |
| The schedule of fees relating to mining license registrations, transactions and area rentals. |
To this end, the following first draft Forms addressing eight (8) initial regulatory priorities are attached in Appendix 6 for the guidance of the Registrar and other “authorized officers” of the transition team:
| Form 1 | Application for a Mining License. |
| Form 2 | Registration of Transfer/Assignment of a Mining License |
| Form 3 | Mining License No. …… |
| Form 4 | Schedule of Fees and Annual Charges |
| Form 5 | Format for Exploration Work Program to be submitted with Application for Mining License |
| Form 6 | Format for Advanced Exploration and Mining Work Program |
| Form 7 | Format for Final Mine Feasibility Study and subsequent annual Commercial Mining Operation attachments to Advanced Exploration and Mining Work Program |
| Form 8 | Environmental Impact Assessment and Action Plan |
As stated in this mission’s TOR (Appendix 1), the main policy focus was to be directed at “the development of mineral resources and onshore oil and gas potential”. In the case of onshore oil and gas, as contrasted with the essentially “clean slate” for onshore mineral resources, a number of serious development applications had already been tabled with the Secretary of State. In one such proposal, a draft Petroleum Mining Code for Onshore East Timor and a Pro Forma Production Sharing Contract were attached (Reference 6).
The intention of this approach was to assist in accelerating the enactment of interim that would facilitate GOET approval of one or more of these applications as soon as possible. A cursory assessment of the draft code and contract suggested that the contents of both should be of considerable use to the future drafters of comprehensive petroleum legislation.
Due to the long-term national importance of integrated petroleum policy and legislation the small but more immediately available onshore resources with the major offshore potential and critical multi-national agreements, further short-term analysis of this issue was not continued at this time.
Following discussions with representatives of one of the proponents, East Timor Logistics Pty Ltd., and with Jonathan Morrow, UNMISET Legal Advisor on petroleum policy to GOET and the Timor Gap Joint Authority, a note on this consultant’s initial observations was submitted to UNMISET Advisor Barid Manna on 26 June 2002, and is reproduced here.
1. The clear distinction between “mineral resources” and “petroleum resources” and the need for separate legislation must be emphasized.
2. There still appears to be confusion about the role of “Laws” and “Regulations” in drafting legislation. In general, laws may be drafted to incorporate regulatory details where increased legal stability and emphasis is considered to be useful. This is recommended as an appropriate approach in the drafting of both a new “Mines and Minerals Law’ and a new “Petroleum Law” for this new nation.
Regulations, on the other hand, can never be drafted to replace, correct, contradict or amend provisions contained in any law. Regulations are prescribed “by law” for the sole purpose of providing needed detail to better administer the intent of certain legal provisions. They may only be drafted on the direction of enabling clauses clearly stated in the law.
The use of the term “regulations” in many Government documents tends to obscure this critical legislative relationship. Laws must be enacted by Parliament. Regulations may be passed by Cabinet, but should always be linked to an enabling law.
3. The “Natural Oil and Gas Law” must take into consideration the known occurrences of petroleum resources onshore, offshore and in the Timor Gap Joint Authority area. The tripartite nature of these resources will require resource management provisions unique to each of these development environments, for example:
| General provisions consistent with those already established in the Timor Gap treaty |
| Specific provisions reflecting the 100% East Timorese sovereignty and authority over the petroleum resources present within the landmass, territorial waters, continental shelf and the exclusive economic zone of East Timor |
| Specific provisions regarding the special economic, environmental, social and cultural elements to be considered in proceeding with onshore petroleum resources investigation and development. |
4. A key provision in the new law must be that, in all but exceptional and well-defined cases, contractors shall be selected on the basis of competitive bidding. Bids should be solicited in accordance with international practice. A formal tender shall be issued which shall request, inter alia, relevant details on the following items:
| Company profile |
| Past performance |
| Viability and financial status |
| Credit-worthiness |
| Technical and management capability |
| Commitment to localization (e.g., education, training, employment, infrastructure) |
5. Provisions in the new law and implementing regulations must document the rules and procedures under which competitive bids will be tendered, accepted, adjudicated, rated and decided upon in an open, neutral and professional manner.
The foundation of the national mineral development embellishment of the otherwise comprehensive NDP is the enactment of internationally credible mining and petroleum legislation.
With respect to the onshore mineral sector, GOET has a unique opportunity to create an exclusively “made in East Timor” mining law containing provisions which enshrine the constitutionally established principles of economic, environmental and social sustainability. The draft MMML may be the first draft of mining legislation anywhere in the world to clearly define the concept of “sustainable mining” and integrate it into its mineral resources management framework.
The legal drafting, Cabinet evaluation and formal enactment of a Mines and Minerals Management Law and its initial Implementing Regulations is more quickly and easily accomplished than the separate legislation required to address the more internationally complex petroleum endowment of East Timor.
Similarly, the implementation of the regulatory framework to properly control the private sector investigation and development of onshore minerals can be initially managed by a small number of authorized officers. The administrative and regulatory system can grow in proportion to the growth of this sub-sector.
The historically neglected onshore mineral resources of East Timor - if documented, promoted and legally controlled as recommended in this and other reports emanating from the UNDP/ESCAP sponsored Project TIM/01/022 - will attract credible local and international investors to investigate and properly develop this commercially untapped national resources endowment. This sub-sector can generate needed local employment and government revenue in the near future if given priority attention in an up-dated NDP.
Submit technical draft MMML to the Minister and to editing by both national and international legal drafting experts.
Initiate the stakeholder consultation process, as outlined in Section 4.3 of this report.
Recruit and appoint a “Registrar” to begin the research and preparation of NMRRS, as outlined in Section 4.1 of this report.
Solicit international donor support for institutional strengthening and professional capacity building programs, initially focused on the following priority administration areas:
| Mining cadastre and mining license registry office |
| Implementing regulations: drafting, authorized officer education and training, secondments to mature mining jurisdictions. |
| Preparation of National Mineral Development Plan promotional document and public information brochures. |
| Preparation of presentations for regional information sessions on sustainable mining principles, rules and procedures. |
National Development Plan; Planning Commission, Dili, May 2002, 319 pp.
Our Common Future: World Commission on Environment and Development (“the Brundtland Report”); Oxford University Press, 1987.
East Timor: State of the Nation Report; Planning Commission, Dili, April 2002, 129 pp.
Working Group Paper No. 4: Minerals, Natural Resources and Environment; Planning Commission, Dili, 28 March 2002, 13 pp.
Establishment of a Legal Regime for Mining in East Timor; UNTAET draft policy proposal, 20 February 2002.
Draft Hydocarbon Development Proposal, Resource Policy and recommended Onshore Legislation; East Timor Logistics Pty Ltd, James C. Dowell, 13 June 2002, 57 pp.
Terms of Reference (TOR), UN/ESCAP
Agenda for National Workshop on Policy, Strategy and Regulatory Framework in the Development of Mineral Resources in East Timor, June 5-6 2002.
Mineral Development Policy Presentation to National Workshop – J. A. Garnett.
Technical Draft of Mines and Minerals Management Law (MMML).
MMML Policy Presentation to DNMR, UNDP, and UN/ESCAP - J. A. Garnett.
Initial Implementing Regulation Forms (8 Forms)
DNMR | Department of Natural and Mineral Resources |
EIA | Environmental Impact assessment |
EMP | Environmental Management Plan |
GOET | Government of East Timor |
GPS | Geographic Positioning System |
MMML | Mines and Minerals Management Law |
NDP | National Development Plan |
NMRRS | National Mineral Rights Registration System |
SMDA | Sustainable Mining Development Authority |
UNDP | United Nations Development Programme |
UN/ESCAP | United Nations Economic and Social Commission for Asia and the Pacific |
UNMISET | United Nations Mission of Support in East Timor |
UNTAET | United Nations Transitional Administration in East Timor |
UTM | Universal Transverse Mercator (grid system) |
The Timor-Leste Institute for Development Monitoring and Analysis (La’o Hamutuk) |