Indonesia minister sees new mining law by year-end

NUSA DUA, Indonesia, June 4 (Reuters) - A new Indonesian mining law to encourage more foreign investment in the sector could be in force by the end of the year after nearly two years of debate, a top government official said on Monday.

"We're in the final stages of drafting ... We are expecting it to be in place by the end of this year," Mines and Energy Minister Purnomo Yusgiantoro said at a Coaltrans conference on the island of Bali.

The government and parliament have been debating the draft since February of last year, holding up an initiative meant to improve the environment for investing into Indonesia's rich coal, copper, gold, tin and nickel deposits, a key driver of economic growth.

Despite a global price boom for most commodities that has prompted a fresh flurry of investment and mega-mergers, investment into Indonesia has been stymied by regulatory uncertainty, widespread graft and bureaucracy.

While the country's economy grew at 5.5 percent, the mining sector expanded by only 2.2 percent.

The new legislation aims to inject fresh funds into the sector, but mining firms have expressed concerns over some aspects of the law, including plans to replace the use of working contracts with shorter, less rigid mining licences.

The Indonesian government is also pressing the industry to invest more in higher-value processing capacity, turning raw ore into metal. There is only one copper smelter in Indonesia.

Haggling over the draft has caused repeated delays in its implementation. At the start of the year, officials had hoped for parliamentary passage by March.