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Friday, 08 August 14
MINING DISPUTE IS CRIPPLING LOCAL ECONOMIES IN EASTERN INDONESIA - JG
 - By Iwan Harsono -
It seems as if there’s no end in sight to the series of negotiations between the government and mining companies about the Law on Mineral and Coal Mining (No. 4/2009), especially when taking into consideration the fact that Newmont Nusa Tenggara has opted to file for arbitration against the government of Indonesia. Geographically speaking, most mining giants, like Newmont and Freeport Indonesia, are operating in the Eastern Indonesia Region (KTI), comprising Papua, Maluku, Nusa Tenggara and Sulawesi, and the legal uncertainty surrounding mining operations has therefore led to a regional dip in economic growth.
Principally, the purpose of the Mining Law is noble, since it aims to increase the quality of the nation’s mineral exports for the benefit of its citizens, as stated in Article 33 of the 1945 Constitution. To complicate matters, however, several parties have argued that the Indonesian government isn’t ready yet to implement the law. Such circumstances have in turn led to the shutdown of several mineral mining companies across the country, particular in the east, a region rich in lucrative resources such as gold, copper and nickel.
Economic resilience
Currently, Eastern Indonesia is facing major developmental challenges and lately the investment climate has been less than helpful in increasing the region’s economic resilience. Eastern Indonesia has become a region that has suffered the most following the implementation of the Mining Law. At the macro level, this policy has resulted in a significant decrease in economic resilience. For instance, the region’s economic growth in the first quarter of 2014 fell to 4.6 percent (year on year), from 6.6 percent in the fourth quarter of 2013. Economic growth has struggled in several provinces, the majority of which rely heavily on the mining sector, especially Southeast Sulawesi, Papua, West Papua, West Nusa Tenggara, and West Kalimantan.
West Nusa Tenggara saw its economic growth decrease by 3.94 percent, with the mining industry suffering one of the sharpest declines at 9.82 percent in the first quarter of 2014. To make matters worse, an imbalance in the export-import rate often also leads to an even sharper overall economic decline.
There have been many changes following the implementation of the export ban in January earlier this year, and companies in the mining industry have struggled to cope. Strong sales overseas and the availability of only a limited number of smelters has influenced the production of copper (in Papua and Nusa Tenggara), nickel (in Sulawesi) and bauxite (in Kalimantan), and recently it has even threatened the coal industry as well.
Domino effect
Companies that didn’t see any way to sell their extracted resources were forced to shut down, send their employees home with limited pay or in some cases, dismiss them outright. Based on data from the Indonesia Mining Association, approximately 133,000 employees have been dismissed so far.
Newmont, for instance, sent home 6,400 of its employees in June because stockpiles have been full since last May due to the export ban. As one of the most important contributors to the local economy in West Sumbawa, Newmont’s production halt has impacted both the local and regional economies.
And there will be a domino effect on all other sectors that depend on the mining operations, for instance by providing services, and on the government, which will see a drop in tax and royalty income.
While those who were sent home are still receiving their salaries — albeit not the full amount — the economic impact has affected the communities surrounding the mining site the most, as most of them rely heavily on Newmont’s operations. Most of the small shop owners have complained of having excess stock as spending power continues to fall.
Handayani, a local diner owner, said that before the current economic struggles she often earned as much as Rp 10 million ($850) in a single day, though these days she claims she’s lucky if she can earn Rp 1 million by noon. Consequently, she has been forced to cut the number of her employees down from 12 to six.
When we look at the bigger picture, Newmont claims that the West Sumbawa region stands to lose as much as $726 million per year, the most of which comes from decreasing CSR investment, salaries and domestic purchases. If we take tax and royalties into consideration as well, the number would rise to $887 million annually.
Possible solutions
To strengthen the economy of Eastern Indonesia we will need to improve the regional infrastructure for transportation, specifically through the renovation of ports and airports in strategic cities. Unfortunately, at the moment the fear of losing employment has been on everyone’s mind.
With hindsight being 20/20, in retrospect the government should have prepared a mitigation plan prior to implementing the current regulation. Fear, anxiety and uncertainty have miners and surrounding communities worried. They have no other option but to hope the government steps in and lends a helping hand.
Renegotiations have to be finalized sooner rather than later.
For its part, the government has to be wise if it wants to solve the dispute with those involved. From both a macro and a micro economic perspective, the current mining dispute presents a major obstacle to development in Eastern Indonesia.
Renegotiations should offer a solution that is beneficial for both mining companies and the government in order to ensure that operations can be resumed as soon as possible. And it is crucial that the government prepare a safety net for local communities that depend on mining operations. Finally, a mitigation plan should be included in future mining regulations, specifically one that keeps the welfare of the locals in mind. These steps should be taken quickly if we want to fulfil the promises of our constitution.
Iwan Harsono, a member of the Advisory Board for Economic Resources in West Lombok, is a lecturer in economics at the University of Mataram.
This article was originally published in The Jakarta Globe
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Friday, 22 March 24
INDONESIA APPROVES 922.14 MLN T COAL PRODUCTION QUOTA FOR 2024, ABOVE TARGET - REUTERS
Indonesia has approved coal production quotas totalling 922.14 million metric tons for 2024, Bambang Suswantono, a senior official at the mining mi ...
Friday, 22 March 24
CHINA COAL INDUSTRY GROUP EXPECTS OUTPUT GROWTH TO SLOW IN 2024 - REUTERS
China’s coal output is expected to increase 36 million metric tons, or 0.8%, to about 4.7 billion tonnes in 2024, a Chinese coal industry gro ...
Monday, 18 March 24
THREE KEY TAKEAWAYS FROM OUR EUROPE GAS MARKETS SHORT-TERM OUTLOOK Q1 2024 - WOOD MACKENZIE
European gas prices are currently back to pre-crisis levels, but with a complex series of factors affecting future supply and demand, are they set ...
Wednesday, 06 March 24
INDONESIA AIMS TO FINISH MINING OUTPUT QUOTAS APPROVAL BY END-MARCH, OFFICIAL SAYS - REUTERS
Indonesia’s has approved the mining production quotarequests from more than 120mineral companies and aims to complete the approval process th ...
Monday, 04 March 24
IS YOUR GUARANTEE A GUARANTEE? NOTE TO SHIPOWNERS - GARD
KNOWLEDGE TO ELEVATE
The law of guarantees is not always obvious or easy to understand without proper guidance. This article clarifies the dif ...
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- Bhoruka Overseas - Indonesia
- Mjunction Services Limited - India
- Ceylon Electricity Board - Sri Lanka
- Jindal Steel & Power Ltd - India
- Directorate Of Revenue Intelligence - India
- Bukit Makmur.PT - Indonesia
- SMC Global Power, Philippines
- SN Aboitiz Power Inc, Philippines
- Electricity Generating Authority of Thailand
- India Bulls Power Limited - India
- Mercuria Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Binh Thuan Hamico - Vietnam
- Eastern Coal Council - USA
- Antam Resourcindo - Indonesia
- Carbofer General Trading SA - India
- SMG Consultants - Indonesia
- Energy Development Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- McConnell Dowell - Australia
- Kalimantan Lumbung Energi - Indonesia
- Global Coal Blending Company Limited - Australia
- Kumho Petrochemical, South Korea
- Thiess Contractors Indonesia
- Star Paper Mills Limited - India
- Interocean Group of Companies - India
- Iligan Light & Power Inc, Philippines
- Independent Power Producers Association of India
- Bukit Asam (Persero) Tbk - Indonesia
- CNBM International Corporation - China
- Semirara Mining Corp, Philippines
- Renaissance Capital - South Africa
- Georgia Ports Authority, United States
- Manunggal Multi Energi - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Australian Coal Association
- Bulk Trading Sa - Switzerland
- GVK Power & Infra Limited - India
- Coal and Oil Company - UAE
- PNOC Exploration Corporation - Philippines
- Electricity Authority, New Zealand
- Meralco Power Generation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Eastern Energy - Thailand
- Kartika Selabumi Mining - Indonesia
- Vedanta Resources Plc - India
- Tamil Nadu electricity Board
- Madhucon Powers Ltd - India
- Aditya Birla Group - India
- Dalmia Cement Bharat India
- Ministry of Transport, Egypt
- Trasteel International SA, Italy
- OPG Power Generation Pvt Ltd - India
- Singapore Mercantile Exchange
- Riau Bara Harum - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Parliament of New Zealand
- Orica Mining Services - Indonesia
- Tata Chemicals Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Vizag Seaport Private Limited - India
- ASAPP Information Group - India
- European Bulk Services B.V. - Netherlands
- Price Waterhouse Coopers - Russia
- Orica Australia Pty. Ltd.
- Samtan Co., Ltd - South Korea
- Jorong Barutama Greston.PT - Indonesia
- Makarim & Taira - Indonesia
- Medco Energi Mining Internasional
- Global Green Power PLC Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- ICICI Bank Limited - India
- Ministry of Finance - Indonesia
- IEA Clean Coal Centre - UK
- Anglo American - United Kingdom
- Savvy Resources Ltd - HongKong
- Xindia Steels Limited - India
- Directorate General of MIneral and Coal - Indonesia
- PTC India Limited - India
- Barasentosa Lestari - Indonesia
- TeaM Sual Corporation - Philippines
- Kepco SPC Power Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Port Waratah Coal Services - Australia
- Sree Jayajothi Cements Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- PowerSource Philippines DevCo
- Kohat Cement Company Ltd. - Pakistan
- Attock Cement Pakistan Limited
- Bhatia International Limited - India
- Bayan Resources Tbk. - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Thai Mozambique Logistica
- San Jose City I Power Corp, Philippines
- Coastal Gujarat Power Limited - India
- Merrill Lynch Commodities Europe
- Banpu Public Company Limited - Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Mines - Canada
- Africa Commodities Group - South Africa
- Kaltim Prima Coal - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Globalindo Alam Lestari - Indonesia
- Commonwealth Bank - Australia
- Therma Luzon, Inc, Philippines
- Cement Manufacturers Association - India
- AsiaOL BioFuels Corp., Philippines
- Jaiprakash Power Ventures ltd
- Metalloyd Limited - United Kingdom
- Central Java Power - Indonesia
- MS Steel International - UAE
- Aboitiz Power Corporation - Philippines
- London Commodity Brokers - England
- Planning Commission, India
- Sindya Power Generating Company Private Ltd
- Goldman Sachs - Singapore
- Sical Logistics Limited - India
- Power Finance Corporation Ltd., India
- Essar Steel Hazira Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Billiton Holdings Pty Ltd - Australia
- Australian Commodity Traders Exchange
- Standard Chartered Bank - UAE
- Sojitz Corporation - Japan
- Lanco Infratech Ltd - India
- Energy Link Ltd, New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Petron Corporation, Philippines
- Central Electricity Authority - India
- Mercator Lines Limited - India
- New Zealand Coal & Carbon
- Karaikal Port Pvt Ltd - India
- Heidelberg Cement - Germany
- South Luzon Thermal Energy Corporation
- Chamber of Mines of South Africa
- Toyota Tsusho Corporation, Japan
- Mintek Dendrill Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Ind-Barath Power Infra Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Deloitte Consulting - India
- Timah Investasi Mineral - Indoneisa
- PetroVietnam Power Coal Import and Supply Company
- The State Trading Corporation of India Ltd
- VISA Power Limited - India
- Wilmar Investment Holdings
- Videocon Industries ltd - India
- Agrawal Coal Company - India
- Chettinad Cement Corporation Ltd - India
- GMR Energy Limited - India
- Indian Oil Corporation Limited
- Bharathi Cement Corporation - India
- IHS Mccloskey Coal Group - USA
- Indo Tambangraya Megah - Indonesia
- Minerals Council of Australia
- Marubeni Corporation - India
- Siam City Cement PLC, Thailand
- Rio Tinto Coal - Australia
- Larsen & Toubro Limited - India
- Coalindo Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Pendopo Energi Batubara - Indonesia
- Edison Trading Spa - Italy
- Semirara Mining and Power Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Uttam Galva Steels Limited - India
- International Coal Ventures Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Indian Energy Exchange, India
- Gujarat Sidhee Cement - India
- Parry Sugars Refinery, India
- Intertek Mineral Services - Indonesia
- White Energy Company Limited
- Salva Resources Pvt Ltd - India
- Bangladesh Power Developement Board
- Bhushan Steel Limited - India
- Borneo Indobara - Indonesia
- Sakthi Sugars Limited - India
- Kideco Jaya Agung - Indonesia
- Meenaskhi Energy Private Limited - India
- Baramulti Group, Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Maheswari Brothers Coal Limited - India
- The University of Queensland
- Formosa Plastics Group - Taiwan
- GAC Shipping (India) Pvt Ltd
- Wood Mackenzie - Singapore
- Straits Asia Resources Limited - Singapore
- Alfred C Toepfer International GmbH - Germany
- Indogreen Group - Indonesia
- CIMB Investment Bank - Malaysia
- Global Business Power Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- Ambuja Cements Ltd - India
- LBH Netherlands Bv - Netherlands
- Siam City Cement - Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Oldendorff Carriers - Singapore
- Indonesian Coal Mining Association
- Simpson Spence & Young - Indonesia
- Latin American Coal - Colombia
- Posco Energy - South Korea
- Economic Council, Georgia
- Romanian Commodities Exchange
- The Treasury - Australian Government
- Altura Mining Limited, Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Malabar Cements Ltd - India
- Indika Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Kobexindo Tractors - Indoneisa
- Karbindo Abesyapradhi - Indoneisa
- Grasim Industreis Ltd - India
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