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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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- Essar Steel Hazira Ltd - India
- PowerSource Philippines DevCo
- Kohat Cement Company Ltd. - Pakistan
- Wilmar Investment Holdings
- Karaikal Port Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Vizag Seaport Private Limited - India
- Australian Commodity Traders Exchange
- Ceylon Electricity Board - Sri Lanka
- Sojitz Corporation - Japan
- The University of Queensland
- Bank of Tokyo Mitsubishi UFJ Ltd
- OPG Power Generation Pvt Ltd - India
- McConnell Dowell - Australia
- Orica Australia Pty. Ltd.
- Coastal Gujarat Power Limited - India
- Parry Sugars Refinery, India
- Heidelberg Cement - Germany
- Global Coal Blending Company Limited - Australia
- Global Business Power Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Bhushan Steel Limited - India
- Formosa Plastics Group - Taiwan
- Aboitiz Power Corporation - Philippines
- Merrill Lynch Commodities Europe
- Rashtriya Ispat Nigam Limited - India
- Siam City Cement - Thailand
- Cement Manufacturers Association - India
- Indo Tambangraya Megah - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Asam (Persero) Tbk - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Altura Mining Limited, Indonesia
- GVK Power & Infra Limited - India
- Central Java Power - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Meralco Power Generation, Philippines
- TeaM Sual Corporation - Philippines
- Chettinad Cement Corporation Ltd - India
- Samtan Co., Ltd - South Korea
- Ambuja Cements Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Energy Development Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- IEA Clean Coal Centre - UK
- Salva Resources Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- South Luzon Thermal Energy Corporation
- Kartika Selabumi Mining - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Electricity Generating Authority of Thailand
- SMG Consultants - Indonesia
- Aditya Birla Group - India
- SMC Global Power, Philippines
- Vedanta Resources Plc - India
- Videocon Industries ltd - India
- CNBM International Corporation - China
- PTC India Limited - India
- Semirara Mining Corp, Philippines
- Bharathi Cement Corporation - India
- Xindia Steels Limited - India
- Eastern Energy - Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Latin American Coal - Colombia
- Rio Tinto Coal - Australia
- Electricity Authority, New Zealand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Uttam Galva Steels Limited - India
- Indian Oil Corporation Limited
- Metalloyd Limited - United Kingdom
- Renaissance Capital - South Africa
- Simpson Spence & Young - Indonesia
- Parliament of New Zealand
- Medco Energi Mining Internasional
- Goldman Sachs - Singapore
- Barasentosa Lestari - Indonesia
- Malabar Cements Ltd - India
- Bukit Baiduri Energy - Indonesia
- Thai Mozambique Logistica
- Star Paper Mills Limited - India
- Kapuas Tunggal Persada - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Mintek Dendrill Indonesia
- Bhoruka Overseas - Indonesia
- Meenaskhi Energy Private Limited - India
- Ministry of Finance - Indonesia
- Indika Energy - Indonesia
- Marubeni Corporation - India
- Dalmia Cement Bharat India
- Georgia Ports Authority, United States
- Miang Besar Coal Terminal - Indonesia
- London Commodity Brokers - England
- Bangladesh Power Developement Board
- PNOC Exploration Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Deloitte Consulting - India
- PetroVietnam Power Coal Import and Supply Company
- Grasim Industreis Ltd - India
- Straits Asia Resources Limited - Singapore
- Ministry of Transport, Egypt
- Riau Bara Harum - Indonesia
- Tata Chemicals Ltd - India
- Interocean Group of Companies - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Standard Chartered Bank - UAE
- Manunggal Multi Energi - Indonesia
- Coalindo Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- The Treasury - Australian Government
- Indogreen Group - Indonesia
- Timah Investasi Mineral - Indoneisa
- Ind-Barath Power Infra Limited - India
- Edison Trading Spa - Italy
- Kobexindo Tractors - Indoneisa
- Makarim & Taira - Indonesia
- Sical Logistics Limited - India
- Bayan Resources Tbk. - Indonesia
- Holcim Trading Pte Ltd - Singapore
- VISA Power Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indonesian Coal Mining Association
- Pendopo Energi Batubara - Indonesia
- Gujarat Sidhee Cement - India
- Bulk Trading Sa - Switzerland
- Planning Commission, India
- Therma Luzon, Inc, Philippines
- Attock Cement Pakistan Limited
- Leighton Contractors Pty Ltd - Australia
- Alfred C Toepfer International GmbH - Germany
- Coal and Oil Company - UAE
- Singapore Mercantile Exchange
- Commonwealth Bank - Australia
- Ministry of Mines - Canada
- Bhatia International Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Minerals Council of Australia
- Neyveli Lignite Corporation Ltd, - India
- Mercuria Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- New Zealand Coal & Carbon
- Independent Power Producers Association of India
- Sarangani Energy Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Chamber of Mines of South Africa
- Mjunction Services Limited - India
- Iligan Light & Power Inc, Philippines
- Africa Commodities Group - South Africa
- Baramulti Group, Indonesia
- San Jose City I Power Corp, Philippines
- Anglo American - United Kingdom
- Oldendorff Carriers - Singapore
- Borneo Indobara - Indonesia
- Global Green Power PLC Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Jorong Barutama Greston.PT - Indonesia
- Trasteel International SA, Italy
- Kideco Jaya Agung - Indonesia
- Petron Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Mercator Lines Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Orica Mining Services - Indonesia
- Maheswari Brothers Coal Limited - India
- Posco Energy - South Korea
- Sindya Power Generating Company Private Ltd
- Power Finance Corporation Ltd., India
- Savvy Resources Ltd - HongKong
- Siam City Cement PLC, Thailand
- Wood Mackenzie - Singapore
- International Coal Ventures Pvt Ltd - India
- Madhucon Powers Ltd - India
- Directorate Of Revenue Intelligence - India
- GMR Energy Limited - India
- White Energy Company Limited
- Energy Link Ltd, New Zealand
- AsiaOL BioFuels Corp., Philippines
- India Bulls Power Limited - India
- Thiess Contractors Indonesia
- Carbofer General Trading SA - India
- Karbindo Abesyapradhi - Indoneisa
- Bukit Makmur.PT - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Economic Council, Georgia
- ICICI Bank Limited - India
- Agrawal Coal Company - India
- The State Trading Corporation of India Ltd
- European Bulk Services B.V. - Netherlands
- Intertek Mineral Services - Indonesia
- Port Waratah Coal Services - Australia
- LBH Netherlands Bv - Netherlands
- Toyota Tsusho Corporation, Japan
- Sakthi Sugars Limited - India
- Tamil Nadu electricity Board
- Lanco Infratech Ltd - India
- Cigading International Bulk Terminal - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Larsen & Toubro Limited - India
- GAC Shipping (India) Pvt Ltd
- IHS Mccloskey Coal Group - USA
- Globalindo Alam Lestari - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Sree Jayajothi Cements Limited - India
- Jaiprakash Power Ventures ltd
- Romanian Commodities Exchange
- MS Steel International - UAE
- ASAPP Information Group - India
- Kepco SPC Power Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Kumho Petrochemical, South Korea
- Eastern Coal Council - USA
- Jindal Steel & Power Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Energy Exchange, India
- CIMB Investment Bank - Malaysia
- Central Electricity Authority - India
- Kaltim Prima Coal - Indonesia
- Australian Coal Association
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