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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, 23 February 24
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Friday, 23 February 24
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- Wilmar Investment Holdings
- Straits Asia Resources Limited - Singapore
- Trasteel International SA, Italy
- ICICI Bank Limited - India
- PowerSource Philippines DevCo
- International Coal Ventures Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Ministry of Transport, Egypt
- Borneo Indobara - Indonesia
- Grasim Industreis Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Maheswari Brothers Coal Limited - India
- Sinarmas Energy and Mining - Indonesia
- Videocon Industries ltd - India
- Global Green Power PLC Corporation, Philippines
- Petron Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Georgia Ports Authority, United States
- SMC Global Power, Philippines
- GVK Power & Infra Limited - India
- Bangladesh Power Developement Board
- Banpu Public Company Limited - Thailand
- Intertek Mineral Services - Indonesia
- Aboitiz Power Corporation - Philippines
- Global Business Power Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Cement Manufacturers Association - India
- Mjunction Services Limited - India
- Siam City Cement - Thailand
- South Luzon Thermal Energy Corporation
- Merrill Lynch Commodities Europe
- Mintek Dendrill Indonesia
- Medco Energi Mining Internasional
- Coalindo Energy - Indonesia
- Sree Jayajothi Cements Limited - India
- Planning Commission, India
- Star Paper Mills Limited - India
- Dalmia Cement Bharat India
- Malabar Cements Ltd - India
- Baramulti Group, Indonesia
- Posco Energy - South Korea
- Electricity Generating Authority of Thailand
- Latin American Coal - Colombia
- Indian Energy Exchange, India
- Meralco Power Generation, Philippines
- Parry Sugars Refinery, India
- Attock Cement Pakistan Limited
- Mercator Lines Limited - India
- Riau Bara Harum - Indonesia
- Salva Resources Pvt Ltd - India
- The University of Queensland
- Rashtriya Ispat Nigam Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Standard Chartered Bank - UAE
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Australian Commodity Traders Exchange
- The State Trading Corporation of India Ltd
- Maharashtra Electricity Regulatory Commission - India
- Bhoruka Overseas - Indonesia
- GAC Shipping (India) Pvt Ltd
- Manunggal Multi Energi - Indonesia
- Directorate Of Revenue Intelligence - India
- Kumho Petrochemical, South Korea
- Edison Trading Spa - Italy
- Gujarat Electricity Regulatory Commission - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- The Treasury - Australian Government
- European Bulk Services B.V. - Netherlands
- Antam Resourcindo - Indonesia
- Bhushan Steel Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Thiess Contractors Indonesia
- Bayan Resources Tbk. - Indonesia
- Singapore Mercantile Exchange
- Petrochimia International Co. Ltd.- Taiwan
- TNB Fuel Sdn Bhd - Malaysia
- Toyota Tsusho Corporation, Japan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Iligan Light & Power Inc, Philippines
- Binh Thuan Hamico - Vietnam
- Pendopo Energi Batubara - Indonesia
- TeaM Sual Corporation - Philippines
- Meenaskhi Energy Private Limited - India
- New Zealand Coal & Carbon
- Indogreen Group - Indonesia
- Economic Council, Georgia
- San Jose City I Power Corp, Philippines
- Bhatia International Limited - India
- Vizag Seaport Private Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Savvy Resources Ltd - HongKong
- Sojitz Corporation - Japan
- Formosa Plastics Group - Taiwan
- Electricity Authority, New Zealand
- AsiaOL BioFuels Corp., Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Simpson Spence & Young - Indonesia
- Indian Oil Corporation Limited
- Makarim & Taira - Indonesia
- CNBM International Corporation - China
- Aditya Birla Group - India
- Central Electricity Authority - India
- Heidelberg Cement - Germany
- OPG Power Generation Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Interocean Group of Companies - India
- Independent Power Producers Association of India
- Port Waratah Coal Services - Australia
- Global Coal Blending Company Limited - Australia
- Central Java Power - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Sarangani Energy Corporation, Philippines
- Uttam Galva Steels Limited - India
- Vedanta Resources Plc - India
- Siam City Cement PLC, Thailand
- Thai Mozambique Logistica
- Wood Mackenzie - Singapore
- Chettinad Cement Corporation Ltd - India
- Marubeni Corporation - India
- Billiton Holdings Pty Ltd - Australia
- MS Steel International - UAE
- Jaiprakash Power Ventures ltd
- Power Finance Corporation Ltd., India
- Offshore Bulk Terminal Pte Ltd, Singapore
- IHS Mccloskey Coal Group - USA
- Bukit Asam (Persero) Tbk - Indonesia
- McConnell Dowell - Australia
- Metalloyd Limited - United Kingdom
- Altura Mining Limited, Indonesia
- Rio Tinto Coal - Australia
- Anglo American - United Kingdom
- PNOC Exploration Corporation - Philippines
- Eastern Coal Council - USA
- Eastern Energy - Thailand
- Larsen & Toubro Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Indo Tambangraya Megah - Indonesia
- GMR Energy Limited - India
- Romanian Commodities Exchange
- Ceylon Electricity Board - Sri Lanka
- Coastal Gujarat Power Limited - India
- Ministry of Finance - Indonesia
- Ind-Barath Power Infra Limited - India
- Deloitte Consulting - India
- Energy Link Ltd, New Zealand
- Orica Australia Pty. Ltd.
- Kepco SPC Power Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- Madhucon Powers Ltd - India
- Orica Mining Services - Indonesia
- VISA Power Limited - India
- Therma Luzon, Inc, Philippines
- Sakthi Sugars Limited - India
- Energy Development Corp, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- White Energy Company Limited
- Goldman Sachs - Singapore
- Minerals Council of Australia
- Commonwealth Bank - Australia
- Gujarat Sidhee Cement - India
- Leighton Contractors Pty Ltd - Australia
- Kideco Jaya Agung - Indonesia
- IEA Clean Coal Centre - UK
- Neyveli Lignite Corporation Ltd, - India
- Bukit Makmur.PT - Indonesia
- Kobexindo Tractors - Indoneisa
- ASAPP Information Group - India
- India Bulls Power Limited - India
- Sical Logistics Limited - India
- Mercuria Energy - Indonesia
- Bulk Trading Sa - Switzerland
- Lanco Infratech Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Bahari Cakrawala Sebuku - Indonesia
- CIMB Investment Bank - Malaysia
- PTC India Limited - India
- Indonesian Coal Mining Association
- Indika Energy - Indonesia
- Coal and Oil Company - UAE
- Chamber of Mines of South Africa
- Carbofer General Trading SA - India
- Holcim Trading Pte Ltd - Singapore
- Africa Commodities Group - South Africa
- Samtan Co., Ltd - South Korea
- Parliament of New Zealand
- Ambuja Cements Ltd - India
- Xindia Steels Limited - India
- Timah Investasi Mineral - Indoneisa
- Agrawal Coal Company - India
- Renaissance Capital - South Africa
- Oldendorff Carriers - Singapore
- Bharathi Cement Corporation - India
- SN Aboitiz Power Inc, Philippines
- Ministry of Mines - Canada
- Australian Coal Association
- Tamil Nadu electricity Board
- Kartika Selabumi Mining - Indonesia
- LBH Netherlands Bv - Netherlands
- Globalindo Alam Lestari - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- SMG Consultants - Indonesia
- Jindal Steel & Power Ltd - India
- Sindya Power Generating Company Private Ltd
- Gujarat Mineral Development Corp Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- London Commodity Brokers - England
- Karbindo Abesyapradhi - Indoneisa
- Kaltim Prima Coal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Karaikal Port Pvt Ltd - India
- Tata Chemicals Ltd - India
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