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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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Tuesday, 13 February 24
WHAT IS THE OUTLOOK FOR THE NATURAL GAS SPOT PRICE IN 2024 AND 2025? EIA
We expect the U.S. benchmark Henry Hub natural gas spot price to average higher in 2024 and 2025 than in 2023, but to remain lower than $3.00 per m ...
Monday, 12 February 24
US THERMAL COAL EXPORTS HIT 5-YEAR HIGHS AND TOP $5 BLN IN 2023 - REUTERS
United States exporters of thermal coal earned more than $5 billion in 2023 as they shipped out more than 32.5 million metric tons of the high-poll ...
Tuesday, 06 February 24
NEW E-FUELS PROJECT TO MAKE INTERNATIONAL SHIPPING CLIMATE-NEUTRAL - RINA
Transport and trade on the ocean blue must be made much greener. This is the goal of the new €17 million European GAMMA project, where compani ...
Tuesday, 06 February 24
INDIA SEES ANNUAL COAL OUTPUT UP 10.9% IN 2024/25 - REUTERS
India expects domestic coal output to increase by 10.9% to 1.13 billion metric tons in the fiscal year ending March 2025, a senior government offic ...
Tuesday, 06 February 24
INDIA'S COAL PRODUCTION INCREASES BY 10.3% TO 99.73 MILLION TONNE IN JANUARY - PTI
The country’s coal output rose 10.3 per cent to 99.73 Million Tonne (MT) in January, over the same month in the previous fiscal.
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- Thai Mozambique Logistica
- Australian Coal Association
- Carbofer General Trading SA - India
- Bhoruka Overseas - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Banpu Public Company Limited - Thailand
- LBH Netherlands Bv - Netherlands
- Port Waratah Coal Services - Australia
- PowerSource Philippines DevCo
- Kalimantan Lumbung Energi - Indonesia
- IHS Mccloskey Coal Group - USA
- Essar Steel Hazira Ltd - India
- Vizag Seaport Private Limited - India
- Makarim & Taira - Indonesia
- GVK Power & Infra Limited - India
- Sinarmas Energy and Mining - Indonesia
- Kepco SPC Power Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Wood Mackenzie - Singapore
- India Bulls Power Limited - India
- Mercator Lines Limited - India
- Kartika Selabumi Mining - Indonesia
- Attock Cement Pakistan Limited
- Georgia Ports Authority, United States
- Kumho Petrochemical, South Korea
- Toyota Tsusho Corporation, Japan
- Manunggal Multi Energi - Indonesia
- Edison Trading Spa - Italy
- OPG Power Generation Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Indian Energy Exchange, India
- Petrochimia International Co. Ltd.- Taiwan
- TNB Fuel Sdn Bhd - Malaysia
- Indika Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Xindia Steels Limited - India
- Sindya Power Generating Company Private Ltd
- Marubeni Corporation - India
- Directorate Of Revenue Intelligence - India
- Neyveli Lignite Corporation Ltd, - India
- Formosa Plastics Group - Taiwan
- CNBM International Corporation - China
- Bayan Resources Tbk. - Indonesia
- IEA Clean Coal Centre - UK
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Finance - Indonesia
- Timah Investasi Mineral - Indoneisa
- Chamber of Mines of South Africa
- Central Java Power - Indonesia
- London Commodity Brokers - England
- GMR Energy Limited - India
- Kapuas Tunggal Persada - Indonesia
- Independent Power Producers Association of India
- Global Business Power Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Electricity Authority, New Zealand
- Minerals Council of Australia
- Intertek Mineral Services - Indonesia
- Binh Thuan Hamico - Vietnam
- Anglo American - United Kingdom
- Uttam Galva Steels Limited - India
- Rio Tinto Coal - Australia
- Energy Development Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Bhushan Steel Limited - India
- Interocean Group of Companies - India
- Grasim Industreis Ltd - India
- Parry Sugars Refinery, India
- The State Trading Corporation of India Ltd
- Price Waterhouse Coopers - Russia
- Global Green Power PLC Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Meralco Power Generation, Philippines
- MS Steel International - UAE
- Indogreen Group - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Economic Council, Georgia
- Medco Energi Mining Internasional
- Star Paper Mills Limited - India
- Mercuria Energy - Indonesia
- The Treasury - Australian Government
- Therma Luzon, Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- International Coal Ventures Pvt Ltd - India
- Baramulti Group, Indonesia
- Aboitiz Power Corporation - Philippines
- Planning Commission, India
- Africa Commodities Group - South Africa
- Heidelberg Cement - Germany
- South Luzon Thermal Energy Corporation
- European Bulk Services B.V. - Netherlands
- Krishnapatnam Port Company Ltd. - India
- Orica Australia Pty. Ltd.
- Energy Link Ltd, New Zealand
- Tata Chemicals Ltd - India
- McConnell Dowell - Australia
- Bangladesh Power Developement Board
- Barasentosa Lestari - Indonesia
- SMC Global Power, Philippines
- Indonesian Coal Mining Association
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Altura Mining Limited, Indonesia
- PTC India Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Indian Oil Corporation Limited
- Malabar Cements Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Riau Bara Harum - Indonesia
- Petron Corporation, Philippines
- Goldman Sachs - Singapore
- Mintek Dendrill Indonesia
- Karaikal Port Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- San Jose City I Power Corp, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Jaiprakash Power Ventures ltd
- Globalindo Alam Lestari - Indonesia
- CIMB Investment Bank - Malaysia
- Gujarat Sidhee Cement - India
- Australian Commodity Traders Exchange
- Lanco Infratech Ltd - India
- Salva Resources Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Tamil Nadu electricity Board
- Sojitz Corporation - Japan
- Semirara Mining and Power Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Merrill Lynch Commodities Europe
- PNOC Exploration Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Antam Resourcindo - Indonesia
- Meenaskhi Energy Private Limited - India
- Thiess Contractors Indonesia
- Standard Chartered Bank - UAE
- Asmin Koalindo Tuhup - Indonesia
- TeaM Sual Corporation - Philippines
- ICICI Bank Limited - India
- Romanian Commodities Exchange
- Samtan Co., Ltd - South Korea
- Ind-Barath Power Infra Limited - India
- Ambuja Cements Ltd - India
- Aditya Birla Group - India
- Sical Logistics Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Global Coal Blending Company Limited - Australia
- Parliament of New Zealand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Coal and Oil Company - UAE
- Metalloyd Limited - United Kingdom
- Oldendorff Carriers - Singapore
- Videocon Industries ltd - India
- Bukit Baiduri Energy - Indonesia
- Trasteel International SA, Italy
- The University of Queensland
- Larsen & Toubro Limited - India
- Simpson Spence & Young - Indonesia
- Sakthi Sugars Limited - India
- Eastern Energy - Thailand
- Coastal Gujarat Power Limited - India
- Renaissance Capital - South Africa
- Jindal Steel & Power Ltd - India
- SMG Consultants - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Latin American Coal - Colombia
- Bukit Asam (Persero) Tbk - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Sree Jayajothi Cements Limited - India
- Electricity Generating Authority of Thailand
- Holcim Trading Pte Ltd - Singapore
- Cement Manufacturers Association - India
- Chettinad Cement Corporation Ltd - India
- Savvy Resources Ltd - HongKong
- ASAPP Information Group - India
- Orica Mining Services - Indonesia
- VISA Power Limited - India
- Wilmar Investment Holdings
- Coalindo Energy - Indonesia
- Siam City Cement - Thailand
- Power Finance Corporation Ltd., India
- Leighton Contractors Pty Ltd - Australia
- Semirara Mining Corp, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Kaltim Prima Coal - Indonesia
- Bharathi Cement Corporation - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mjunction Services Limited - India
- Ministry of Transport, Egypt
- Miang Besar Coal Terminal - Indonesia
- Kideco Jaya Agung - Indonesia
- Commonwealth Bank - Australia
- Gujarat Mineral Development Corp Ltd - India
- Singapore Mercantile Exchange
- Eastern Coal Council - USA
- White Energy Company Limited
- Indo Tambangraya Megah - Indonesia
- Straits Asia Resources Limited - Singapore
- Vedanta Resources Plc - India
- Pipit Mutiara Jaya. PT, Indonesia
- AsiaOL BioFuels Corp., Philippines
- Bukit Makmur.PT - Indonesia
- Maheswari Brothers Coal Limited - India
- Bhatia International Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Gujarat Electricity Regulatory Commission - India
- Dalmia Cement Bharat India
- Ministry of Mines - Canada
- New Zealand Coal & Carbon
- Agrawal Coal Company - India
- Borneo Indobara - Indonesia
- Posco Energy - South Korea
- Madhucon Powers Ltd - India
- Deloitte Consulting - India
- Central Electricity Authority - India
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