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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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Sunday, 07 September 14
FREIGHT MARKET CONTINUED TO BE FIRM IN SPITE OF CAPE'S THIS WEEK'S WEAK PERFORMANCE
COALspot.com: BDI up by 0.7 pct week on week and closed at 1155 points this week. The Baltic Dry Index is a composite of three sub-indexes that mea ...
Sunday, 07 September 14
SHIPMANAGERS SUPERVISION CONTRACT FOR NEWBUILDS - BIMCO
Shipmanagers are frequently called upon by their owner clients to supervise newbuilding projects on their behalf. The scope of the manager’s ...
Saturday, 06 September 14
SLOW COAL EXPORT REGISTRATION RAISES CONCERNS - THE JAKARTA POST
Several coal mining companies have yet to receive the go-ahead from the Energy and Mineral Resources Ministry to obtain exporting licenses, leading ...
Saturday, 06 September 14
DRY BULK MARKET'S PROSPECTS ARE IMPROVING, DESPITE WEAK SECOND QUARTER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has been rebounding during the past month, with the Baltic Dry Index (BDI) ended the week on a high note, reaching 1,155 points ...
Saturday, 06 September 14
INDONESIA WANTS TO REGULATE COAL DEALS - THE TELEGRAPH INDIA
Indonesia has raised concerns about suspected coal deals struck between overseas buyers and its unregistered domestic miners, the telegraph India r ...
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- Chettinad Cement Corporation Ltd - India
- Jindal Steel & Power Ltd - India
- Agrawal Coal Company - India
- Indian Oil Corporation Limited
- Renaissance Capital - South Africa
- GVK Power & Infra Limited - India
- Sical Logistics Limited - India
- Samtan Co., Ltd - South Korea
- The State Trading Corporation of India Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- VISA Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Aditya Birla Group - India
- Carbofer General Trading SA - India
- Iligan Light & Power Inc, Philippines
- Parliament of New Zealand
- Siam City Cement PLC, Thailand
- Gujarat Sidhee Cement - India
- Orica Mining Services - Indonesia
- Sakthi Sugars Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- PTC India Limited - India
- Sree Jayajothi Cements Limited - India
- White Energy Company Limited
- Coal and Oil Company - UAE
- Indogreen Group - Indonesia
- Kobexindo Tractors - Indoneisa
- Goldman Sachs - Singapore
- Mercuria Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Power Finance Corporation Ltd., India
- Baramulti Group, Indonesia
- Petron Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Minerals Council of Australia
- The University of Queensland
- Bank of Tokyo Mitsubishi UFJ Ltd
- Formosa Plastics Group - Taiwan
- SMG Consultants - Indonesia
- Altura Mining Limited, Indonesia
- Global Business Power Corporation, Philippines
- Merrill Lynch Commodities Europe
- GN Power Mariveles Coal Plant, Philippines
- Xindia Steels Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Africa Commodities Group - South Africa
- Gujarat Electricity Regulatory Commission - India
- Rio Tinto Coal - Australia
- Independent Power Producers Association of India
- Aboitiz Power Corporation - Philippines
- Directorate Of Revenue Intelligence - India
- Port Waratah Coal Services - Australia
- Romanian Commodities Exchange
- Simpson Spence & Young - Indonesia
- SMC Global Power, Philippines
- Makarim & Taira - Indonesia
- Riau Bara Harum - Indonesia
- Georgia Ports Authority, United States
- SN Aboitiz Power Inc, Philippines
- Latin American Coal - Colombia
- Siam City Cement - Thailand
- The Treasury - Australian Government
- Vizag Seaport Private Limited - India
- Commonwealth Bank - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Kapuas Tunggal Persada - Indonesia
- Indika Energy - Indonesia
- Sojitz Corporation - Japan
- Ministry of Mines - Canada
- Meenaskhi Energy Private Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Binh Thuan Hamico - Vietnam
- Meralco Power Generation, Philippines
- Ambuja Cements Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Manunggal Multi Energi - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Thai Mozambique Logistica
- Banpu Public Company Limited - Thailand
- Bukit Makmur.PT - Indonesia
- Uttam Galva Steels Limited - India
- Grasim Industreis Ltd - India
- Madhucon Powers Ltd - India
- Chamber of Mines of South Africa
- Wilmar Investment Holdings
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ind-Barath Power Infra Limited - India
- Alfred C Toepfer International GmbH - Germany
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Maheswari Brothers Coal Limited - India
- Orica Australia Pty. Ltd.
- Lanco Infratech Ltd - India
- Coalindo Energy - Indonesia
- Tamil Nadu electricity Board
- Essar Steel Hazira Ltd - India
- Mjunction Services Limited - India
- PNOC Exploration Corporation - Philippines
- New Zealand Coal & Carbon
- India Bulls Power Limited - India
- Mintek Dendrill Indonesia
- Australian Coal Association
- Semirara Mining and Power Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Jaiprakash Power Ventures ltd
- Kaltim Prima Coal - Indonesia
- Global Coal Blending Company Limited - Australia
- GMR Energy Limited - India
- Electricity Authority, New Zealand
- Barasentosa Lestari - Indonesia
- TeaM Sual Corporation - Philippines
- Rashtriya Ispat Nigam Limited - India
- Indian Energy Exchange, India
- Mercator Lines Limited - India
- Ceylon Electricity Board - Sri Lanka
- Kepco SPC Power Corporation, Philippines
- Attock Cement Pakistan Limited
- Ministry of Finance - Indonesia
- Thiess Contractors Indonesia
- Sarangani Energy Corporation, Philippines
- ASAPP Information Group - India
- Planning Commission, India
- Deloitte Consulting - India
- Miang Besar Coal Terminal - Indonesia
- McConnell Dowell - Australia
- Larsen & Toubro Limited - India
- Bayan Resources Tbk. - Indonesia
- San Jose City I Power Corp, Philippines
- Dalmia Cement Bharat India
- IEA Clean Coal Centre - UK
- Petrochimia International Co. Ltd.- Taiwan
- Bhoruka Overseas - Indonesia
- Trasteel International SA, Italy
- Anglo American - United Kingdom
- PowerSource Philippines DevCo
- Oldendorff Carriers - Singapore
- Australian Commodity Traders Exchange
- Vedanta Resources Plc - India
- London Commodity Brokers - England
- Bukit Baiduri Energy - Indonesia
- Wood Mackenzie - Singapore
- Coastal Gujarat Power Limited - India
- Indo Tambangraya Megah - Indonesia
- Borneo Indobara - Indonesia
- OPG Power Generation Pvt Ltd - India
- Tata Chemicals Ltd - India
- Central Electricity Authority - India
- Timah Investasi Mineral - Indoneisa
- Eastern Coal Council - USA
- Offshore Bulk Terminal Pte Ltd, Singapore
- GAC Shipping (India) Pvt Ltd
- Krishnapatnam Port Company Ltd. - India
- CNBM International Corporation - China
- Star Paper Mills Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bharathi Cement Corporation - India
- Bukit Asam (Persero) Tbk - Indonesia
- Bhatia International Limited - India
- Antam Resourcindo - Indonesia
- Bhushan Steel Limited - India
- Singapore Mercantile Exchange
- Price Waterhouse Coopers - Russia
- Heidelberg Cement - Germany
- Ministry of Transport, Egypt
- TNB Fuel Sdn Bhd - Malaysia
- CIMB Investment Bank - Malaysia
- Sinarmas Energy and Mining - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Savvy Resources Ltd - HongKong
- Parry Sugars Refinery, India
- Eastern Energy - Thailand
- Pendopo Energi Batubara - Indonesia
- Indonesian Coal Mining Association
- Interocean Group of Companies - India
- Straits Asia Resources Limited - Singapore
- Billiton Holdings Pty Ltd - Australia
- ICICI Bank Limited - India
- Leighton Contractors Pty Ltd - Australia
- Globalindo Alam Lestari - Indonesia
- Semirara Mining Corp, Philippines
- Metalloyd Limited - United Kingdom
- Medco Energi Mining Internasional
- Kartika Selabumi Mining - Indonesia
- Cement Manufacturers Association - India
- Directorate General of MIneral and Coal - Indonesia
- South Luzon Thermal Energy Corporation
- Salva Resources Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- Economic Council, Georgia
- IHS Mccloskey Coal Group - USA
- Posco Energy - South Korea
- Electricity Generating Authority of Thailand
- Malabar Cements Ltd - India
- Bangladesh Power Developement Board
- Energy Development Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- European Bulk Services B.V. - Netherlands
- Karaikal Port Pvt Ltd - India
- Standard Chartered Bank - UAE
- Central Java Power - Indonesia
- Kumho Petrochemical, South Korea
- Toyota Tsusho Corporation, Japan
- International Coal Ventures Pvt Ltd - India
- Marubeni Corporation - India
- Energy Link Ltd, New Zealand
- Edison Trading Spa - Italy
- Videocon Industries ltd - India
- Intertek Mineral Services - Indonesia
- MS Steel International - UAE
- Bulk Trading Sa - Switzerland
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