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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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Saturday, 30 August 14
INDIAN GOVERNMENT SHOULD TAKE NOTICE: THERMAL COAL IMPORT PRICES EXTREMELY LOW - COMMODORE RESEARCH
COALspot.com: Both Indonesian and Australian thermal coal prices are at the lowest levels seen this decade, with Indonesia's monthly benchmark ...
Saturday, 30 August 14
RECOVERY IN SIGHT FOR THE DRY BULK SHIPPING MARKET - DREWRY SHIPPING CONSULTANTS
Despite weak freight rates so far this year, Dry Bulk shipping earnings are forecast to recover as demand for both major and minor bulk commodities ...
Friday, 29 August 14
U.S. WEEKLY COAL PRODUCTION DROPS 1.3 PERCENT, EIA SAYS
COALspot.com – United States the world's second largest coal producer, produced approximately 19.40 million short tons (mmst) of coal in ...
Friday, 29 August 14
ADARO'S PROFITS SINK FURTHER AMID FALL IN COAL PRICES - JP
Adaro Energy, one of the country’s largest coal miners, has reported a 31 percent drop in net profit in the first half of this year as global ...
Friday, 29 August 14
CHINESE LIGNITE IMPORTS: QUANTITY OVER QUALITY? - CLARKSONS
In the first half of 2014, Chinese seaborne coal imports declined 0.4% y-o-y to 148mt, largely reflecting a 3.3% fall in imports of steam coal. Mea ...
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- Independent Power Producers Association of India
- Banpu Public Company Limited - Thailand
- European Bulk Services B.V. - Netherlands
- The University of Queensland
- Asmin Koalindo Tuhup - Indonesia
- Medco Energi Mining Internasional
- ICICI Bank Limited - India
- PNOC Exploration Corporation - Philippines
- CNBM International Corporation - China
- Bahari Cakrawala Sebuku - Indonesia
- Aditya Birla Group - India
- Thiess Contractors Indonesia
- Jindal Steel & Power Ltd - India
- Global Coal Blending Company Limited - Australia
- Therma Luzon, Inc, Philippines
- Sree Jayajothi Cements Limited - India
- GVK Power & Infra Limited - India
- Edison Trading Spa - Italy
- Sarangani Energy Corporation, Philippines
- Electricity Generating Authority of Thailand
- Cement Manufacturers Association - India
- Directorate Of Revenue Intelligence - India
- Thai Mozambique Logistica
- Binh Thuan Hamico - Vietnam
- Rio Tinto Coal - Australia
- Manunggal Multi Energi - Indonesia
- Agrawal Coal Company - India
- Indian Oil Corporation Limited
- Tamil Nadu electricity Board
- Ministry of Finance - Indonesia
- Globalindo Alam Lestari - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- SMG Consultants - Indonesia
- International Coal Ventures Pvt Ltd - India
- Electricity Authority, New Zealand
- Semirara Mining Corp, Philippines
- Kobexindo Tractors - Indoneisa
- Videocon Industries ltd - India
- Coastal Gujarat Power Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bayan Resources Tbk. - Indonesia
- Orica Australia Pty. Ltd.
- Karbindo Abesyapradhi - Indoneisa
- Indonesian Coal Mining Association
- Australian Coal Association
- Maharashtra Electricity Regulatory Commission - India
- Karaikal Port Pvt Ltd - India
- Mjunction Services Limited - India
- Xindia Steels Limited - India
- Port Waratah Coal Services - Australia
- Iligan Light & Power Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- Central Electricity Authority - India
- Star Paper Mills Limited - India
- Tata Chemicals Ltd - India
- Commonwealth Bank - Australia
- Sinarmas Energy and Mining - Indonesia
- GAC Shipping (India) Pvt Ltd
- Trasteel International SA, Italy
- PTC India Limited - India
- Meenaskhi Energy Private Limited - India
- Leighton Contractors Pty Ltd - Australia
- Singapore Mercantile Exchange
- VISA Power Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Petrochimia International Co. Ltd.- Taiwan
- Miang Besar Coal Terminal - Indonesia
- The Treasury - Australian Government
- Cigading International Bulk Terminal - Indonesia
- Latin American Coal - Colombia
- GN Power Mariveles Coal Plant, Philippines
- Mercator Lines Limited - India
- Savvy Resources Ltd - HongKong
- ASAPP Information Group - India
- MS Steel International - UAE
- Economic Council, Georgia
- Parliament of New Zealand
- Indo Tambangraya Megah - Indonesia
- Parry Sugars Refinery, India
- GMR Energy Limited - India
- Chamber of Mines of South Africa
- Kartika Selabumi Mining - Indonesia
- Riau Bara Harum - Indonesia
- Larsen & Toubro Limited - India
- Antam Resourcindo - Indonesia
- McConnell Dowell - Australia
- Mintek Dendrill Indonesia
- Global Business Power Corporation, Philippines
- Lanco Infratech Ltd - India
- Indian Energy Exchange, India
- Semirara Mining and Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Australian Commodity Traders Exchange
- Indika Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Georgia Ports Authority, United States
- Kalimantan Lumbung Energi - Indonesia
- PowerSource Philippines DevCo
- PetroVietnam Power Coal Import and Supply Company
- Altura Mining Limited, Indonesia
- Gujarat Electricity Regulatory Commission - India
- Global Green Power PLC Corporation, Philippines
- Sical Logistics Limited - India
- Baramulti Group, Indonesia
- Dalmia Cement Bharat India
- London Commodity Brokers - England
- Bhushan Steel Limited - India
- Petron Corporation, Philippines
- Interocean Group of Companies - India
- Mercuria Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Ministry of Mines - Canada
- Makarim & Taira - Indonesia
- Bulk Trading Sa - Switzerland
- Goldman Sachs - Singapore
- Kepco SPC Power Corporation, Philippines
- Vedanta Resources Plc - India
- Siam City Cement - Thailand
- Ind-Barath Power Infra Limited - India
- Pendopo Energi Batubara - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Renaissance Capital - South Africa
- Heidelberg Cement - Germany
- Merrill Lynch Commodities Europe
- Directorate General of MIneral and Coal - Indonesia
- Samtan Co., Ltd - South Korea
- Deloitte Consulting - India
- Ambuja Cements Ltd - India
- IHS Mccloskey Coal Group - USA
- Bhoruka Overseas - Indonesia
- Ministry of Transport, Egypt
- Gujarat Sidhee Cement - India
- Krishnapatnam Port Company Ltd. - India
- Power Finance Corporation Ltd., India
- Bangladesh Power Developement Board
- CIMB Investment Bank - Malaysia
- Malabar Cements Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Sakthi Sugars Limited - India
- Chettinad Cement Corporation Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Africa Commodities Group - South Africa
- Siam City Cement PLC, Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sojitz Corporation - Japan
- Metalloyd Limited - United Kingdom
- LBH Netherlands Bv - Netherlands
- Borneo Indobara - Indonesia
- OPG Power Generation Pvt Ltd - India
- SMC Global Power, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Attock Cement Pakistan Limited
- Pipit Mutiara Jaya. PT, Indonesia
- Grasim Industreis Ltd - India
- Coal and Oil Company - UAE
- Sindya Power Generating Company Private Ltd
- Indogreen Group - Indonesia
- Simpson Spence & Young - Indonesia
- Marubeni Corporation - India
- Planning Commission, India
- Eastern Energy - Thailand
- Alfred C Toepfer International GmbH - Germany
- Oldendorff Carriers - Singapore
- Wilmar Investment Holdings
- Central Java Power - Indonesia
- Straits Asia Resources Limited - Singapore
- Rashtriya Ispat Nigam Limited - India
- Bukit Makmur.PT - Indonesia
- Madhucon Powers Ltd - India
- Wood Mackenzie - Singapore
- Coalindo Energy - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Energy Link Ltd, New Zealand
- Kumho Petrochemical, South Korea
- Kohat Cement Company Ltd. - Pakistan
- Uttam Galva Steels Limited - India
- Bhatia International Limited - India
- Orica Mining Services - Indonesia
- IEA Clean Coal Centre - UK
- White Energy Company Limited
- Barasentosa Lestari - Indonesia
- Standard Chartered Bank - UAE
- Posco Energy - South Korea
- Meralco Power Generation, Philippines
- Eastern Coal Council - USA
- Romanian Commodities Exchange
- Bharathi Cement Corporation - India
- South Luzon Thermal Energy Corporation
- Energy Development Corp, Philippines
- Jaiprakash Power Ventures ltd
- Holcim Trading Pte Ltd - Singapore
- Intertek Mineral Services - Indonesia
- TeaM Sual Corporation - Philippines
- Anglo American - United Kingdom
- India Bulls Power Limited - India
- Carbofer General Trading SA - India
- Aboitiz Power Corporation - Philippines
- Toyota Tsusho Corporation, Japan
- Gujarat Mineral Development Corp Ltd - India
- Essar Steel Hazira Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Minerals Council of Australia
- The State Trading Corporation of India Ltd
- Formosa Plastics Group - Taiwan
- San Jose City I Power Corp, Philippines
- AsiaOL BioFuels Corp., Philippines
- New Zealand Coal & Carbon
- Kaltim Prima Coal - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Vizag Seaport Private Limited - India
- Maheswari Brothers Coal Limited - India
- Price Waterhouse Coopers - Russia
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