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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 $887 million annually.
Possible solutions
To strengthen the economy of Eastern Indonesia we will need to improve the regional infrastructure for transportation, specifically through the renovation of ports and airports in strategic cities. Unfortunately, at the moment the fear of losing employment has been on everyone’s mind.
With hindsight being 20/20, in retrospect the government should have prepared a mitigation plan prior to implementing the current regulation. Fear, anxiety and uncertainty have miners and surrounding communities worried. They have no other option but to hope the government steps in and lends a helping hand.
Renegotiations have to be finalized sooner rather than later.
For its part, the government has to be wise if it wants to solve the dispute with those involved. From both a macro and a micro economic perspective, the current mining dispute presents a major obstacle to development in Eastern Indonesia.
Renegotiations should offer a solution that is beneficial for both mining companies and the government in order to ensure that operations can be resumed as soon as possible. And it is crucial that the government prepare a safety net for local communities that depend on mining operations. Finally, a mitigation plan should be included in future mining regulations, specifically one that keeps the welfare of the locals in mind. These steps should be taken quickly if we want to fulfil the promises of our constitution.
Iwan Harsono, a member of the Advisory Board for Economic Resources in West Lombok, is a lecturer in economics at the University of Mataram.
This article was originally published in The Jakarta Globe
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Thursday, 28 August 14
PANAMAX: OWNERS CAN GET AROUND USD 16000 FOR A FRONTHAUL; PERIOD MARKET - VERY QUIET - FEARNLEYS
Handy
The activity and sentiment is improving in the Atlantic with the general TA rate is up about US$ 800 w-o-w. We see more South American carg ...
Thursday, 28 August 14
BANPU REPORTS HIGHER FIRST-HALF YEAR RESULTS FOR 2014
COALspot.com: Banpu Public Company Limited (BANPU) reports higher first half-year financial results for 2014 having its gross profit increasing 3 p ...
Wednesday, 27 August 14
FREIGHT MARKET: IS THE MARKET IN A RECOVERY MOOD? - GEORGE ILIOPOULOS
Is the market in a recovery mood?
August is typically a time when the shipping industry takes it easy… charter-ers book their requireme ...
Tuesday, 26 August 14
4TH ANNUAL ASIA NICKEL
4th Annual Asia Nickel
19-20 Nov 2014
Grand Hyatt Jakarta, Indonesia
Web Site
Asia’s Premier Nickel Conference
Regulation in ...
Tuesday, 26 August 14
DESPITE LOW DRY BULK RATES, BULKER PRICES ARE STILL HIGH - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Traditionally, August tends to be a month of slow activity in the sale and purchasing market and this year has been no exception. However, as shipb ...
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- Bangladesh Power Developement Board
- Ministry of Finance - Indonesia
- GMR Energy Limited - India
- Pendopo Energi Batubara - Indonesia
- Indian Energy Exchange, India
- Vizag Seaport Private Limited - India
- Power Finance Corporation Ltd., India
- Savvy Resources Ltd - HongKong
- Georgia Ports Authority, United States
- Semirara Mining Corp, Philippines
- Interocean Group of Companies - India
- Port Waratah Coal Services - Australia
- Marubeni Corporation - India
- Africa Commodities Group - South Africa
- Krishnapatnam Port Company Ltd. - India
- Karaikal Port Pvt Ltd - India
- Madhucon Powers Ltd - India
- Standard Chartered Bank - UAE
- Heidelberg Cement - Germany
- Ceylon Electricity Board - Sri Lanka
- Bahari Cakrawala Sebuku - Indonesia
- Sindya Power Generating Company Private Ltd
- Semirara Mining and Power Corporation, Philippines
- Indonesian Coal Mining Association
- Bukit Baiduri Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Pipit Mutiara Jaya. PT, Indonesia
- Trasteel International SA, Italy
- Sinarmas Energy and Mining - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- CIMB Investment Bank - Malaysia
- Toyota Tsusho Corporation, Japan
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Larsen & Toubro Limited - India
- Merrill Lynch Commodities Europe
- New Zealand Coal & Carbon
- The State Trading Corporation of India Ltd
- European Bulk Services B.V. - Netherlands
- Vedanta Resources Plc - India
- Uttam Galva Steels Limited - India
- GVK Power & Infra Limited - India
- Thiess Contractors Indonesia
- SMG Consultants - Indonesia
- Banpu Public Company Limited - Thailand
- Bharathi Cement Corporation - India
- Coastal Gujarat Power Limited - India
- Global Business Power Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Antam Resourcindo - Indonesia
- Wilmar Investment Holdings
- Kohat Cement Company Ltd. - Pakistan
- Coal and Oil Company - UAE
- Bhatia International Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- The Treasury - Australian Government
- Tata Chemicals Ltd - India
- Globalindo Alam Lestari - Indonesia
- Economic Council, Georgia
- Electricity Generating Authority of Thailand
- Mintek Dendrill Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Jaiprakash Power Ventures ltd
- Sakthi Sugars Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Alfred C Toepfer International GmbH - Germany
- Ambuja Cements Ltd - India
- Siam City Cement PLC, Thailand
- Medco Energi Mining Internasional
- Rashtriya Ispat Nigam Limited - India
- Price Waterhouse Coopers - Russia
- Chettinad Cement Corporation Ltd - India
- Petron Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- GAC Shipping (India) Pvt Ltd
- ICICI Bank Limited - India
- Kaltim Prima Coal - Indonesia
- Indian Oil Corporation Limited
- Grasim Industreis Ltd - India
- Kepco SPC Power Corporation, Philippines
- Videocon Industries ltd - India
- Romanian Commodities Exchange
- Baramulti Group, Indonesia
- White Energy Company Limited
- San Jose City I Power Corp, Philippines
- Straits Asia Resources Limited - Singapore
- LBH Netherlands Bv - Netherlands
- Bukit Makmur.PT - Indonesia
- Chamber of Mines of South Africa
- VISA Power Limited - India
- Maheswari Brothers Coal Limited - India
- Makarim & Taira - Indonesia
- Mercuria Energy - Indonesia
- Kumho Petrochemical, South Korea
- Singapore Mercantile Exchange
- Intertek Mineral Services - Indonesia
- Parliament of New Zealand
- Wood Mackenzie - Singapore
- Eastern Energy - Thailand
- Siam City Cement - Thailand
- Meralco Power Generation, Philippines
- Renaissance Capital - South Africa
- Indogreen Group - Indonesia
- Timah Investasi Mineral - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Anglo American - United Kingdom
- Directorate General of MIneral and Coal - Indonesia
- Simpson Spence & Young - Indonesia
- Therma Luzon, Inc, Philippines
- Kideco Jaya Agung - Indonesia
- Global Coal Blending Company Limited - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Deloitte Consulting - India
- Iligan Light & Power Inc, Philippines
- Salva Resources Pvt Ltd - India
- Attock Cement Pakistan Limited
- Sojitz Corporation - Japan
- Goldman Sachs - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Australian Coal Association
- Billiton Holdings Pty Ltd - Australia
- Carbofer General Trading SA - India
- Sree Jayajothi Cements Limited - India
- India Bulls Power Limited - India
- Sarangani Energy Corporation, Philippines
- Mjunction Services Limited - India
- Karbindo Abesyapradhi - Indoneisa
- The University of Queensland
- TeaM Sual Corporation - Philippines
- Aboitiz Power Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
- Posco Energy - South Korea
- Leighton Contractors Pty Ltd - Australia
- Directorate Of Revenue Intelligence - India
- Metalloyd Limited - United Kingdom
- Holcim Trading Pte Ltd - Singapore
- Indika Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Orica Mining Services - Indonesia
- Global Green Power PLC Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Asmin Koalindo Tuhup - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Manunggal Multi Energi - Indonesia
- Mercator Lines Limited - India
- Electricity Authority, New Zealand
- Dalmia Cement Bharat India
- OPG Power Generation Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Xindia Steels Limited - India
- Gujarat Sidhee Cement - India
- Kartika Selabumi Mining - Indonesia
- Jindal Steel & Power Ltd - India
- Star Paper Mills Limited - India
- PTC India Limited - India
- Bhoruka Overseas - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Australian Commodity Traders Exchange
- Ministry of Mines - Canada
- London Commodity Brokers - England
- PowerSource Philippines DevCo
- Ministry of Transport, Egypt
- CNBM International Corporation - China
- Binh Thuan Hamico - Vietnam
- Energy Development Corp, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Coalindo Energy - Indonesia
- Commonwealth Bank - Australia
- Indo Tambangraya Megah - Indonesia
- Latin American Coal - Colombia
- Bulk Trading Sa - Switzerland
- IHS Mccloskey Coal Group - USA
- Central Java Power - Indonesia
- Meenaskhi Energy Private Limited - India
- Sical Logistics Limited - India
- Aditya Birla Group - India
- Bhushan Steel Limited - India
- McConnell Dowell - Australia
- Planning Commission, India
- Edison Trading Spa - Italy
- Energy Link Ltd, New Zealand
- Essar Steel Hazira Ltd - India
- International Coal Ventures Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Lanco Infratech Ltd - India
- Independent Power Producers Association of India
- Barasentosa Lestari - Indonesia
- Borneo Indobara - Indonesia
- Eastern Coal Council - USA
- Riau Bara Harum - Indonesia
- Kobexindo Tractors - Indoneisa
- SMC Global Power, Philippines
- Altura Mining Limited, Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Agrawal Coal Company - India
- Oldendorff Carriers - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Malabar Cements Ltd - India
- SN Aboitiz Power Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Central Electricity Authority - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Cement Manufacturers Association - India
- Thai Mozambique Logistica
- IEA Clean Coal Centre - UK
- Rio Tinto Coal - Australia
- Formosa Plastics Group - Taiwan
- Minerals Council of Australia
- PNOC Exploration Corporation - Philippines
- Parry Sugars Refinery, India
- ASAPP Information Group - India
- MS Steel International - UAE
- Ind-Barath Power Infra Limited - India
- Tamil Nadu electricity Board
- Neyveli Lignite Corporation Ltd, - India
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