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