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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 $887 million annually.
Possible solutions
To strengthen the economy of Eastern Indonesia we will need to improve the regional infrastructure for transportation, specifically through the renovation of ports and airports in strategic cities. Unfortunately, at the moment the fear of losing employment has been on everyone’s mind.
With hindsight being 20/20, in retrospect the government should have prepared a mitigation plan prior to implementing the current regulation. Fear, anxiety and uncertainty have miners and surrounding communities worried. They have no other option but to hope the government steps in and lends a helping hand.
Renegotiations have to be finalized sooner rather than later.
For its part, the government has to be wise if it wants to solve the dispute with those involved. From both a macro and a micro economic perspective, the current mining dispute presents a major obstacle to development in Eastern Indonesia.
Renegotiations should offer a solution that is beneficial for both mining companies and the government in order to ensure that operations can be resumed as soon as possible. And it is crucial that the government prepare a safety net for local communities that depend on mining operations. Finally, a mitigation plan should be included in future mining regulations, specifically one that keeps the welfare of the locals in mind. These steps should be taken quickly if we want to fulfil the promises of our constitution.
Iwan Harsono, a member of the Advisory Board for Economic Resources in West Lombok, is a lecturer in economics at the University of Mataram.
This article was originally published in The Jakarta Globe
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Monday, 25 August 14
API 8 CFR SOUTH CHINA COAL SWAP GAINED DAY OVER DAY AND MONTH OVER MONTH
COALspot.com: API 8 CFR South China Coal swap for delivery in September 2014 increased US$ 0.30 (+0.44%) day on day and decreased US$ 0.20 (- ...
Sunday, 24 August 14
SEA FREIGHT MARKETS STARTING TO LOOK POSITIVE; CAPES DRIVE FREIGHTS HIGHER
COALspot.com: The freight market has strengthen further this week with BDI up 7.19 pct week on week. The BDI was closed at 1,088 points while the B ...
Friday, 22 August 14
INDIAN IRON ORE ROYALTY RISE NOT LIKELY TO HURT STEELMAKERS' MARGINS - FITCH
Fitch Ratings does not expect an increase in India's iron ore royalty rates to have a major impact on the profitability of steel producers in t ...
Friday, 22 August 14
ARBITRATION CLAUSE IN LOU HELD TO REPLACE CHARTERPARTY ARBITRATION CLAUSE
KNOWLEDGE TO ELEVATE
The Claimants had claims for cargo damage against the vessel Owners arising under four bills of lading. The vessel was th ...
Friday, 22 August 14
ICAP ENERGY LAUNCHES GLOBAL COKING COAL DERIVATIVES TRADING
First contract completed and cleared on CME
COALspot.com: ICAP Energy, the energy business of ICAP plc, announces today that it has successful ...
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- Bharathi Cement Corporation - India
- Minerals Council of Australia
- Attock Cement Pakistan Limited
- Ministry of Mines - Canada
- Chamber of Mines of South Africa
- Bhatia International Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- GMR Energy Limited - India
- Sojitz Corporation - Japan
- Grasim Industreis Ltd - India
- Indonesian Coal Mining Association
- Leighton Contractors Pty Ltd - Australia
- Jaiprakash Power Ventures ltd
- Ambuja Cements Ltd - India
- Tamil Nadu electricity Board
- Gujarat Electricity Regulatory Commission - India
- Metalloyd Limited - United Kingdom
- Directorate Of Revenue Intelligence - India
- Gujarat Mineral Development Corp Ltd - India
- Madhucon Powers Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Latin American Coal - Colombia
- SMC Global Power, Philippines
- Intertek Mineral Services - Indonesia
- San Jose City I Power Corp, Philippines
- Anglo American - United Kingdom
- IEA Clean Coal Centre - UK
- GVK Power & Infra Limited - India
- Lanco Infratech Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Economic Council, Georgia
- Mjunction Services Limited - India
- European Bulk Services B.V. - Netherlands
- Coal and Oil Company - UAE
- Central Java Power - Indonesia
- Kumho Petrochemical, South Korea
- Dalmia Cement Bharat India
- Jindal Steel & Power Ltd - India
- Planning Commission, India
- Bukit Makmur.PT - Indonesia
- Borneo Indobara - Indonesia
- Siam City Cement PLC, Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Aditya Birla Group - India
- Electricity Authority, New Zealand
- Larsen & Toubro Limited - India
- Binh Thuan Hamico - Vietnam
- Banpu Public Company Limited - Thailand
- Toyota Tsusho Corporation, Japan
- Maheswari Brothers Coal Limited - India
- White Energy Company Limited
- McConnell Dowell - Australia
- Tata Chemicals Ltd - India
- Global Business Power Corporation, Philippines
- Gujarat Sidhee Cement - India
- Straits Asia Resources Limited - Singapore
- Deloitte Consulting - India
- Karaikal Port Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Ind-Barath Power Infra Limited - India
- Alfred C Toepfer International GmbH - Germany
- Billiton Holdings Pty Ltd - Australia
- Meenaskhi Energy Private Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Merrill Lynch Commodities Europe
- Jorong Barutama Greston.PT - Indonesia
- Kepco SPC Power Corporation, Philippines
- Electricity Generating Authority of Thailand
- Krishnapatnam Port Company Ltd. - India
- Cement Manufacturers Association - India
- Holcim Trading Pte Ltd - Singapore
- Globalindo Alam Lestari - Indonesia
- Manunggal Multi Energi - Indonesia
- Petron Corporation, Philippines
- Bhushan Steel Limited - India
- Indian Oil Corporation Limited
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Africa Commodities Group - South Africa
- Miang Besar Coal Terminal - Indonesia
- SMG Consultants - Indonesia
- Mercuria Energy - Indonesia
- Standard Chartered Bank - UAE
- TeaM Sual Corporation - Philippines
- Kartika Selabumi Mining - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Parliament of New Zealand
- Vizag Seaport Private Limited - India
- ASAPP Information Group - India
- Georgia Ports Authority, United States
- Ministry of Transport, Egypt
- Aboitiz Power Corporation - Philippines
- Sical Logistics Limited - India
- CNBM International Corporation - China
- Edison Trading Spa - Italy
- GAC Shipping (India) Pvt Ltd
- Trasteel International SA, Italy
- Renaissance Capital - South Africa
- Goldman Sachs - Singapore
- ICICI Bank Limited - India
- Bukit Baiduri Energy - Indonesia
- Heidelberg Cement - Germany
- Star Paper Mills Limited - India
- Ministry of Finance - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Global Coal Blending Company Limited - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Bangladesh Power Developement Board
- MS Steel International - UAE
- VISA Power Limited - India
- Therma Luzon, Inc, Philippines
- Vedanta Resources Plc - India
- Kideco Jaya Agung - Indonesia
- Antam Resourcindo - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Makarim & Taira - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Sakthi Sugars Limited - India
- Eastern Coal Council - USA
- Simpson Spence & Young - Indonesia
- Timah Investasi Mineral - Indoneisa
- LBH Netherlands Bv - Netherlands
- Orica Australia Pty. Ltd.
- Neyveli Lignite Corporation Ltd, - India
- Vijayanagar Sugar Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Bulk Trading Sa - Switzerland
- Bayan Resources Tbk. - Indonesia
- Carbofer General Trading SA - India
- Karbindo Abesyapradhi - Indoneisa
- Meralco Power Generation, Philippines
- Riau Bara Harum - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Parry Sugars Refinery, India
- The University of Queensland
- PTC India Limited - India
- SN Aboitiz Power Inc, Philippines
- Sinarmas Energy and Mining - Indonesia
- Orica Mining Services - Indonesia
- Semirara Mining Corp, Philippines
- CIMB Investment Bank - Malaysia
- Posco Energy - South Korea
- PNOC Exploration Corporation - Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Wood Mackenzie - Singapore
- Pendopo Energi Batubara - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Indogreen Group - Indonesia
- AsiaOL BioFuels Corp., Philippines
- South Luzon Thermal Energy Corporation
- Singapore Mercantile Exchange
- Altura Mining Limited, Indonesia
- Oldendorff Carriers - Singapore
- Kaltim Prima Coal - Indonesia
- IHS Mccloskey Coal Group - USA
- Ceylon Electricity Board - Sri Lanka
- Iligan Light & Power Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- London Commodity Brokers - England
- Marubeni Corporation - India
- Romanian Commodities Exchange
- Australian Commodity Traders Exchange
- Thai Mozambique Logistica
- PowerSource Philippines DevCo
- Eastern Energy - Thailand
- Xindia Steels Limited - India
- Indo Tambangraya Megah - Indonesia
- Mercator Lines Limited - India
- Essar Steel Hazira Ltd - India
- Sindya Power Generating Company Private Ltd
- Uttam Galva Steels Limited - India
- Mintek Dendrill Indonesia
- Malabar Cements Ltd - India
- Energy Development Corp, Philippines
- Coastal Gujarat Power Limited - India
- Rio Tinto Coal - Australia
- The Treasury - Australian Government
- Siam City Cement - Thailand
- Indian Energy Exchange, India
- Power Finance Corporation Ltd., India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Interocean Group of Companies - India
- Independent Power Producers Association of India
- Barasentosa Lestari - Indonesia
- Indika Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Medco Energi Mining Internasional
- Baramulti Group, Indonesia
- Energy Link Ltd, New Zealand
- Sarangani Energy Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Formosa Plastics Group - Taiwan
- International Coal Ventures Pvt Ltd - India
- Thiess Contractors Indonesia
- Coalindo Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- PetroVietnam Power Coal Import and Supply Company
- Commonwealth Bank - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- New Zealand Coal & Carbon
- OPG Power Generation Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- India Bulls Power Limited - India
- Central Electricity Authority - India
- Cigading International Bulk Terminal - Indonesia
- Videocon Industries ltd - India
- Wilmar Investment Holdings
- The State Trading Corporation of India Ltd
- Savvy Resources Ltd - HongKong
- Salva Resources Pvt Ltd - India
- Australian Coal Association
- Agrawal Coal Company - India
- Sree Jayajothi Cements Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
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