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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 $887 million annually.
Possible solutions
To strengthen the economy of Eastern Indonesia we will need to improve the regional infrastructure for transportation, specifically through the renovation of ports and airports in strategic cities. Unfortunately, at the moment the fear of losing employment has been on everyone’s mind.
With hindsight being 20/20, in retrospect the government should have prepared a mitigation plan prior to implementing the current regulation. Fear, anxiety and uncertainty have miners and surrounding communities worried. They have no other option but to hope the government steps in and lends a helping hand.
Renegotiations have to be finalized sooner rather than later.
For its part, the government has to be wise if it wants to solve the dispute with those involved. From both a macro and a micro economic perspective, the current mining dispute presents a major obstacle to development in Eastern Indonesia.
Renegotiations should offer a solution that is beneficial for both mining companies and the government in order to ensure that operations can be resumed as soon as possible. And it is crucial that the government prepare a safety net for local communities that depend on mining operations. Finally, a mitigation plan should be included in future mining regulations, specifically one that keeps the welfare of the locals in mind. These steps should be taken quickly if we want to fulfil the promises of our constitution.
Iwan Harsono, a member of the Advisory Board for Economic Resources in West Lombok, is a lecturer in economics at the University of Mataram.
This article was originally published in The Jakarta Globe
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Thursday, 14 August 14
INDIA'S PLAN TO START AN INFRASTRUCTURE BOOM AND TO INVEST US$ 1 TRILLION BY 2017 WILL SURELY AFFECT THE DRY BULK TRADE - FEARNLEYS
Handy
The Atlantic Supra market has continued its improving sentiment with rates climbing and TA´s are now up about US$ 900 w-o-w, said Fea ...
Wednesday, 13 August 14
WEEKLY MARKET INSIGHT - KONSTANTINOS KONTOMICHIS SNP BROKER
Being at the peak of the holiday season, August is, as usual, the quietest month in terms of snp transactions, yet it is also a time very critical ...
Wednesday, 13 August 14
WHAT DOES PROJECT CARGO REALLY MEAN TO INSURERS?
KNOWLEDGE TO ELEVATE
Richard Kamppari-Baker, claims manager of FP Marine Risks, explains the challenges of project cargo risk assessment from ...
Wednesday, 13 August 14
INDONESIAN COAL PRICE REFERENCE FALL AGAIN CLOSE TO 57 MONTHS LOWS
COALspot.com - The Ministry of Energy & Mineral Resources of Indonesia revised down the coal bench mark price in August. HBA for the month of A ...
Monday, 11 August 14
LARGEST CHINESE TRADE SURPLUS EVER RECORDED IN JULY - BIMCO
China recorded a trade surplus of USD 47.3 billion in July 2014. The record high surplus came on the back of very strong export growth while import ...
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- Sakthi Sugars Limited - India
- Bayan Resources Tbk. - Indonesia
- Coastal Gujarat Power Limited - India
- Edison Trading Spa - Italy
- Holcim Trading Pte Ltd - Singapore
- Straits Asia Resources Limited - Singapore
- Grasim Industreis Ltd - India
- Planning Commission, India
- South Luzon Thermal Energy Corporation
- MS Steel International - UAE
- Therma Luzon, Inc, Philippines
- CIMB Investment Bank - Malaysia
- ASAPP Information Group - India
- India Bulls Power Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Banpu Public Company Limited - Thailand
- SN Aboitiz Power Inc, Philippines
- Attock Cement Pakistan Limited
- Toyota Tsusho Corporation, Japan
- Tata Chemicals Ltd - India
- VISA Power Limited - India
- Ministry of Finance - Indonesia
- Semirara Mining and Power Corporation, Philippines
- GVK Power & Infra Limited - India
- Price Waterhouse Coopers - Russia
- Bhoruka Overseas - Indonesia
- Ind-Barath Power Infra Limited - India
- McConnell Dowell - Australia
- Eastern Energy - Thailand
- Videocon Industries ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Trasteel International SA, Italy
- PetroVietnam Power Coal Import and Supply Company
- Kalimantan Lumbung Energi - Indonesia
- Ministry of Transport, Egypt
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- Global Business Power Corporation, Philippines
- Siam City Cement - Thailand
- Global Coal Blending Company Limited - Australia
- Asmin Koalindo Tuhup - Indonesia
- Meralco Power Generation, Philippines
- Lanco Infratech Ltd - India
- Renaissance Capital - South Africa
- Larsen & Toubro Limited - India
- Karaikal Port Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Jaiprakash Power Ventures ltd
- PNOC Exploration Corporation - Philippines
- Bulk Trading Sa - Switzerland
- Deloitte Consulting - India
- Xindia Steels Limited - India
- Bhatia International Limited - India
- Tamil Nadu electricity Board
- London Commodity Brokers - England
- Energy Link Ltd, New Zealand
- Barasentosa Lestari - Indonesia
- Indo Tambangraya Megah - Indonesia
- Thai Mozambique Logistica
- Wilmar Investment Holdings
- Samtan Co., Ltd - South Korea
- White Energy Company Limited
- San Jose City I Power Corp, Philippines
- Kideco Jaya Agung - Indonesia
- SMG Consultants - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Miang Besar Coal Terminal - Indonesia
- Sree Jayajothi Cements Limited - India
- Jindal Steel & Power Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Borneo Indobara - Indonesia
- Globalindo Alam Lestari - Indonesia
- Chettinad Cement Corporation Ltd - India
- Maheswari Brothers Coal Limited - India
- Latin American Coal - Colombia
- Sarangani Energy Corporation, Philippines
- Port Waratah Coal Services - Australia
- Gujarat Electricity Regulatory Commission - India
- Kohat Cement Company Ltd. - Pakistan
- Bangladesh Power Developement Board
- Dalmia Cement Bharat India
- Semirara Mining Corp, Philippines
- Antam Resourcindo - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Petrochimia International Co. Ltd.- Taiwan
- The University of Queensland
- Pendopo Energi Batubara - Indonesia
- Ambuja Cements Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Altura Mining Limited, Indonesia
- Aboitiz Power Corporation - Philippines
- Carbofer General Trading SA - India
- LBH Netherlands Bv - Netherlands
- Heidelberg Cement - Germany
- Alfred C Toepfer International GmbH - Germany
- Kartika Selabumi Mining - Indonesia
- Agrawal Coal Company - India
- Parry Sugars Refinery, India
- Meenaskhi Energy Private Limited - India
- Sindya Power Generating Company Private Ltd
- Marubeni Corporation - India
- Central Electricity Authority - India
- GMR Energy Limited - India
- Coal and Oil Company - UAE
- Economic Council, Georgia
- Uttam Galva Steels Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PTC India Limited - India
- Sical Logistics Limited - India
- Riau Bara Harum - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Commonwealth Bank - Australia
- Kapuas Tunggal Persada - Indonesia
- Vedanta Resources Plc - India
- Romanian Commodities Exchange
- Electricity Authority, New Zealand
- Eastern Coal Council - USA
- Aditya Birla Group - India
- Iligan Light & Power Inc, Philippines
- Binh Thuan Hamico - Vietnam
- International Coal Ventures Pvt Ltd - India
- Sojitz Corporation - Japan
- Timah Investasi Mineral - Indoneisa
- Baramulti Group, Indonesia
- SMC Global Power, Philippines
- Singapore Mercantile Exchange
- GAC Shipping (India) Pvt Ltd
- Petron Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Cement Manufacturers Association - India
- Power Finance Corporation Ltd., India
- Bukit Asam (Persero) Tbk - Indonesia
- Ministry of Mines - Canada
- Anglo American - United Kingdom
- OPG Power Generation Pvt Ltd - India
- Interocean Group of Companies - India
- Minerals Council of Australia
- Africa Commodities Group - South Africa
- Georgia Ports Authority, United States
- Orica Mining Services - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Kumho Petrochemical, South Korea
- Essar Steel Hazira Ltd - India
- Bharathi Cement Corporation - India
- Formosa Plastics Group - Taiwan
- Gujarat Sidhee Cement - India
- Central Java Power - Indonesia
- Goldman Sachs - Singapore
- Orica Australia Pty. Ltd.
- TeaM Sual Corporation - Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Parliament of New Zealand
- Manunggal Multi Energi - Indonesia
- Electricity Generating Authority of Thailand
- Intertek Mineral Services - Indonesia
- Indogreen Group - Indonesia
- Indian Energy Exchange, India
- Independent Power Producers Association of India
- Mintek Dendrill Indonesia
- Bukit Makmur.PT - Indonesia
- Star Paper Mills Limited - India
- AsiaOL BioFuels Corp., Philippines
- Salva Resources Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Jorong Barutama Greston.PT - Indonesia
- Indian Oil Corporation Limited
- TNB Fuel Sdn Bhd - Malaysia
- New Zealand Coal & Carbon
- CNBM International Corporation - China
- Oldendorff Carriers - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Australian Commodity Traders Exchange
- Savvy Resources Ltd - HongKong
- Mercator Lines Limited - India
- Kepco SPC Power Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Makarim & Taira - Indonesia
- Directorate Of Revenue Intelligence - India
- Cigading International Bulk Terminal - Indonesia
- The State Trading Corporation of India Ltd
- Mjunction Services Limited - India
- Global Green Power PLC Corporation, Philippines
- IEA Clean Coal Centre - UK
- Australian Coal Association
- Posco Energy - South Korea
- Madhucon Powers Ltd - India
- IHS Mccloskey Coal Group - USA
- Wood Mackenzie - Singapore
- Mercuria Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Rashtriya Ispat Nigam Limited - India
- PowerSource Philippines DevCo
- Standard Chartered Bank - UAE
- Rio Tinto Coal - Australia
- Indonesian Coal Mining Association
- Bhushan Steel Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Billiton Holdings Pty Ltd - Australia
- Kobexindo Tractors - Indoneisa
- Vizag Seaport Private Limited - India
- Simpson Spence & Young - Indonesia
- Chamber of Mines of South Africa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Energy Development Corp, Philippines
- Coalindo Energy - Indonesia
- European Bulk Services B.V. - Netherlands
- ICICI Bank Limited - India
- Merrill Lynch Commodities Europe
- Malabar Cements Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Indika Energy - Indonesia
- Thiess Contractors Indonesia
- Medco Energi Mining Internasional
- The Treasury - Australian Government
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