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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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Wednesday, 30 July 14
CAPES SEEMED TO BE STRANDED AT THE SAME LEVELS; PANAMAXES MANAGED TO SLIGHTLY REVIVE - INTERMODAL
COALspot.com: The Dry Bulk market took a breath this past week, as both Panamaxes and Supras started to see a small influx of activity, which was j ...
Tuesday, 29 July 14
TOTAL SELLS ITS SOUTH AFRICAN COAL MINING ASSETS TO EXXARO
Total has signed an agreement with Exxaro Resources Ltd for the sale of its 100% stake in Total Coal South Africa (TCSA), its coal-producing affili ...
Tuesday, 29 July 14
GENCO: DRY BULK SHIPPING VALUATIONS NO LONGER ANCHORED TO DISCOUNTED CASH FLOW METHOD - WEIL
KNOWLEDGE TO ELEVATE
Discounted cash flow analysis is a mainstay among the valuation methodologies used by restructuring professionals and bank ...
Tuesday, 29 July 14
SHIP OWNERS' DEMAND OF NEW VESSELS DENTED AS A RESULT OF LOWER FREIGHT RATES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The sharp downward direction of dry bulk freight rates has had a negative impact on investors’ secondhand buying appetite that wait to see th ...
Monday, 28 July 14
Q3' 14, SUB-BIT FOB INDONESIA COAL SWAP GAINED $ 0.08 DAY ON DAY AND $ 0.68 WEEK ON WEEK
COALspot.com: Indonesian coal swaps for average Q3’ 2014 increased by just US$ 0.08 day on day and US$ 0.68 week on week. The swap was lost U ...
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- Indo Tambangraya Megah - Indonesia
- GMR Energy Limited - India
- Bukit Baiduri Energy - Indonesia
- Borneo Indobara - Indonesia
- McConnell Dowell - Australia
- Directorate General of MIneral and Coal - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Salva Resources Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Kartika Selabumi Mining - Indonesia
- Malabar Cements Ltd - India
- ASAPP Information Group - India
- Central Java Power - Indonesia
- Semirara Mining and Power Corporation, Philippines
- GVK Power & Infra Limited - India
- Renaissance Capital - South Africa
- Jaiprakash Power Ventures ltd
- Kohat Cement Company Ltd. - Pakistan
- Electricity Generating Authority of Thailand
- Oldendorff Carriers - Singapore
- Barasentosa Lestari - Indonesia
- PowerSource Philippines DevCo
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ambuja Cements Ltd - India
- Grasim Industreis Ltd - India
- Manunggal Multi Energi - Indonesia
- Makarim & Taira - Indonesia
- Sarangani Energy Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- CNBM International Corporation - China
- Leighton Contractors Pty Ltd - Australia
- Uttam Galva Steels Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Mintek Dendrill Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Bhatia International Limited - India
- Rashtriya Ispat Nigam Limited - India
- Timah Investasi Mineral - Indoneisa
- Australian Commodity Traders Exchange
- Orica Mining Services - Indonesia
- Bharathi Cement Corporation - India
- Xindia Steels Limited - India
- Bhoruka Overseas - Indonesia
- Ministry of Mines - Canada
- Commonwealth Bank - Australia
- Eastern Energy - Thailand
- Medco Energi Mining Internasional
- Mercuria Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Krishnapatnam Port Company Ltd. - India
- Sojitz Corporation - Japan
- Cement Manufacturers Association - India
- Semirara Mining Corp, Philippines
- The University of Queensland
- Coal and Oil Company - UAE
- Vedanta Resources Plc - India
- Global Business Power Corporation, Philippines
- Trasteel International SA, Italy
- Planning Commission, India
- Wood Mackenzie - Singapore
- Thai Mozambique Logistica
- Marubeni Corporation - India
- Ministry of Finance - Indonesia
- Price Waterhouse Coopers - Russia
- Samtan Co., Ltd - South Korea
- Binh Thuan Hamico - Vietnam
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sical Logistics Limited - India
- Ministry of Transport, Egypt
- Bangladesh Power Developement Board
- PNOC Exploration Corporation - Philippines
- Wilmar Investment Holdings
- Star Paper Mills Limited - India
- Miang Besar Coal Terminal - Indonesia
- Sindya Power Generating Company Private Ltd
- Simpson Spence & Young - Indonesia
- The Treasury - Australian Government
- Attock Cement Pakistan Limited
- Singapore Mercantile Exchange
- Aditya Birla Group - India
- Posco Energy - South Korea
- LBH Netherlands Bv - Netherlands
- Merrill Lynch Commodities Europe
- Iligan Light & Power Inc, Philippines
- Therma Luzon, Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- Karaikal Port Pvt Ltd - India
- Indian Energy Exchange, India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- CIMB Investment Bank - Malaysia
- Petrochimia International Co. Ltd.- Taiwan
- Meralco Power Generation, Philippines
- Antam Resourcindo - Indonesia
- Latin American Coal - Colombia
- Baramulti Group, Indonesia
- Rio Tinto Coal - Australia
- Sree Jayajothi Cements Limited - India
- Vizag Seaport Private Limited - India
- San Jose City I Power Corp, Philippines
- Siam City Cement - Thailand
- Bukit Makmur.PT - Indonesia
- Toyota Tsusho Corporation, Japan
- Central Electricity Authority - India
- Kalimantan Lumbung Energi - Indonesia
- Heidelberg Cement - Germany
- Indian Oil Corporation Limited
- Gujarat Sidhee Cement - India
- PTC India Limited - India
- London Commodity Brokers - England
- Parliament of New Zealand
- India Bulls Power Limited - India
- Global Coal Blending Company Limited - Australia
- Dalmia Cement Bharat India
- Directorate Of Revenue Intelligence - India
- Banpu Public Company Limited - Thailand
- Energy Development Corp, Philippines
- New Zealand Coal & Carbon
- TNB Fuel Sdn Bhd - Malaysia
- Coastal Gujarat Power Limited - India
- Kepco SPC Power Corporation, Philippines
- Electricity Authority, New Zealand
- Carbofer General Trading SA - India
- Energy Link Ltd, New Zealand
- Chamber of Mines of South Africa
- Kaltim Prima Coal - Indonesia
- Globalindo Alam Lestari - Indonesia
- OPG Power Generation Pvt Ltd - India
- Mercator Lines Limited - India
- Orica Australia Pty. Ltd.
- Minerals Council of Australia
- Africa Commodities Group - South Africa
- PetroVietnam Power Coal Import and Supply Company
- Madhucon Powers Ltd - India
- Jindal Steel & Power Ltd - India
- Pendopo Energi Batubara - Indonesia
- Meenaskhi Energy Private Limited - India
- Bhushan Steel Limited - India
- Indogreen Group - Indonesia
- VISA Power Limited - India
- International Coal Ventures Pvt Ltd - India
- Goldman Sachs - Singapore
- White Energy Company Limited
- Standard Chartered Bank - UAE
- Sinarmas Energy and Mining - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Formosa Plastics Group - Taiwan
- The State Trading Corporation of India Ltd
- Larsen & Toubro Limited - India
- Power Finance Corporation Ltd., India
- Pipit Mutiara Jaya. PT, Indonesia
- Tamil Nadu electricity Board
- SN Aboitiz Power Inc, Philippines
- Deloitte Consulting - India
- Kobexindo Tractors - Indoneisa
- Romanian Commodities Exchange
- Indonesian Coal Mining Association
- Coalindo Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- Port Waratah Coal Services - Australia
- Mjunction Services Limited - India
- European Bulk Services B.V. - Netherlands
- Bulk Trading Sa - Switzerland
- Anglo American - United Kingdom
- ICICI Bank Limited - India
- IHS Mccloskey Coal Group - USA
- Vijayanagar Sugar Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Petron Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Global Green Power PLC Corporation, Philippines
- Eastern Coal Council - USA
- Gujarat Mineral Development Corp Ltd - India
- Economic Council, Georgia
- Bukit Asam (Persero) Tbk - Indonesia
- Aboitiz Power Corporation - Philippines
- Jorong Barutama Greston.PT - Indonesia
- Agrawal Coal Company - India
- TeaM Sual Corporation - Philippines
- Thiess Contractors Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Sakthi Sugars Limited - India
- Edison Trading Spa - Italy
- SMC Global Power, Philippines
- South Luzon Thermal Energy Corporation
- Tata Chemicals Ltd - India
- Savvy Resources Ltd - HongKong
- Maharashtra Electricity Regulatory Commission - India
- Australian Coal Association
- Karbindo Abesyapradhi - Indoneisa
- Maheswari Brothers Coal Limited - India
- IEA Clean Coal Centre - UK
- SMG Consultants - Indonesia
- Videocon Industries ltd - India
- Cigading International Bulk Terminal - Indonesia
- Siam City Cement PLC, Thailand
- Indika Energy - Indonesia
- MS Steel International - UAE
- Lanco Infratech Ltd - India
- Intertek Mineral Services - Indonesia
- Parry Sugars Refinery, India
- Asmin Koalindo Tuhup - Indonesia
- Metalloyd Limited - United Kingdom
- Billiton Holdings Pty Ltd - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Riau Bara Harum - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Georgia Ports Authority, United States
- Kumho Petrochemical, South Korea
- Straits Asia Resources Limited - Singapore
- Independent Power Producers Association of India
- Bank of Tokyo Mitsubishi UFJ Ltd
- GN Power Mariveles Coal Plant, Philippines
- Interocean Group of Companies - India
- Bayan Resources Tbk. - Indonesia
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