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Indonesian government can't bury mining
conflicts
By Bill Guerin
JAKARTA - Jakarta plans to sell small stakes in
three state-owned mining companies this year as part of
efforts to meet its privatization target of Rp5 trillion
(US$590 million). Up to 14 percent stakes in miners
Tambang Batubara Bukit Asam (Bukit Asam), PT Timah
Indonesia (Timah) and Aneka Tambang (Antam) will be
offered.
These are all healthy, well run
companies, and shares in several mining companies rose
last week upon news of the planned share sales. But the
rally masks pessimism about the sector in the long run.
Coal miner Bukit Asam expects to post a net
profit of over Rp200 billion ($23 million) for last year
helped by stronger coal prices.
Timah, the
world's largest integrated tin miner, expects final net
profits of around Rp80 billion, a massive jump from
Rp11.28 billion in 2002 though still puny compared with
its Rp331 billion earnings in 2000. Sales last year rose
to $200 million amid higher tin prices and rising
volume, and this year may be better. Timah forecasts
world tin prices rising above $5,500 per ton and demand
5 to 10 percent higher thanks to more buoyant
electronics and automotive industries.
Gold and
nickel miner Antam is one of Indonesia's top diversified
mining companies and its largest nickel producer. It
also won the 2003 Annual Report Award in the publicly
listed company category. Despite depressed markets at
present, Antam is pressing ahead with a third smelter
project, FeNi III, to process low-grade nickel,
projected to boost annual production by about 15,000
tons in 2006.
Bleak prospects
In spite
of the success of these three companies, Indonesia's
mining sector ranked 27th out of 35 countries for
"attractiveness" in a 2001-2002 industry survey, and
that ranking surely hasn't improved in recent years.
Though Article 33 of the 1945 constitution specifically
requires the land and natural resources of Indonesia to
be used for the benefit of the people, mining analysts
say unfulfilled potential costs the state vast
prospective revenue from taxes, royalties and profit
sharing, while local communities miss out on thousands
of job opportunities.
Industry analysts predict
only a handful of miners - PT Freeport Indonesia (gold
and copper), PT Inco (nickel), PT Kaltim Prima Coal, PT
Newmont Nusa Tenggara (gold and copper), and PT Adaro
Indonesia (coal) - may still be operating in Indonesia
by the end of the decade.
Investment and
exploration in the sector has ground toward a halt over
the last six years due to illegal mining, uncertainty
about government policy, high taxes, lack of security
guarantees, corruption and concerns over regional
autonomy legislation.
This slowdown is costing
the government dearly. Energy and Mineral Resources
Minister Purnomo Yusgiantoro said state revenue from the
mining sector amounted to only Rp1.07 trillion ($127
million) in 2003, down from Rp1.3 trillion in 2002.
Ironically, Indonesia is still one the world's
most geologically promising countries, but as existing
mineral reserves become exhausted, many mining companies
are closing up shop and leaving Indonesia for better
digging abroad.
Rio Tinto, for example, has been
in Indonesia for three decades, but is now rapidly
downgrading its operations. Its Kelian goldmine in
Kalimantan will shut down this year, and its Citra Palu
mine in Sulawesi is up for sale.
Last year's
move by Rio Tinto and BP Plc to sell their stake in the
country's second largest coal producer, PT Kaltim Prima
Coal (KPC), to local company PT Bumi Resources, was the
beginning of the end for the Anglo-Australian giant.
Rio Tinto's Indonesian exploration activities
have been scaled down, and its only remaining investment
will be its interest in the Grasberg mine in Papua,
operated by American giant Freeport.
The changes
follow years of frustration with the uncertainty in the
country's mining policy. In 2002, Aurora Gold packed up
and left, claming it was helpless against the ravages of
illegal miners.
No confidence
vote
Indonesian Mining Association (IMA) warned
that more foreign companies might follow suit without
improvements in the investment climate for mining. "It
has become a growing trend now among foreign mining
companies to sell their mining interests in Indonesia,"
IMA executive director P L Coutrier said. "They simply
have no confidence in the country's mining policy."
BHP-Billiton's proposed nickel mine in a
protected forest on Gag Island, off West Papua, has been
delayed for years because of environmental concerns. The
Raja Ampat archipelago (which includes Gag) contains
some of the richest coral reefs in the world, and UNESCO
says the plan for submarine tailings disposal would
introduce mining waste into a highly biodiverse marine
environment, inviting disaster.
The major
battles are being fought over forestry law 41/1999,
which prohibits open pit mining in protected forest
areas. Protected forest areas currently stand at 11.4
million hectares out of an estimated total 85 million
hectares of forest, while current mining concessions
cover an estimated 47 to 67 million hectares of forest
and other areas.
However, miners say that
virtually all of Indonesia's forests include rock that
may contain commercially viable deposits, including the
protected areas. "Most of the mineral deposits are
located in the forests, so if all forests are considered
protected forest, we won't have any new mining areas to
work on," Antam's development director Darma Ambiar said
last month.
BHP-Billiton and fellow
multinationals Rio Tinto, Freeport MacMoran, Newmont, BP
and Inco have been in the forefront of lobbying the
government to open up protected forests for mining, but
there is no end in sight to the conflict.
The
government planned to issue permits to 15 mining
companies to resume their work in protected forests.
Those companies - Freeport Indonesia in Papua; Newmont
in Nusa Tenggara; International Nickel Indonesia (Inco),
Indominco Mandiri, Arutmin Indonesia, Aneka Tambang,
Karimun Granite, Nusa Halmahera Minerals in Maluku;
Natarang Mining in Lampung; Meares Soputan Mining,
Nabire Bakti Mining, Meratus Sumber Mas, Weda Bay Nikel,
Gag Nickel and Citra in Palu - all signed their
contracts before the law was enacted and their working
areas became classified as protected forest.
According to Minister of Energy and Mineral
Resources Purnomo Yusgiantoro, the decision to grant
permits was taken at a ministerial meeting on June 18
last year. He said at the time that the new permits only
awaited President Megawati Sukarnoputri's approval. The
government later prioritized 13 companies that had all
actually been mining before the ban.
Lightning strikes
Legislators from
House of Representatives Commission III on forestry
affairs and Commission VIII on mining affairs screened
the sites in a series of what miners termed "lightning"
visits, and in November, Commission III rejected the
proposed permits.
Coordinating Minister for the
Economy Dorodjatun Kuntjoro-Jakti immediately appealed
to legislators to reverse the decision, saying companies
with signed contracts should be allowed to proceed.
Kuntjoro-Jakti added that Indonesia needs additional
investment of $170 billion over the next five years to
develop mining infrastructure, particularly in eastern
Indonesia. "After 2007, there will be no new
activities," he warned. "Please allow these 13 companies
to go in."
Government documents assert the 13
mining companies have invested $7.6 billion in
Indonesian projects. They claim the new projects would
lead to $380 million annual revenue and jobs for 47,269
local workers. Analysts estimate the government could
also face $22.8 billion in costs and compensation
payments through litigation if it fails to honor the
mining contracts.
While acknowledging concerns
over environmental degradation, Kuntjoro-Jakti noted the
13 companies' mines would occupy only 2 percent of total
protected forest areas. But with April's legislative
elections only weeks away, lawmakers are very unlikely
to reverse their decision and risk the wrath of rural
voters. A long awaited presidential decree on mining
reportedly due soon may override the House on these 13
permits, but it won't end the conflict over mining.
Mining is one of Indonesia's biggest industries.
According to Energy and Mineral Resources Minister
Purnomo, investment from the four biggest concessions
alone amounts to $9 billion. But mining also can destroy
natural resources on which many millions of rural and
urban Indonesians depend for their livelihoods, and it
can endanger their health.
An Indonesian
non-governmental organization coalition led by Mining
Advocacy Network, known by its Indonesian acronym JATAM,
has spearheaded a campaign to maintain the ban. The
coalition argues that if the government caves in to
mining multinationals, the outcome will be continued
conflict with local communities whose lands will be
taken for mining. On Thursday, paramilitary police in
North Maluku shot dead a local man demonstrating for an
end to mining in a protected forest area.
Blind eye
Opponents of mining also
predict more fatal floods and landslides will take place
as forest cover is lost. They accuse the government of
turning a blind eye to environmental and social
consequences for the sake of big corporations.
During a single week last July, protests against
mining in protected forests took place in 13 cities in
Sumatra, Kalimantan, Nusa Tenggara Timur, Sulawesi, and
Java, including the capital, Jakarta. In both Central
Sulawesi and South Kalimantan, provincial governments
have refused permission for mining in their protected
forests, and Kalimantan has declared a province-wide
mining moratorium. These local rules conflict with
national mining laws, adding another layer of
uncertainty to the industry.
Amid the web of
restrictions and regulations, rampant illegal mining is
inflicting massive losses on the government. Last month,
retired general Muzani Syukur, chairing the government
team tasked with implementing Presidential Decree
No.25/2001 on the eradication of illegal mining, fuel
smuggling and electricity theft, said illegal mining
caused annual losses of Rp 3.3 trillion ($389.4
million), three times previous estimates.
"The
losses exclude environmental destruction, pollution and
other forms of damage whose impacts are far greater than
the material losses," Syukur said, blaming the problem
on "reform euphoria, weak law enforcement and the poor
performance of state officials".
But he added it
was impossible for the government to take stern measures
against illegal miners because there are so many of
them. "Around 75,000 people currently engage in illegal
mining. If each of them has four family members to feed,
will we take action against all of them?" he asked.
(Copyright 2004 Asia Times Online Ltd. All
rights reserved. Please contact content@atimes.com for
information on our sales and syndication
policies.)
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