Mining to resume in protected Indonesian
forests By Bill Guerin
JAKARTA
- With the House of Representatives in recess, and
campaigning for seats in the new legislature heating up,
a cabinet meeting chaired by President Megawati
Sukarnoputri issued an administrative order allowing
mining companies with contracts in place before 1999 to
resume activities in protected forests.
The
legislative mechanism used last Thursday to legitimize
the controversial move, a perpu, is only a government
regulation but carries the full weight of law. The issue
of a perpu in lieu of a law has only been done once
before by this administration, when clamping down on
terrorism after the Bali bombings of October 2002.
Article 83(A) of the regulation, Perpu No
1/2004, which supersedes the earlier Forestry Law No
41/1999, stipulates that all licenses and contracts on
mining affairs in forests made before the enactment of
the original forestry law are now valid for the
remainder of the original term of the license or
contract.
An estimated 375 operational forest
concessions are left in Indonesia, a significant
decrease from more than 600 in the early 1980s, but the
new ruling will, for the time being, only apply to 13
companies with operations already in place and at most
nine others with exploration contracts.
The 13
are among 22 contractors that appealed to the government
to resume operations in protected forests. Their
contracts were awarded by the government several years
ago, before the law was enacted, and their concession
areas were not then designated as protected forests.
Coordinating Minister for the Economy Dorodjatun
Kuntjoro-Jakti explained that the lucky 13 will be
allowed to resume operations because they had "proven
reserves and were economically viable". Most mining
companies operating in Indonesia discovered their
deposits in the 1970s and 1980s when the country was
looked on as one of the best in the world for mining
operations. Mine explorations then declined sharply
throughout the 1990s because of a lack of competitive
policies.
The worsening of the investment
climate in the sector resulted in a halt in exploration
and there has been none since 1998. As investment
plummeted revenues also fell drastically. The government
received a mere Rp1.07 trillion ($125 million) from the
sector last year, the sixth consecutive year of a
protracted downturn in mining revenues.
"We are
giving a signal to the mining investors that we are
doing the best we can to create a conducive climate,"
Mining and Energy Minister Purnomo Yusgiantoro said
after the decision was announced.
But as in
Robert Browning's "Bishop Blougram's Apology", the
"truth that peeps over the glasses' edge when dinner's
done" - there is a price to pay. The Coalition Against
Mining in Protected Forests, a group of several
environmental non-governmental organizations (NGOs) led
by the Mining Advocacy Network, or JATAM, warned last
week that the policy would only justify further forest
devastation.
The coalition has been campaigning
for some time to maintain the ban and has predicted for
months that a pro-mining decision would also lead to
more conflict with local communities whose lands will be
commandeered for mining, will cause more pollution of
water courses and more fatal floods and landslides as
forest cover is lost. The coalition plans to file for a
judicial review of the perpu at the Constitutional
Court.
"The government is undermining and
violating its own law and legalizing more forest
destruction,? Longgena Ginting, executive director of
environmental group Walhi, said after the news was
announced. Indonesia lost an estimated 40 million
hectares of tropical rainforests through the plunder and
destruction of forests that took place under the 32-year
regime of former president Suharto.
Unsustainable logging has mushroomed in many
regions as a result of regional autonomy. The government
has even leaked a plan to legislate for capital
punishment for those convicted of illegal logging.
Environmentalists claim that last week's
decision not only proved the government's poor
commitment to the environment, was influenced by foreign
intervention. They point to the actions of Canada's
secretary of state for Asia, David Kilgour, who in 2002
was said to have asked Jakarta to review the ban on
mining in protected forests, as it could impede Canadian
investment. Canadian companies affected by the 1999
Forestry Law were Placer Dome in South Kalimantan's
Meratus forests, Weda Bay Minerals Inc (which is
developing a cobalt mine on Halmahera Island), North
Maluku, and Inco, operator of nickel mining and smelting
operations in South and Central Sulawesi that,
environmentalists say, have blighted the lives of local
people for many years.
Last year, according to
Indonesian NGOs, the Australian Embassy in Jakarta
lobbied government ministers and legislators to permit
the resumption of mining, at the request of mining
multinationals BHP-Billiton, Placer Dome, Rio Tinto and
Newcrest. When news of the lobbying broke, angry
students protested outside the embassy in July, saying
the mines would devastate dwindling forest reserves.
The manner in which the new ruling was
implemented is also being questioned. A perpu is usually
issued in cases of emergency, though the government must
notify the House.
The mining industry has long
blamed the delay in resolving the issue for the dearth
of investment, and the Indonesian Mining Association
(IMA) claims that major issues such as legal and
security uncertainties, combined with high tax and legal
inconsistencies resulting from regional autonomy, have
been killing off new mining development.
The
association has argued that the producing and
exploration companies forced to suspend their open-pit
mining operations would not use any additional land or
forest outside their existing mining area anyway, so
that claims of additional forestry areas being destroyed
if they were allowed to resume are false.
The
IMA also points to a significant impact on the regional
economy and opportunity for the local communities to
enjoy the benefits. As well as income tax, valued-added
tax, sales tax, dividends and royalties, mining
companies also have to pay a series of levies imposed by
local governments.
Besides the uncertainty over
mining regulations, the government's fiscal policy has
also impeded mining operations.
"In total, a
mining company has to pay 60 percent of their earnings
to the government. This amount is the highest in the
world," IMA director Paul Coutrier has said. He claimed
last week that the new move would free up some $2.5
billion in mining investment.
Coutrier is on
record as saying that what he calls the "anti-mining
organizations" have "no eyes and no steam" to fight
illegal logging that destroys the forest and that they
also keep silent on illegal mining. A lack of security
guarantees means illegal miners often face no barriers
and can easily operate within a concession area owned by
a mining company due to a lack of legal enforcement.
JATAM, however, says its mandate comes from
local communities and, though it recognizes that
small-scale mining is very destructive to the
environment and is a real problem in Indonesia, it is
the mining industry that attempts to deflect
responsibility for its environmental and social impacts
on to another "poorer, defenseless segment of society".
JATAM notes, as if it were some new capitalist
vice introduced by mining companies, that its main
concern is generating the highest profits at the lowest
possible costs, Thus social programs are an
afterthought, it says, important only the continuation
of their operations in an area is threatened.
That is why pressure groups and watchdog
organizations are so important, JATAM says, to ensure
that environmental and social responsibility is raised
to the highest possible level, to ensure that the
environment and people are protected against short-term
capital gain and exploitation.
Perhaps the
charges would be better directed at the government.
Though it went into effect immediately without requiring
endorsement from the House of Representatives, the deal
is exactly the same as that rejected in November by the
House Commission III on forestry affairs and Commission
VIII on mining affairs, giving rise to speculation that
the outgoing administration has put short-term
investment and business interests ahead of forest
conservation and the long-term good of the environment
by issuing the new regulation.
One legislator,
Muhammad Askin, was quoted as saying that the perpu was
issued before the government had finished a study on
mining activities in protected forests demanded by House
Commission VIII for environmental affairs last year. "So
I think the House will not approve it," Askin warned.
Richard B Ness, president of the Indonesian
subsidiary of the US-based Newmont Corp, PT Newmont
Pacific Nusantara, says Indonesia received less than 1
percent of the world's mining investment in grassroots
exploration, despite the high geological potential still
offered by the country. He warned earlier, "It is
therefore important for related government agencies, the
mining community and other stakeholders to continue to
work together to seek solutions to improve the
investment condition.
"Approval [for the
resumption of mining in the forests concerned] will be
able to turn Indonesia into a better place for mining
operations, for the nation as a whole."
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