[Nasional-e] Supporting development of eastern Indonesia

[Ambon]

The Jakarta Post
Sept. 14, 2002

Supporting development of eastern Indonesia
Paul L. Coutrier, Executive Director Indonesian Mining Association (IMA),
Jakarta

Only in the last two years the government came to realize that eastern
Indonesia (KTI) has been lacking far behind the western regions; estimates
say the east is about 40 years behind western Indonesia, mainly Java. But it
is only in this present period of reform that a special Ministry for the
Acceleration of Eastern Indonesia was formed.
Yet the most important thing to do is to persuade industries and other
economic activities to invest there. Without new investments there will be
no economic growth and of course no additional employment. So far it has
only been the mining industry which has been willing to invest in the east.
What attracts the mining industry is the geological potential to find and
develop significant deposits of metals, such as nickel, gold, silver, copper
and coal in this area.
There are at least four mining projects in KTI with a potential of US$3.5
billion ready for foreign direct investment (FDI) in North Maluku, Papua and
Central Sulawesi. This potential has been waiting for more than two years
for government approval. They may be lost because other countries like
China, Chile or Kazakhsatan, are also waiting for mining investment funds.
FDI is hard to get because it is not a government foreign borrowing. In fact
other areas like Sulawesi Utara has already lost the opportunity for such
FDI because of the indecision of the government and the lack of legal
certainty regarding illegal mining in concession areas.
Many people do not realize what a $3.5 billion investment could mean in
terms of multiplier effects for KTI. A low figure of 20 percent of project
value means that some $700 million or Rp 6.3 trillion will be available for
local economic activities. Imagine the income tax they can contribute to the
local government, also the multiplier effect and the employment it can
generate. There are more than 20 other projects in the pipeline awaiting for
government approval.
If the government is serious to develop KTI a firm decision should be
reached on the status of these projects.
Most of the cases above originate from the inconsistency policy of
government agencies. Most of the projects used to be outside protected
forests and has been granted permits before, but later the agency declared
these sites as protected forests, or did not extend their permits of
operation because of their adjacent locations to protected forests.
Many companies are not even officially informed that their area has been
declared as protected forests. Geographical coordinates of these forests
vis-a-vis mining rights are even not available as everything was decided
from Jakarta.
To the exploration companies, the locals and the regional governments this
is very frustrating because after all, they have the right to judge the
development. Without proper geographical coordinates one can not solve
"overlapping areas" of conflict.
There are already conflicting figures on the size of overlapping areas. One
company was told that 40,000 hectares of its site is in a protected forest
while the real concession area left is only 4,000 ha. This is, of course,
absurd and proves lack of professionalism. Since the companies have issued
hundreds of million dollars in their operations, canceling the previous
permits may develop into an international arbitration case.
The attitude of many people and officials to this kind of dispute is very
much influenced by the statements of certain groups who are on the outset
anti mining. Their faulty statements were unfortunately also quoted by the
media and certain officials outside the mining sector. The group claims that
thousands of mining permits has been issued by the government, covering a
total area of 44 million hectares which enable the companies to "occupy"
about 35 percent of the total land area.
This is, of course, not true and is only based on their wrong perception of
what the permits really mean. In fact, mining permits were issued to big
companies in the form of exploration permits. Based on these permits the
companies have the sole right to explore minerals in that area and pay taxes
for the whole area of exploration.
The area which has been explored and does not have any deposits will be
relinquished and returned to the government. Last year the total area of
exploration for Contract of Works (Kontrak Karya) remained only six million
ha. This includes about 2 million ha of "overlapping areas" with protected
forests because of the problem of mapping.
This estimate is even on the high side because many exploration companies
have left the country because of the inconsistency of government policy and
lack of legal certainty. Government policy can change very suddenly
especially in the fiscal regime. This is not conducive for small and medium
scale exploration companies.
Exploration companies have retained only a small area where mineral is found
for production. The total area of all production fields in Indonesia is only
135,000 ha or 0.1 percent of the total land area. This already includes area
for infrastructure, roads, housing, schools and other public facilities.
In forestry concessions, the timber can grow anywhere in the forestry area
and the concessionaire will therefore try to maintain the same size of the
forest area from the beginning till the end of his concession right. In
mining exploration, the area shrinks as the exploration proceeds.
The exploration area is not really "occupied" by the companies because
during the exploration stage there is no change of title of land and people
can work as usual. Exploration can be done without significantly changing
the environment because only small holes are digged for seismic purposes and
sampling. Blaming the mining industry to destroy 11 million hectares is
therefore, a false perception.
The success ratio of finding an economic mineral deposit is so small that
among the 100 exploration companies, only four will be successful. This is
why the government gave permits for prospecting to so many local as well as
foreign companies.
To develop KTI, the government should give support and priority to
industrial activities ready to develop KTI. The government should have the
courage to decide and avoid "business as usual".
The people of KTI are awaiting for actions on developments, not rhetoric.
The development should, however, be evaluated holistically following the
principles of sustainable development.
In these hard times economic sustainability should be given priority. Once
the government has decided to support mining in KTI, all the agencies should
implement the decision, unless there is a minister who feels he is not a
member of the Cabinet. The mining industry should adhere to the Toronto
Declaration issued by the international mining industry which supported the
principle of sustainable development.