THE FAILURE OF INDONESIA'S MINING INDUSTRY

THE FAILURE OF INDONESIA'S MINING INDUSTRY

JATAM

13th January 2006

Mining sector should have been the last resort - The mining industry has been running for almost four decades in the country. However, it has failed to prove its "myth" to sustain Indonesia's economy, moreover to give local people a more prosperous life. The sector only contributed Rp. 1.3 to 2.3 trillion (*) to the National Budget during the last four years, a smaller amount compared to that of forestry sector.

It also has a low added value, since mining products are mostly exported as raw materials, not to mention its low absorption of mass labor at local level. The portrait of failure becomes more undeniable as the sector also fails to show its responsibility for environmental damages, human rights violations, and conflict settlement with local communities in mining locations.

The myths about how mining sector will provide prosperity are increasingly losing their validity. Freeport Corp., Indonesia's first large-scale mining corporation which has been operating for 32 years in Papua, serves the best example for this.

At least 1,448 tons of gold, not to mention vast amounts of copper and silver have been scraped out of Grasberg Mount. Papua's condition, however, is far from the 'glitter' of its gold mountain. Although Papua earns the third highest Gross Domestic Product, it's Human Development Index (HDI), which reflects mortality rates of pregnant mothers as well as babies, has been falling to the bottom.

Papua has the biggest number of poor people with HDI index in the 29th rank among Indonesia's 30 provinces. The number of people living below the poverty line has increased to more than 35% out of the total population. Ironically [the poverty] is concentrated around Freeport's mining concession [1]. As Freeport's mining production increases, so do cases of prostitution in Timika, making the mining city the area with the biggest number of HIV AIDS patients in Indonesia, a shocking record.

Large-scale mining corporations have also failed in handling the destructive potential of mineral extraction. Freeport Corp. has failed in showing its responsibility towards environmental management as well as conflict resolution with local communities. About 1.3 billion tons of tailing waste and 3.6 billion tons of waste rock have been dumped into the environment without proper treatment. The wastes have polluted Ajkwa River and caused Lake Wanagon to collapse, as well as contaminating hundreds of hectares of land long way down to the Arafura sea.

Freeport Corp. has also been proven not to have accountability, as it violates various environmental laws, ranging from Ministerial Decree No. 51/2004 on Quality Standard of Sea Water, to Government Regulation No. 82/2001 on Management of Water Quality and Water Contamination Control [2]. The Ministry of Environment even stated that the company doesn't have any permit to dispose of tailings. Not to mention the company's record of human right violations that have been taking place around the mining location, as documented by the National Commission on Human Rights and groups of churches in Papua in 1995, yet which remain unsettled up to the present [3].

Responding to these issues, National Coordinator of JATAM (Indonesian Mining Advocacy Network), Siti Maimunah comments that, "The impunity of multinational corporations such as Freeport Corp. in violation of environmental laws has gone beyond government's capacity to control. Ironically, the country's policy is none other than to keep issuing mining contracts and waiting for the income from royalty".

Not-so-different portraits can easily be found at other large-scale mining locations, such as in the gold mining of PT Barisan Tropikal Mining (Laverton Gold) in Sumatera island; PT Indo Muro Kencana (Strait Resources), PT Kelian Equatorial Mining (Rio Tinto), PT Indominco Mandiri (Banpu), PT Adaro, PT Arutmin, PT Bahari Cakrawala Sebuku (Strait Resources) in Borneo island ; PT Inco, PT Newmont, PT Antam in Sulawesi; PT Newmont, PT Arumbai in Nusa Tenggara; PT Nusa Halmahera Minerals (Newcrest) in the islands of Mollucas, and PT Freeport in Papua.

Worse conditions are found in locations where the mining operation has been terminated and where mine pits were abandoned without rehabilitation. Consider the locations of PT Barisan Tropikal Mining in Muara Tiku Regency, South Sumatera, and that of PT Indo Muro Kencana in Central Kalimantan.

Ironically too, among mentioned 'achievements' of Indonesian mining actors - through IMA (Indonesian Mining Association)- is to keep on demanding, and even intimidating or pressing the government, into giving special treatment in various aspects, such as tax reduction, the lowering of environmental regulation standards, or [industry] requests to open 11.4 million hectares of protected forests for open-pit mining. For this, the companis have threatened to remove or cancel their investment - a disgraceful conduct.

With such an 'achievement' of Indonesia's mining sector, the country's officials should review and make a fundamental reform to mining sector in order not to inflict a loss upon the country or threaten the safety of local communities as well as the environment. If these measures cannot be accomplished, then the mining sector only deserves to be the last resort for a developing the country [4]. Or at least until the country can really manage it well.

Media Contact : Adi Widianto (+62 21 7941559) (+62 815 116 55911)

Notes:

[1] Source : JATAM's Database, 2005

[2] Government Regulation of Republic of Indonesia No. 82 yr 2001 on Management of Water Quality and Control over Water Contamination states that Total Suspended Solid (TSS) content in the water should not be more than 400 milligram per liter. Meanwhile, according to a 2004 field report made by the Ministry of Environment, TSS content in lowland rivers is 37,500 miligram/liter and 7,500 miligram/liter in rivers that flow to Arafura Sea (The Cost of Gold, The Hidden Payroll. Below A Mountain of Wealth, A River of Waste. The New York Times. December 27, 2005). Such a high content of TSS also violates Environmental Ministerial Decree No 51/ 2004 on Quality Standard of Sea Water.

[3] National Human Rights Commission of Indonesia, "Results of Monitoring and Investigation of Five Incidents at Timika and One Incident at Hoea, Irian Jaya During October 1994-June 1995," Jakarta, 1995. In addition, commissioners involved in the investigation have called it incomplete for failing to examine involvement in the violations by Freeport itself. See "Freeport's Involvement has not yet been investigated," Kompas, 2 October 1995 (English translation of original in Bahasa Indonesia; source: TAPOL).

[4] The last resort means that mining should be the last choice to exploit on a large scale. This is based on the fact that mining sector has 'destructive potential' and deals with unrenewable resources which at a certain point will run out.