ASEAN and the Indonesian Mining Industry – Getting There [Coal Asia Vol. 33]

ASEAN and the Indonesian Mining Industry – Getting There

By Ian Wollff

The author is an expatriate principal geologist of about 28 years experience in the Indonesian exploration & mining industry, and is employed by an international consultant company.

 

The Association of South East Asian Nations (ASEAN) was established on 8 August 1967. Member states are Bruni, Darussalam, Cambodia, Indonesia, Lao, P.D.R.Malaysia, Myanmar Philippines, Singapore, Thailand, Viet Nam with the ASEAN Secretariat based in Jakarta. Their outlook is that each of the ASEAN nations can achieve more through working together on a wide range of issues, from security, commerce, social to cultural enhancement etc. This range of activities includes the primary industries wherein this article looks at the ASEAN aspect of the future direction of the minerals and coal industries. Their principal outlook is to develop the mineral and coal industries in a responsible manner. ASEAN provides a platform for outlining regional policies and goals with implementation through ministerial meetings, seminars, training programs etc.

The first part of this article looks at some of the ASEAN mineral and coal strategy plans, while the second part reflects on implementation.

The ASEAN Minerals Cooperation Action Plan 2005-2010 (AMCAP) of 4 August 2005 objective “is to create a vibrant ASEAN minerals sector by enhancing trade and investment , strengthening cooperation and capability for sustainable development in the region”. Under the Vientiane Action Program (VAP) “ASEAN member countries will strive, to implement strategic policies, measures and initiatives to further enhance minerals trade and investment, to attract robust private sector participation in the investment of the exploration and development of mineral resources, and to promote environmentally and socially sustainable mining practices.” The implementing strategies include ;- “Identify opportunities for and impediments to minerals exploration, production and processing, with a view to enhance regional cooperation, trade and investment in the mineral sector.” “Support private sector development and national and foreign investment for environmentally and socially sustainable mineral development”. “Develop a regional framework to facilitate cross border movement of skilled and professional workforce as well as technology”. This was implemented through various studies on the ASEAN countries mineral potential & policies plus forums on mining investment etc.

The Hanoi Declaration on Sustainable ASEAN Connectivity in Minerals (9 Dec 2011) reaffirmed its support to the establishment of the ASEAN Economic Community by 2015 by enhancing the ASEAN minerals sector to provide the necessary resources for a sustainable socio-economic development. This was outlined briefly in 6 points, and adopted the ASEAN Minerals Cooperation Action Plan (AMCAP) 2011-2015. This sets out six strategies with allocation of implementing programs assigned to the various countries. Indonesia’s coordination projects include :

• Establish information sharing mechanism to possibly harmonize mineral policies of ASEAN member states,
• Review existing regulations and incentives with a view to promote and facilitate trade and investment.
• Put into operation, maintain and enhance the ASEAN Mineral Information System, including its infrastructure.
• Exchange of information, statistics and publication on mineral exploration, development and utilization as well as value added activities, including mineral laws and regulations.
• Sharing information on increasing added value in minerals and precious stones.
• Development of an ASEAN data base on minerals.
• Organize training courses, exchanging experts in mineral data base sector between AESEN member states.
• Identify and document indigenous knowledge and best practices in environmental protection and rational utilization of mineral resources.
• Continuous programs on exchange of knowledge an environmentally and socially responsible mineral development practices.
• R&D on increasing added value in minerals and precious stones.
• Training on geological surveys and resource mapping.
• Short term training courses on specialized areas, especially environmental management, mineral processing and rehabilitation.
• Holding training’s on Extractive Industries Transparency Initiative (EITI) for ASEAN senior officials on minerals.

The ASEAN Vision 2020, ASEAN cooperation in the field of energy 2010 – 2015 under the theme of “Bringing Policies to Actions” includes some aspects of the coal sector. The achievements in the 2004-2009 period included seminars, workshops and training on clean coal technology. The objectives for 2010 – 2015 are “to promote the development and use of clean coal technologies and to facilitate ASEAN coal trade towards enhancing regional energy security needs as well as to cooperate and promote sustainable development and utilization of coal while addressing environmental issues and facilitating intra ASEAN coal related issues”. There is a broad action plan, and interestingly includes an action to adopt an ASEAN Agreement on coal supply and trading – could this be a widening of the Indonesian Domestic Market obligation policy in Indonesia ? Action plans also include the encouragement of the private sector investment and participation in the promotion of coal and clean coal technologies, and also to promote increased coal trade, exploration and investment through seminars, workshops, tours and business to business arrangements. Building of an ASEAN coal image is identified as a key success factor.

The Evolving Towards ASEAN 2015 – ASEAN annual report 2011-2012 section on ASEAN Economic Community (AEC) review of the services sector includes ; “ASEAN has intensified its efforts to complete its negotiations for an ASEAN Agreement of Movement of Natural Persons (MNP) to facilitate the movement of persons engaged in trade of goods, trade in services and investment which is expected to be completed in 2012.ASEAN is also reviewing the 1995 ASEAN Framework Agreement on Services (AFAS) to transform this into a comprehensive services agreement to achieve free flow of services by 2015. The ASEAN Minerals Cooperation Scoreboard 2009-2011 successfully implemented a number of seminars and training sessions and accepted the Ha Noi Declaration and Ministers endorsed AMCAP.

The ASEAN Comprehensive Investment Agreement (ACIA) took effect on 29 March 2012 – The introduction document indicates this is designed to create a free and open investment regime in the context of an integrated community. It is expected to create a more conductive business / investment environment. It is based upon international best practices with provisions on liberalization and protection, with liberalization provisions including mining and associated services. The provisions to include clearer and transparent provisions for obtaining approval and transfers, and being in line with international investment agreements plus comprehensive mechanism on investor – State dispute settlement.

It is interesting to note that at the eighth meeting on Working Group on Capacity Building in Minerals (WGCBM) held in December 2011 that a proposed project is on “Capacity Building on Cross Border Geological Correlation”. The objective of this project is, among others, to enhance the geological correlation in border areas of ASEAN Member States and to evaluate potential areas for mineral in border areas of member countries based on geological correlation. The project is proposed to be implemented in a form of training program, which include lectures, seminar, and visitation”.

As part of the ASEAN Mineral Cooperation Action Plan (AMCAP) 2011- 2015 the first international conference on geology and natural resources (geoASEAN 1) was held in Viet Nam on 13 May 2013, with a focus on the exploration and mining of titanium.

The ASEAN minerals trust fund has been proposed for some time, but it appears not all nations, including Indonesia, are enthusiastic for this form of funding to support AMCAP. Thus, with such poor funding bases, the ASEAN initiative may remain largely a political stage with limited implementation.

The Jakarta Post reported Friday 21 June that “The implementation of the AEC, under which 10 member states of ASEAN are set to see economic integration, is behind schedule on its stated objectives and timelines, according to a report published by the CIMB ASEAN Research Institute. The report, titled The ASEAN Economic Community (AEC): The Status of Implementation, Challenges and Bottlenecks, also says that progress toward the AEC does not fully correspond with the reality and is influenced by political motives. Another problem involves the low utilization of free trade provisions among business people. The report quoted a 2012 survey from the ASEAN Business Advisory Council (ASEAN-BAC) on ASEAN competitiveness, which stated only 25 percent of the respondents said they used preferential trade provisions in ASEAN when doing business and 29 percent of them planned to use the provisions. The other 46 percent said they did not use the provisions, with many of them not even realizing the provisions existed”.

A quick look at the ASEAN minerals/coal web GIS site shows a regional map with areas and points located based on commodity. This appears as a reasonable starting point but the maps appear unfinished, and are presently of little professional use. The associated ESDM map on mineral strategies of districts gives a more useful list of commodities for Indonesian districts, though the associated map appears to have no beneficial zoom in features.

In fulfilling the ASEAN objectives of transparency, Indonesia has joined the Extractive Industries Transparency Initiative (EITI) with Philippines, Viet Nam and Myanmar considering joining, while Cambodia is adopting the values and principals but do not want to join EITI. The position of Thailand, Laos, Brunei and Malaysia are less defined. Indonesia is here in commended upon its leading ASEAN towards the implementation this AMCAP objective.

The ASEAN review process on service industries appears to address this outlook on a sector by sector bases, wherein financial services and some IT services are progressing. The exploration and mining service sectors appear to have not yet been considered, but can be expected to be addressed by 2015. It would seem the Indonesian Ministry of Energy & Mineral Resources (MoEMR) is preempting the ASEAN implementation of the exploration and mining sector through its recent MoEMR regulation on mining service providers (24/2012). Certainly this regulation ticks the right boxes for a responsible mining industry, but will also provide an added hurdle for other ASEAN states to enter the Indonesian mining service sector business through its definitions and range of encumbrances. Perhaps the Indonesian and other ASEAN private sector service companies may consider lobbying through ASEAN as an avenue to seek a wider representation to present their case on the mining service sector issues.

The recent Jakarta Post report (29 June) refers to Indonesia’s agreement to provide training to Vietnam officials in mining exploration and associated technology would appear to comply with ANCAP and reflects Indonesia’s growing influence upon the ASEAN mining industry.

The practical impact of ASEAN objectives (enhancing trade and investment in minerals, transparency etc ) are also reflected in the Jakarta Post article (29 June) wherein Indonesia’s Coordinating Economic Minister Hatta Rajasa wants to introduce an economic package to simplify licensing, whereby his office would transfer the license granting authority from ministries or local governments to the single window integrated licensing services (PTSP). Hatta’s examples included mining exploration (25 licenses) and production (another 25 licenses). Hatta’s office would focus on license simplification and also foster legal certainty by setting the number of days needed to acquire licenses.

It is apparent that Indonesia is a significant player in the ongoing development of the ASEAN mineral and coal field wherein Indonesia promotes its strong grounding in the geological and mining sciences, environmental and social concerns, and its future outlook on value added. The ESDM web site does show some implementation compliance wherein the format may be suited to school projects, but is presently of limited professional use. The government is clearly moving forward on the ASEAN mineral and coal objectives, wherein the CIMB report is a reflection of much of industries concern for the government to persist and improve its efforts to achieve these ASEAN goals. There may be a potential for the mining industry to lobbying through ASEAN, to express its outlook on Indonesia and other ASEAN countries.