It’s time to talk to politicians [Coal Asia Vol 57]

It’s time to talk to politicians.

The mining industry has some well-established avenues of communication with the government for conveying the industries outlook on policy. Traditionally, this included developing personal contacts between leading figures in industry and the ministry, which worked because both groups were professionals with similar mining and geological backgrounds. However there was a significant disruption to the professionalism approach when the Director General’s proposal to implement a workable arrangement for the implementation of the smelter policy was flatly rejected by parliament, and ended with an effective ban on raw mineral exports. The politicians had exerted their power, leaving the professionals within the ministry and industry isolated from policy decisions.

Large mining companies were strong enough to arrange meetings with the mines department, while smaller players relied upon the professional associations such as PERHAPI or IMA to hold conferences and press meetings in an effort to influence policy, but the government showed only lip service.Times change, and so the old motto of “win-win” was left behind as several constitutional court challenges reflected a widening gap between the parliament and the people of the mining industry.

This year the parliament has scheduled to revise the 2004 mining law. Coal Asia (Vol.56) reported “DGMC completes first draft of revised mining law” and quotes the Director General of Minerals and Coal R. Sukhyer “We’re still in discussions with industry players and associations”. So now is the time for industry to talk. Indonesia’s economic outlook is increasingly seen as fragile, so now is the right time to effect communication from the mining industry to the government on improving the mining law. However the old ways of such communication need to be updated, with a stronger focus on the parliament, rather than relying on the messenger (the mines department) to achieve the right policy.

There are560 elected politicians in parliament, from many competing political parties that present a daunting task for influencing. Fortunately it may be more effective to focus on Commission VII. The commissions’ scope includes the preparation, discussion and refinement of bills for energy and mineral resources, as well as research, technology and the environment. Commission VII works with the Department of Energy & Mineral Resources and many other ministries and State institutions.

Insights into Commission VII.

For some time I have been watching the government web site for the published list of commission members, and it has finally been posted, showing the smiling faces of its 46 members. The next step is towards understanding how to influence these politicians is to look at the public records of their activity related to the mineral and coal industry. There are numerous party policy statements, but discussions with a number of industry leaders indicate a public outlook that the political parties say one thing, but often do something else. Indeed many in the mining industry wish the mining policy to change to more accurately reflect the will of the people, who understand the exploration and mining industry.

For insight to the Commission VII members I refer to the 15 January 2015 meeting between the Commission VII and the Director General of Coal and Minerals (R. Sukhyar) from the ministry of Coal and Mineral Resources. Here the Director General outlined his immediatestrategic issues related to the implementation of the mining law. Thisincluded negotiations of the COW (minerals & coal), realization of the mineral processing program, supporting the house of representatives, reconciliation of Clean & Clear, clarify mining areas, increase state revenues and mineral & coal export policy. This is to be undertaken with the overriding constitutional objective to materialize as much as possible for the prosperity of the people. Other significant factors include the increase of coal to support power generation, and increasing the non-tax revenue from mining. Furthermore the ministry officials carry out the functions of coaching and supervising the mining business activities of exploration, production, environment, safety and other business activities.

The meeting progressed wherein the Commission VII members were invited to speak. They typically used this opportunity to pose polite introductions with a few questions on small scale local mining. Some admitted they did not know about the mining activities in their electorates. Their comments seemed to indicate they had not prepared for this meeting and their general level of awareness was based around the hot topics in the newspapers. The few well directed questions typically sought greater transparency.

The next phase of the meeting saw the political party faction leaders make a more thoughtful series of comments and questions. So perhaps the more seasoned politicians, or the political leaders do all the “work” at such meetings. The Garinda Party seemed ready to discuss issues that impact on monetary policy, including the implementation of the smelter issues and other matters. The Haruna Party expressed empathy for local bauxite businessmen and emphasized the importance of entrepreneurs for Indonesia’s future, and went on to question such change in regulation not only caused commercial losses and laying off people, but were compounded with the tenement holders being still required to pay land rent and other taxes to the government. The Partai Democracy Indonesia Perjuangan (PDIP) called for a clearer system of estimating reserves to be based on exploration surveys and include performance indicators and work plans. The PDIP called for transparency in the termination of non C&C, and touched on greater transparency for smelting, CSR and environment issues. One PDIP politician simply wants Freeport to build a smelter in Papua, and further commented on the districts to administer the 5,000 IUP’s. The PartaiPersatuan Indonesia Raya (Perindo) called for careful consideration that smelters should be built only as viable private or public enterprises. The PartaiGerakan Indonesia Raya (Gerindra) called for the clarification from the mines department in implementing its regulations and obligations. The PartaiAmanat National called for clearer data on the smelter programs and to not to expect the government to build smelters but the government should give incentives for private smelters. They urged for renegotiations with the COW’s to be tougher, but also acknowledged the governments’ fundamental weakness in that it needs such investors. They expressed the opinion that contracts (COW or IUP) that refer to compliance with Indonesian regulations should be automatically changed each time the government changes the regulations. At one phase of the presentation one politician expressed concern that a bauxite miner in his district was confused that he had to stop exporting, but still had to pay land rent, and felt this should be reconsidered with a win-win situation.

The Director General’s response was relatively muted to listing its successes and following the governments’ aspirations to increase added value of the mining sector through building aluminum smelters. A general discussion period followed with a call for greater legal certainty, optimizing state revenues, urging more discussion on smelters, plus some specific issues in the coal industry. One particular politician’s telling comment was a call for the Director General to help educate the politicians on the miningindustry and mining law.

Communication& Influence.

Narrow profit margins, improved corporate responsibility, an active anti corruption body (KPK) and the growing sophistication of politics in Indonesia means that granting favors to a few key figures is no longer the simple way to influence people. Fortunately there are many standard ways to express influence, including through seminars, holding press releases as individuals or through industry associations, such as IMA, PERHAPI, IAG or EMDI.

Recently in Australia an industry sponsored direct publicity campaign was waged to influence the Australian government to change its new “windfall tax” on the mining industry. The TV and newspaper commercials achieved a significant level of public empathy with the miners that won the day for the people, and the tax was changed.  Now that’s an active democracy where the people’s view can change the government’s policies. In Indonesia, similar public outcries on a range of social matters have been seen to work on a local scale. There are now a host of tabloids, newspapers, TV and radio channels at the local, national and international level that may be used as outlets for disseminating the exploration and mining viewpoints.

Just as it seems many politicians do not know about mining in their electorate, then it is likely that many people in the mining industry (owners, employees, contractors etc.) may not know their elected representatives. Each person has a right to approach their representative and to express their outlook on the exploration and mining industry. Professional associations and NGO’s may also approach the Commission VII or other politicians to express their views, as participants of “the people of Indonesia”. The means of communicating directly with the politicians is now more varied and easier that before, from direct meetings, written letters to Email, twitter etc.

The recent spate of Constitutional Court challenges to the mining & water industry focus on the constitution statement that resources are placed in the ground for the benefit of the people of Indonesia. The government then asserts that it is the appropriate body to determine how to interpret the concept of such benefits. Often the concept of “people’s benefits” is implemented as benefits towards government income, rather than benefits directly to the people, such as employment or investment opportunities etc. In the case of the raw ore export ban there was a significant real reduction in benefits for many people in the mining industry as was expressed in the 15 January meeting as above. Clearly the people associated with the exploration and mining industry need to be more active in expressing their outlook for a fair share of benefits from exploration andmining.

Each player in the mining industry, from education, exploration, mining, contracting, transport, marketing and financing are encouraged to develop their own strategies for conveying their policy outlook to Commission VII and other politicians.

Attached is a list of the Commission VII members derived from the parliament web site, and the secretariat Email is set_komisi7@dpr.go.id