The Hard Struggle [Coal Asia magazine Vol. 51]
The Hard Struggle. By Ian Wollff
The Constitutional Court Decision No. 10/PUU-XII/2014 was to uphold the Mining Law 4/2009 and thereby give effect to the implementing regulation that bans raw ore exports, and mandates sever mineral processing requirements upon exploration and mining companies.
The plaintiffs consisted of a wide spectrum from the mining and mining service industry that claimed financial losses and manpower retrenchments were due to an improper Mining Law (Article 102 & 103) and related implementing regulations. Each plaintiff made a brief statements and were supported by a number of expert witnesses. The court accepted their claims as within the law to be heard by the Constitutional Court. The Government then made a number of statements and called its expert witnesses, plus some NGO’s made statements. There is a lot of repetition and poor science in the 179 page Indonesian document. The Government had a clear win on the case.
In my opinion
- Overall the plaintiff’s cases were not well presented, being essential simple complaints. They did not adequately focus on a solid linkage of their claim with the specific conflict to the Constitutional Law.
- Overall the Governments rebuttal was a little about the good Law, and much about national aspirations. The rebuttal was essentially – the government feels the law is OK, and the plaintiffs should follow the law.
- Both sides agreed at various points there was no formal law “banning the export of minerals”, and the Court ruled it was not appropriate for it to rule on an implementing regulation.
What does an Indonesian geologists or miner get from this Constitutional Court decision:
Both petitioners and the government defense agreed on the Constitution clause; “The earth and water and the natural resources contained in it are controlled by the state and used for the greatest prosperity of the people” (Google translate). However the difference between industry and Government was the outlook on “the greatest prosperity of the people”. One of the Government arguments indicates Indonesia should conserve its resources for use by future generations, while the petitioners argued that resources should be used to generate jobs & wealth now, rather than later. If we were to apply similar logic to the petroleum industry, then clearly Indonesia should slow down oil production and stop refinery abroad – but clearly this is not in the Governments planning. So why is there an opposite approach between oil & gas and minerals? The violence at the end of the Soeharto rule was a factor that lead to the creation of Regional Autonomy, wherein the Government kept oil & gas at the central level, but gave the responsibility of minerals & coal to the Regions, as some form of sacrificial lamb to maintain peace with Regions. Since then minerals & coal has become further politicized, with the left elements increasing their sphere of influence over minerals. It is looking more likely that to get a geologist job or career path, then a position in oil & gas remain best options, while a career path in minerals is a least option. Note that a position as a government geologist in the regions is still uncertain, as limited budgets and nepotism are a career path obstacles.
The pro government argument expresses concern that Indonesian ore should be processed domestically, and not abroad, such that Indonesia may get multiple benefits, though conveniently avoiding the negative effects of pollution etc. The Government argues further that such finished products will be cheaper in the long run for Indonesia, though provides no reasonable scientific bases. Aside from this court record, we understand that many of the current proposals to build refineries are foreign dominated, and the potential of Indonesia’s downstream industry being controlled by foreign parties is not mentioned in such “aspirational” arguments by the Government. Ultimately the conversion of resources to reserves shall depend on the marketing strategy of these foreign dominated process plants. Dr IrArif S. Siregar (expert for plaintiff) points out that a typical feasibility study for a process plant requires “the guarantee of raw materials (feed stock security) approximately two times the period of repayment is one of the main requirements to get a bankable feasibility study”(Google translate). With only a few processing plants being built, then once such limited resource / reserve have been defined, then there is no need of further resources. Potentially the foreign controlled process plants may indirectly control the nation’s resources and reserves. Be careful what you wish for. So where does this leave the Indonesian geologist – a vague promise of further technology transfer for mineral process engineers seems insignificant to the loss of so many exploration & mining jobs.
One Presidential statement is that “ …increased exploitation and sale of mineral ore abroad (raw material) is massive and will accelerate the pace of reduction in the national mineral reserves and subsequent shortages or scarcity of supply of minerals to meet domestic needs” (Google translate). Most experienced geologists realize the opposite is true, that a growing demand will drive exploration to find more (and sometimes better) resources & reserves. Indeed this is what has happened over the past 5 years. Within this court document, the Government experts glow with pride that Indonesia now has 1.13 billion tons of lateritic nickel reserves and 2.85 billion tons of resources. Others government experts mention the wonderful bauxite industry and iron ore industries. Without a potential ore product sale, then there will be less incentive to explore for such minerals, and ultimately Indonesia’s national resources, and certainly the national reserves, shall shrink faster through lack of compliance, lack of competition to dive efficiencyand lack of opportunism,than through perceived excessive consumption. Less exploration and mining means the industry will shrink in terms of people and possibly geological development.
The Pro Government expert, Prof. Hikmanhanto Heilbron, SH, LLM, PhD quotes part of the 1945 constitution to include “The national economy shall be organized based on economic democracy with the principles of togetherness, equitable efficiency, sustainability, environment friendliness, independence, and balancing economic progress and national unity”(Google translate). Clearly both sides of this argument can claim this statement supports their outlook. What it means for the 4,000 or more Indonesian geologists and miners in the minerals & coal sector is that they should be become more politically active in support of their profession as a major driver of Indonesia’s future development. Perhaps we need more Ahok geologists in government rather than dangdut singers.
The Pro Government expert, Dr. Ahmad Redi, SH points out that “Article 36 (1) of the Mining Law stipulates the IUP Exploration activities (general investigation, exploration and feasibility study) and IUP OP (construction, mining, management and refining, transport and sales) ….so that even an IUP Exploration can-not be granted without appropriate management and purification plans” (Google translate). This view is supported by Ir. Areshman Ryad Chaiil, LLM “Interpretation of the provisions of the Mining Act, …..explained that the essence of exploration and exploitation as an integrated whole can-not be separated with the processing and refining activities (Google translate). A further statement by A. Tony Prasetiantolo, PhD argues that during the initial period of implementation Indonesia will suffer until such processing comes on stream, and goes on to say “In every business there are such things as economies of skill and as such the small entrepreneurs can-not penetrate some industries” (rough Google translate). Clearly these experts do not understand the exploration and mining industry thrives on small exploration companies taking high risks to find resources. The Pro Government camp often criticized Freeport and Newmont in this document, even though such companies were not involved in the case. However if only large competent companies can commence exploration, then some of the few companies that may qualify, and commit,are Freeport and Newmont. So there is less opportunity for geologists with small companies, and more with big companies. Such big companies can select the best applicants and not have to pay highly competitive wages, with little other opportunities for everyone else. Similarly big companies may not wish to explore areas of high geological risk, and ultimately less exploration may be undertaken throughout Indonesia, and possibly less discoveries made in Indonesia.
The hard reality.
There are many idealist geologists and miners who support the concept of value adding and the law.Unfortunately many will have to bear the burden personally, (whether they approve or not of such laws) with the loss of their profession. I met a new taxi driver in Jakarta and chatted as I had to direct him about town. It turned out he was a mining superintendent for a good company for more than 10 years, having come up the ranks and learnt on the job to be prompt, loyal and that the company cared for him and his family. But driving a taxi for a well know company was a huge let down into a job where the hours were not real, safety was only a word, the pay uncertain and the company and fellow workers did not really care about him. He was alone in Jakarta, as there was no work in his home town of Samarinda where his wife and children were dependent upon him.
Looking for ways out.
There may be one way for industry to achieve a win-win situation, as outlined in the pro Government expert Ir. Areshman Ryad Chairil LLM point “ As for matters related to the percentage of concentration of mandatory mineral ore grade or degree of purification is highly dependent on the progress of research and technology from time to time. It was the authority of the Government through the Minister of Energy & Mineral Resources (MEMR) to set the standard. If there are parties who object to the MEMR settings, then in accordance with the regulations, an appeal can be filed to the Supreme Court, not the Constitutional Court”. (Google translate).
Public debate in the media around the time of implementation (January 2014) focused on the argument that loss of jobs and loss of national income would be a temporary pain that Indonesia should accept, in order to have a much brighter future. This argument is also brought out in a number of the Governments rational in the court documents. However the argument has not stopped with the court decision. The Jakarta Post (17 December 2014) quotes the R. Sukhyar of the Ministry of Energy and Mineral Resources in relation to raising coal output for 2015 as “This is a real dilemma for us; maintaining coal production to be in line with the national policy or increasing contributions to state revenues”. Also the Jakarta Post (16 December 2014) article by Darmansjah Djumala, the director general / head of policy analysis and development agency at the Foreign Ministry wherein the new foreign policy includes “down to earth” policy as defined as foreign policy that is orientated for the benefit of the people. This is taken a step further (Jakarta Post 23 December 2014) wherein the “Trade Minister Rachmat Gobel has challenged Indonesian trade attaches and representatives worldwide to work hard and help boost the country’s exports, otherwise they could lose their jobs”. The answers to those seeking to increase exports is in the same newspaper , under the article “Nickel shortage propels RP mining boom” wherein the Philippines is now exporting nickel ore that use to be sourced from Indonesia.
There are typically limited opportunities for refineries in Indonesia. It is possible one province may get a refinery, and one or two mines shall be enough to supply such refinery. This will mean loss of opportunity for other Districts / Provinces with mineral resources but no access to smelters. There should be room for both, as Australia has both aluminum refineries and bauxite exports.
It’s Time to Review.
It has been a year since the 4th January 2004 implementation on the effective raw ore export ban, and it is time to have a transparent public review of the implementation of the aspiration goals set by last year’s Government. The Constitutional court documents indicate some 3,000 people lost their jobs from the 9 companies bringing the court case, so imagine how many more are not “getting the maximum benefit from Indonesia’s resources”!
The struggle.
Perhaps I can close with a Pro Government statement by Ir. Areshman Ryad Chairil, LL.M. “We remembered the advice of President Sukarno in the speech of independence in 1964, which states:
Struggle is easier when you repel invaders, but your struggle will be more difficult when it is against your own people.” (Google translate). This struggle of geologists and miners for a better today is a tough struggle against the academic dreamers.