Bill Guerin, Jakarta – With the House of Representatives in recess, and campaigning for seats in the new legislature heating up, a cabinet meeting chaired by President Megawati Sukarnoputri issued an administrative order allowing mining companies with contracts in place before 1999 to resume activities in protected forests.
The legislative mechanism used last Thursday to legitimize the controversial move, a perpu, is only a government regulation but carries the full weight of law. The issue of a perpu in lieu of a law has only been done once before by this administration, when clamping down on terrorism after the Bali bombings of October 2002.
Article 83(A) of the regulation, Perpu No 1/2004, which supersedes the earlier Forestry Law No 41/1999, stipulates that all licenses and contracts on mining affairs in forests made before the enactment of the original forestry law are now valid for the remainder of the original term of the license or contract.
An estimated 375 operational forest concessions are left in Indonesia, a significant decrease from more than 600 in the early 1980s, but the new ruling will, for the time being, only apply to 13 companies with operations already in place and at most nine others with exploration contracts.
The 13 are among 22 contractors that appealed to the government to resume operations in protected forests. Their contracts were awarded by the government several years ago, before the law was enacted, and their concession areas were not then designated as protected forests.
Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti explained that the lucky 13 will be allowed to resume operations because they had "proven reserves and were economically viable". Most mining companies operating in Indonesia discovered their deposits in the 1970s and 1980s when the country was looked on as one of the best in the world for mining operations. Mine explorations then declined sharply throughout the 1990s because of a lack of competitive policies.
The worsening of the investment climate in the sector resulted in a halt in exploration and there has been none since 1998. As investment plummeted revenues also fell drastically. The government received a mere Rp1.07 trillion ($125 million) from the sector last year, the sixth consecutive year of a protracted downturn in mining revenues.
"We are giving a signal to the mining investors that we are doing the best we can to create a conducive climate," Mining and Energy Minister Purnomo Yusgiantoro said after the decision was announced.
But as in Robert Browning's "Bishop Blougram's Apology", the "truth that peeps over the glasses' edge when dinner's done" – there is a price to pay. The Coalition Against Mining in Protected Forests, a group of several environmental non-governmental organizations (NGOs) led by the Mining Advocacy Network, or JATAM, warned last week that the policy would only justify further forest devastation.
The coalition has been campaigning for some time to maintain the ban and has predicted for months that a pro-mining decision would also lead to more conflict with local communities whose lands will be commandeered for mining, will cause more pollution of water courses and more fatal floods and landslides as forest cover is lost. The coalition plans to file for a judicial review of the perpu at the Constitutional Court.
"The government is undermining and violating its own law and legalizing more forest destruction,? Longgena Ginting, executive director of environmental group Walhi, said after the news was announced. Indonesia lost an estimated 40 million hectares of tropical rainforests through the plunder and destruction of forests that took place under the 32-year regime of former president Suharto.
Unsustainable logging has mushroomed in many regions as a result of regional autonomy. The government has even leaked a plan to legislate for capital punishment for those convicted of illegal logging.
Environmentalists claim that last week's decision not only proved the government's poor commitment to the environment, was influenced by foreign intervention. They point to the actions of Canada's secretary of state for Asia, David Kilgour, who in 2002 was said to have asked Jakarta to review the ban on mining in protected forests, as it could impede Canadian investment. Canadian companies affected by the 1999 Forestry Law were Placer Dome in South Kalimantan's Meratus forests, Weda Bay Minerals Inc (which is developing a cobalt mine on Halmahera Island), North Maluku, and Inco, operator of nickel mining and smelting operations in South and Central Sulawesi that, environmentalists say, have blighted the lives of local people for many years.
Last year, according to Indonesian NGOs, the Australian Embassy in Jakarta lobbied government ministers and legislators to permit the resumption of mining, at the request of mining multinationals BHP-Billiton, Placer Dome, Rio Tinto and Newcrest. When news of the lobbying broke, angry students protested outside the embassy in July, saying the mines would devastate dwindling forest reserves.
The manner in which the new ruling was implemented is also being questioned. A perpu is usually issued in cases of emergency, though the government must notify the House.
The mining industry has long blamed the delay in resolving the issue for the dearth of investment, and the Indonesian Mining Association (IMA) claims that major issues such as legal and security uncertainties, combined with high tax and legal inconsistencies resulting from regional autonomy, have been killing off new mining development.
The association has argued that the producing and exploration companies forced to suspend their open-pit mining operations would not use any additional land or forest outside their existing mining area anyway, so that claims of additional forestry areas being destroyed if they were allowed to resume are false.
The IMA also points to a significant impact on the regional economy and opportunity for the local communities to enjoy the benefits. As well as income tax, valued-added tax, sales tax, dividends and royalties, mining companies also have to pay a series of levies imposed by local governments.
Besides the uncertainty over mining regulations, the government's fiscal policy has also impeded mining operations.
"In total, a mining company has to pay 60 percent of their earnings to the government. This amount is the highest in the world," IMA director Paul Coutrier has said. He claimed last week that the new move would free up some $2.5 billion in mining investment.
Coutrier is on record as saying that what he calls the "anti-mining organizations" have "no eyes and no steam" to fight illegal logging that destroys the forest and that they also keep silent on illegal mining. A lack of security guarantees means illegal miners often face no barriers and can easily operate within a concession area owned by a mining company due to a lack of legal enforcement.
JATAM, however, says its mandate comes from local communities and, though it recognizes that small-scale mining is very destructive to the environment and is a real problem in Indonesia, it is the mining industry that attempts to deflect responsibility for its environmental and social impacts on to another "poorer, defenseless segment of society".
JATAM notes, as if it were some new capitalist vice introduced by mining companies, that its main concern is generating the highest profits at the lowest possible costs, Thus social programs are an afterthought, it says, important only the continuation of their operations in an area is threatened.
That is why pressure groups and watchdog organizations are so important, JATAM says, to ensure that environmental and social responsibility is raised to the highest possible level, to ensure that the environment and people are protected against short-term capital gain and exploitation.
Perhaps the charges would be better directed at the government. Though it went into effect immediately without requiring endorsement from the House of Representatives, the deal is exactly the same as that rejected in November by the House Commission III on forestry affairs and Commission VIII on mining affairs, giving rise to speculation that the outgoing administration has put short-term investment and business interests ahead of forest conservation and the long-term good of the environment by issuing the new regulation.
One legislator, Muhammad Askin, was quoted as saying that the perpu was issued before the government had finished a study on mining activities in protected forests demanded by House Commission VIII for environmental affairs last year. "So I think the House will not approve it," Askin warned.
Richard B Ness, president of the Indonesian subsidiary of the US-based Newmont Corp, PT Newmont Pacific Nusantara, says Indonesia received less than 1 percent of the world's mining investment in grassroots exploration, despite the high geological potential still offered by the country. He warned earlier, "It is therefore important for related government agencies, the mining community and other stakeholders to continue to work together to seek solutions to improve the investment condition.
"Approval [for the resumption of mining in the forests concerned] will be able to turn Indonesia into a better place for mining operations, for the nation as a whole."