The polemics over
implementation of Law no 4 /2009 on Mineral and Coal Mining kept rolling. Some
were pro and some were against implementation of the Law. As known
implementation of the Minerba Law had its consequences on the life of mining
operator companies.
An example was PT Freeport Indonesia, which operated the
biggest gold and copper mine in the world, which would probably run mass
dismissals of workers as related to implementation of Law no 4/2009 in Mineral
and Coal Mining.
As told, Chairman of the Branch Management of the
Indonesian Labor Union [SPSI]; Chemical Energy and Mining [SP KEP] of the
Mimika Regency Virgo Solossa said that the Minerba Law made it mandatory to
purify 99% of copper, gold and other by minerals at home.
They said that today 30 to 40% of metal concentrate of PT
Freeport Indonesia were already transported to smelter center in Gresik, East
Java while the rewst were exported as the capacity of Gresik smelter could only
accommodate 40% of PT Freeport quota. Eveb the capacity had to be shared with
PT Newmont so PT Freeport only sent 30% while the other 10% was sent from PT
Newmont.
They were worried that if the Central Government did not
ease rules, PT Freeport would have to reduce remaining production quota by
30%-40%. By such consequences as head of SPSI which commanded tens of labor
unions, most of which were in Freeport mining area, feared mass workers
dismissalsmightt have to happen.
With production downturn of around 60% to 70%, mining
field areas would not need too many workers. Certainly there were 18 to 20
thousand workers who would be dismissed of the total 31,000 workers active
today.
Just like demand of PT Freeport workers, the Regent of
West Sumbawa, West Nusa Tenggara, Zulkifli Muhadi said he had sent a letter to
president SBY to ask that PT Newmont Nusa Tenggara [NNT] be given dispensation
to export raw mineral ore after Law No.4/2009 on Mining was put in effect on
January 12, 2014.
The provincial Government of West Sumatra supported
execution of the Law but they asked the prohibition to export mineral ore be
suspended until they [PT Newmount] had smelters in operation. The Regent argued
that the request was forwarded because of fear there would be mass dismissal of
workers when the Minerba law was put in effect. As known the NTT province was
onlky able to produce ores amounting to 800,000 tons per year.
Of the total product, the smelter in Gresik, East Java
was only able to absorb 30%. If by January 12 2014 this US based company was no
longer allowed to export ore, automatically the production would be lowered
according to Gresik smelter absorption capacity which might lead to mass
dismissals. As he did not wish mass dismisals to happen in his region, Zulkifli
the regent had asked for dispensation for PT Newmont.
He even remarked that if PT Newmont was replaced by PT
Antam Tbk, I would not solve problems. The problems was there was no smelters
in West Sumbawa. So the Minerba Law could not be implemented because there
would be multiplier effect, i.e. there would be workers mass dismissals in West
Sumbawa. Even of PT Newmont was replaced by PT Antam it would not change the
situation as there was not a single smelter in West Sumbawa.
Noteworthy was the statement of the Indonesia Mineral
Producers Association [Apemindo] who denied Government’s statement that mining
operators were involved in the decision making process to prohibit export of
mineral ores. Apemindo’s statements simultaneously answered statement of the
Director General of Mineral and Mining, Ministry of Mineral Resources R.Sukhyar
who said that the Government and businessplayers agreed on the obligation to
process and purify mineral ores.
Apemindo complained that the information was misleading;
the Government mentioned only a few permit holding miners [IUP] whom the
Government claimed as having signed the agreement, but Apemindo was never in
volved in, or agreed to, the stipulation. Such was statement of the Chairman of
Apindo, Poltak Sitanggang as quoted by the print media. According to Poltak,
Apemindo who organized and accommodate 680 mining operators in Indonesia firmly
rejected the regulation to prohibit export of mineral ores by the Government
per January 12, 2014.
The Government had issue around 10,600 mining permits, so
if only 213 had agreed to the rules it did not represent Apemindo at all.
Apemindo had written an open letter to the government and Parliament containing
some important points for promoting mineral industry in Indonesia and
recommended the Government to take the following steps.
Firstly, to cancel the Regulation which prohibited export
of raw mineral ores.
Secondly, to open a forum for comprehensive dialogue between
businesspeople, the Government, and House to scheme up a strategic plan and
road map in relation to processing and purifying mineral ores at home for
national interest an maximum benefit to the people.
Thirdly, to extend export permit for miner companies who
were commited to build smelters in the country.
Fourthly, to build infra structure and power house to
support mining industry whereby to accelerate the process of smelters buildong
for ore processing and purification at home.
Fifthly to set up regulation for space planning related
to smelter building, considering the B3 wastage which was extremely dangerous
to Man’s health. Such were the points expected by Apemindo from the government,
but what they got was prohibition of raw mineral ore exporting.
In regard to the above, in the near future Apemindo
planned to run national grand meeting because in Law no 4/2009 there was no
point that mentioned restriction of mineral export. And so far there was no
guidline of any sort on the technical execution which restricted export of raw
mineral ores and the obligation to build smelters.
In their opinion, it was not right to export products
when there was still scarcity of raw materials for domestic need. In a
condition of abundance of raw materials due to export restriction of raw
materials it would only bring low profit to downstream producers as price of
raw materials were low and abnormal.
So it might be concluded that the government’s policy to
restrict export of raw ore materials which would be due on January 12, 2014
still triggered polemics. There were some who related export prohibition of raw
ores with trade deficit in Indonesia. Over four quarters up to quarter III/2013
deficit in Indonesia’s trading was posted at USD 9.7 billion or equal to 1.1%
of GDP.
To illustrate, prohibition of export of raw mineral ores
was predicted to reduce Indonesia’s export or ores to the amount of USD 5
billion per year.
Assuming that other product remained unchanged, deficit
in trading would expand from USD 9,5 billion [1.1% of GDP] to USD 14.7 billion
or 1.7% of GDP.
The discourse of trade deficit was still speculative
since at global level there was strengthening of USD value due to US Tappering
Off by the Fed, by end of Quarter II-2013 until mid quarter III/2013 Rupiah was
depreciated by 16% as trade deficit increased to 1,3% of GDP against 0.4% of
GDP in quarter II to become 1.7% of GDP in quarter II/2013.
Thereby prohibition of export of mineral ores would
expand deficit to 0.6% of GDP against deficit in Indonesia’s trade balance [due
to reduction of mineral ore export worth USD 5 billion] or around half of
Rupiah depreciation of 16 percent. The estimate was inclusive of the potential
import due to higher need for important components for the downstream industry.
A speculative opinion could be right or wrong, but it
seemed that the Ministry of Energy and Mineral Resources persisted to restrict
mineral ore per January 2014. The Government would prohibit export of ores like
nickel, bauxite and copper which would cause state’s income to be reduced by
millions of dolar per year.
The prohibition was expected to force mining operators to
build smelters to purify minerals at home. Mining operators expressed their
grievances that to build smelters was a long and costly process. If it must be
there by January, it was mission impossible and might generate a wave of
joblessness.
Susilo Siswoutomo, Deputy Ministry of Energy and Mineral
Resources said that the Government was trying to make a compromise. Susilo said
that the concept of smelter building was most reasonable; in a way it might be
disadvantageous but some mining operators would be exempted from the rule.
Companies should be criticized for only willing to dig and sell, they should
have made feasibility study long time ago. Mineral processing would multiply
added value by ten fold.
The Deputy Ministry said that the Government would only
make it compulsory for natural resources to be processed and purified in
Indonesia, because natural resources should be used to promote people’s
prosperity. The Government did not wish to talk about escavating mineral ore
and sell them, such was againt the Constitution. He said that the Law required
ore purification to be done in Indonesia; so any reason to justify rejection
was rated as irrelevant.
The point was that the Government must find a wayout of
uncertainty before starting purification on January 12 2014 next. Mining
operators should not have another period of transistion; but there must be a
wayout. So the Government demanded mining operators to run Law no 4/2009 on
mineral and coal [Minerba] without dismissing workers.
According to Irianto Simbolon, Director General of
Industrial Relationship and Social Security, Ministry of Labor and
Transmigration, the Government would take some measure to anticipate
massdismissals related to the execution of Law no 4/2009 on January 12, 2014.
The point was that the Government would insist mining operators to take
preemptive measures among others to discharge some workers first. The point was
that companies could not dismiss employees according to Law no 13/2013 on Labor
Force.
In that Law employers and employees were expected to use
the services of bipatrit agency at company’s level to settle industrial
relationship with employees that might arise due to the application of the
Mineral-and-Coal Law. Companies were expected to maintain good industrial
relationship with workers.
In response to the above polemics, the Ministry of Energy
Jero Wacik stated that the Government would run the Mineral-and-Coal Law. In
this case there were at least two conclusions from the Coordinative Meeting
today. The first conclusion of Meeting was that the Government would exercise
Law no 4 on Minerba consistenly. Meaning since January 12, 2014 export of raw
mineral would no longer be permitted.
The second conclusion was that companies who were not
doing processing and purification were no longer permitted to export raw
materials. Companies who were already doing processing and purification of
metals would be regulated further in the new Government’s regulation.
This Government Regulation would be released before
January 12, 2014. The Government was very serious about dissecting this Minerba
Law as it concerned the life of mining industry including the environment for
Indonesia today and tomorrow. However the Ministry of Energy and Mineral
Resources was not willing to explain in detail content of the Regulation.
In support to Ministry Jerro Wacik’s statement,
Coordinating Minister Hatta Rajasa underscore the Government would prohibit
export of raw mineral ore. The Minerba Law would be consistenly exrcised and
there could be no other interpretation of the Law.
In
regard to processing and purification there was already processing of ores
underway; purification was beginning but not 100 percent productive. The
Government Regulation was regarded as wayout before January 12, 2014 soon.
Hopefully the polemic over the Minerba law would be settled once and for all so
there would be certainty in mining business. (SS)
Business News - January 3, 2014
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