Forestry Law 41/1999 set alarm bells ringing in the offices of foreign mining companies because it prohibited them from operating open pit mines in Indonesia's protected forests. Despite this, after a concerted international and domestic campaign, the government looks set to allow 13 companies holding Mining Contracts of Work issued before 1999 to operate in protected forests.
The reason for this is clear. According to the Department of Energy and Mineral Resources (DEMR) there has been no new mining investment since 1999. A survey conducted by Price Waterhouse Coopers says the same thing. Since 1999, total expenditure in the mining sector declined from US$ 96 million to only US$ 18.9 million. The 1999 Forestry Law, announced by the reformasi President Abdurrachman Wahid, was a departure from New Order era laws designed to facilitate exploitation, not protection, of natural resources. The law clearly forbids activities that damage the forest. For example, Article 15.1 states that the 'protection of forest areas is needed to provide sustainability of its functions'. Article 15.2 reaffirms that 'prevention and limitation of any damage to the forest and its products caused by human activities is needed'.
It is difficult to understand how any mining operation - let alone a large open pit mine -will not physically damage the forest and its products.
Open pit mining also gets a specific mention in the Foresty Law, which emphatically says, 'In protected forests it is prohibited to extract minerals using the open pit method'. This is backed up by Article 7.3 of Government Regulation No. 28/1995 which states: 'In protected and conservation forest areas, it is prohibited to collect forest products by using inappropriate methods, or carry out activities which damage the soil, or destroy the land or the trees'. This clearly includes mining activities.
But with the government desperate for foreign investment, the mining companies are playing their cards right. They have put pressure on the government, arguing that regulations such as the 1999 Forestry Law mean that Indonesia will miss out on opportunities to attract potentially lucrative investment in the mining sector.
A roadmap for mining
Because they issue mining permits, bureaucrats in DEMR control mineral wealth like businesspeople, which is why they are trying to promote what they call a 'roadmap' for the mining industry in Indonesia. This roadmap was prepared by DEMR in collaboration with the University of Indonesia's Institute for Economic and Social Research. According to it, there are five main issues affecting the mining sector: first, how to share authority to issue mining permits beween central and local governments; second, overlapping land use regulations between the Department of Forestry and DEMR; third, environmental problems; fourth, taxation issues and fifth, poor coordination between departments that have an interest in controlling land use. This last issue raises particular difficulties. In Indonesia, different government departments and agencies (like the Department of Energy and Minerals, the Department of Forestry and the National Land Board Agency) control the exploitation of natural resources under separate laws or jurisdictions. Thus, separate mining and forestry (and most recently plantation) laws protect big business from the legitimate interests of other parties. The roadmap does recommend inter-departmental dialogue and coordination, particularly between the Department of Forestry and DEMR. But on closer examination, it appears to be nothing more than a proposal to allow mining companies to begin operations in protected forest areas.
Most mining concessions in Indonesia are on state-owned forestry land, which according to Forestry Law No. 41/1999 falls under the control of the Department of Forestry. Under Indonesian law, forestry land is divided into three categories: production forests, protected forest areas, and conservation areas. The Law does not allow any mining operations to be conducted in protected and conservation forest areas.
Around 33.6 million hectares of protected forest in Indonesia are controlled by the Department of Forestry. There are currently 22 mining companies holding concessions issued before 1999 in protected forest areas. Most companies listed in the 2000 edition of the Indonesian Minerals Exploration & Mining Directory are joint ventures with foreign capital. Thirteen of these companies have been given permission to carry out mineral exploration activities in 682,000 hectares of protected forests, even though it is illegal to mine in these areas.
Circumventing the law
So what has happened to the Forestry Law? The parties who promote the facilitation of new investment in the mining sector requested that President Megawati introduce a shortcut executive regulation, called a Replacement Regulation (Peraturan Pemerintah Pengganti Undang-undang, Perpu) which can override laws passed by parliament.
Under Indonesia's constitution the President is given emergency powers to issue Perpu in situations where the government must take swift and decisive action to guarantee security. Before a Perpu is formalised, the President is required to outline the threat to security which has prompted its introduction. Even then, the President still needs approval from parliament before the Perpu can be passed. The parliament still has control over the executive, but once passed, a Perpu has the same legal status as a law made by the parliament.
But does no new investment in the mining sector for five years constitute a threat to the nation? For the government, who measure things by profit, no new investment over a long period is threatening, particularly as corporations are lined up who can buy a public mining policy which enables them to intensify the extraction of Indonesia's natural resources.
President Megawati clearly thought so. Perpu No. 1/2004, signed by Megawati on 11 March 2004, amends Forestry Law No. 41/1999 to allow the 13 companies that had been given permits before 1999 to continue their mining operations in protected forests. Even though this Perpu has not yet been approved by the national parliament, this has not stopped the government in its haste to see investment return to the mining sector.
The Perpu was followed by Presidential Decree (Keputusan Presiden, Keppres) No. 41/2004, which gave permission for mining operations in several protected forest areas around Indonesia. Both the Perpu and the Decree are good examples of how public policy is related to the interests of private capital in Indonesia.
Studies have shown that in Indonesia large-scale mining operations hardly ever make a significant contribution to the economic development of local communities. My research found that approximately 62 per cent of net profits from mining operations in Indonesia leave the country. Only 38 per cent remain in Indonesia. Of this 38 per cent, only 10 per cent is earmarked for local communities and for restoration of the environment. Of the total profits from mining then, a mere 3.8 per cent goes to the local community and the environment. But do local communities even get that much?
The recent Perpu and Keppres are examples of how current agrarian politics and the politics of development give priority to the interests of large investors, rather than the sustainability of local people's livelihood and nationhood. The sad reality is that local people often receive few benefits from mining operations. Instead, they get environmental destruction like marine and coastal pollution (Newmont gold mine), evictions of small-scale miners (Kelian Equitorial Mining), or human rights violations such as torture and intimidation (Freeport). Mining operations in protected forest areas will only exacerbate this situation.
Megawati's executive decrees which support large companies at the expense of local people are undisguised maladministration. She may be the President of the Republic of Indonesia, but Megawati is behaving like a street vendor who attracts her customers - particularly foreign investors - by shouting: 'Come on Sir! Come on Sir! We still have more for you ' and it's all cheap, really cheap!'
Dianto Bachriadi (email@example.com) is Executive Director of Pergerakan, the People-Centered Advocay Institute, and a board member of KPA (the Consortium for Agrarian Reform). He is the author of Merana di Tengah Kelimpahan (1997), which explores human rights violations and large mining companies' operations in Indonesia.