MAC: Mines and Communities

Indonesia: On the brink of a coal boom, Papuans ask who will benefit

Published by MAC on 2020-04-24
Source: Mongabay

On the brink of a coal boom, Papuans ask who will benefit

Will a new mining industry planned for Papua repeat an old story of dispossession and environmental degradation?

by Febriana Firdaus

21 April 2020

Mongabay Series: Indonesian coal, Land rights and extractives

Across Indonesia, a huge and poorly regulated coal industry has generated enormous wealth for investors but left local people behind to deal with the impacts of environmental degradation.
The country’s easternmost Papua region has several untapped coal reserves. But the central government is working on a plan to open it for coal mining.
An investigation into the coal industry in Horna, on the Bird’s Head Peninsula of the island of New Guinea, reveals that a company granted exploration rights in the area is closely connected to local and national power players.

BINTUNI BAY, Indonesia — Residents of this part of the island of New Guinea have long known they live atop a coal deposit. Some local people recall hearing traditional stories of how the weather is hot because of the coal found deep in the bowels of the Earth.

The Dutch, who controlled New Guinea’s western half for three centuries, knew it too. They identified coal deposits in what is now the Bintuni Bay district of Indonesia’s West Papua province. Even the Dutch name for Bintuni, Steenkool, which survives in the name of the local airport, referred to the reserves of coal stones they found here. But the sites were deemed too remote and difficult to mine, and they were passed over in favor of more accessible natural resources elsewhere.

Today, Indonesia is in the grips of a coal boom. The country is one of the world’s biggest exporters of the commodity. Plans are also in the works to ramp up domestic consumption, with dozens of new coal-fired power plants scheduled for construction as part of President Joko Widodo’s electricity drive.

So far, mining has been concentrated on the islands of Sumatra and Borneo. There, companies operating amid lax government oversight have torn down rainforests, polluted water sources and grabbed land from indigenous communities. But a growing hunger for cheap energy, paired with an increasing drive to bring the country’s easternmost provinces more firmly under control of the central government, has brought renewed attention to the Papua region’s coal reserves.

In West Papua province, attention has focused on Bintuni Bay, believed to hold the province’s best and largest coal deposits. Since 2009, 25 companies have received permits to explore for coal in the district, according to data from the government of West Papua province. In recent years, most of these firms’ progress through the licensing process has stalled. But according to local sources, four of these firms have gotten as far as arranging meetings with traditional landowners.

An area called Horna, part of Bintuni’s Dataran Beimes subdistrict, has been identified as having the best-quality coal in the province. There, Mongabay has found a picture that will look familiar to people living near mining sites across Indonesia: The companies poised to benefit from extracting coal have close connections to both the local and national political and economic elite.

One firm, PT Horna Inti Mandiri (HIM), was granted an exploration permit by a local politician, Alfons Manibui, whose brother sat on the company board. And analysis of company documents reveals a web of ties to some of the country’s most powerful political and business figures. The boards of PT HIM and its parent companies are peppered with high-profile names: Rizal Mallarangeng, a powerful politician in the influential Golkar political party who has close ties to Aburizal Bakrie, one of Indonesia’s wealthiest and most powerful men; Rizal’s brother Andi “Choel” Mallarangeng, convicted of graft in 2013; and Amir Faisal, former vice president of Bakrie Global Ventura, the mining wing of Aburizal Bakrie’s family firm.

Meanwhile, the Sough tribe, traditional owners of the land for which PT HIM was given an exploration permit are among the country’s poorest and most marginalized people, and they say they have been given little information on the value of what they are giving away, or the negative impacts mining could have on their communities.

Officials at the Ministry of Energy and Mineral Resources in Jakarta are said to be working on a map to determine exactly which areas of Papua will be opened up for coal mining. For now, mining in the province is on hold. But once the map is released, people living in the district could face a wave of exploration and speculation.

Across Indonesia, the opening of frontier areas for industries like logging, mining and oil palm has enriched economic and political elites while leaving most local people behind. Although it remains Indonesia’s most heavily forested region, Papua is no exception. It is home to a gold and copper mine that in 2018 generated $5.8 billion in revenue. Meanwhile, more than a quarter of people in Papua and West Papua provinces live on less than $1 per day.

As Papua prepares to be opened up for coal, Papuan activists question whether this new extractive industry will be any different than the old ones.

Although Papua’s coal reserves are so far untapped, the region is no stranger to resource extraction. Papua is home to the Grasberg mine, the world’s largest gold mine. And Bintuni Bay itself hosts a multibillion-dollar natural gas project.

The environmental and social legacies of these projects have left many in Papua wary of the impacts of a new extractive industry; the Grasberg mine dumps thousands of tons of waste directly into river systems every day, and human rights abuses of local people are rampant.

Across Indonesia, mining has long been interlinked with business, politics, poverty and the dispossession of indigenous peoples. In Papua, which today is divided into the provinces of Papua and West Papua, the fraught relationship with the Indonesian state adds an extra layer of complexity.

Since August 2019, the island has been wracked by a wave of violence that has left at least 30 people dead. The immediate cause was racism against Papuan students that sparked riots across the region. But it was underpinned by simmering discontent among Papuans after half a century of rule from Jakarta during which they have faced suppression of basic freedoms, a wave of immigration of non-Papuans into the island, and the exploitation of Papua’s natural resources while most Papuans remain in poverty.

Genset City

The $8 billion Tangguh liquefied natural gas project in Bintuni Bay sends shiploads of fuel to Sumatra, Java and beyond. But the city of Bintuni itself still lacks 24-hour electricity. Instead, with electricity available only at night, those who can afford to rely by day on diesel generators, known locally as genset. That’s earned Bintuni the nickname “Genset City.”

Tanah Merah, a village of 127 families, had to be relocated for the gas processing plant. BP, which manages operations at the gas plant, pledged to set new standards for corporate social responsibility, employing development experts, establishing a social benefits program, building a resettlement village and setting aside jobs for community members.

In 2011, locals told U.K.-based NGO Down to Earth they felt “discarded.” Employment opportunities were limited, and the company’s social benefit program lasted only two years. Local people watched gas flow out and a wave of migrants from elsewhere gain well-paying jobs. In the meantime, villagers said they lost their communal farmland and were also prohibited from harvesting shrimp on the beach.

In Bintuni’s central market, the wealth gap between indigenous people and migrants from elsewhere in Indonesia is on stark display. Most of the market stalls are owned by migrants from the islands of Sulawesi, Madura and Java. Meanwhile, the mama-mama Papua, or Papuan women traders, ply their wares from mats placed on the street, where they display small heaps of produce: areca nuts, tubers, sweet potatoes and other vegetables. It’s very rare to see a Papuan trader selling in large quantities like their migrant competitors.

The Bintuni market reflects a situation that’s become a public issue across West Papua.

“The new market building project is focused on and prioritizes migrants,” says Yohanes “Anes” Akwan, an environmentalist who was born in Bintuni. “That’s why money only circulates among the migrants. The mama-mama Papua still sell their goods in the street. They often sell for very low prices or just throw their goods away if no one buys them.”

The city also has a security problem. At 5 a.m. one day during Mongabay’s visit, an illegal motorcycle race had taken over the main street, where heavily intoxicated teenagers were passed out. Minors here have easy access to liquor, thanks to the massive amounts smuggled into Bintuni Bay each year.

The conditions in the city are reminiscent of Timika, the notorious mining town that serves Freeport’s Grasberg mine. Indeed, Papuans call BP Tangguh “the second Freeport,” Anes says.

And while BP has at least made some efforts to develop a new model for corporate social responsibility, the coal companies circling Papua appear to be operating out of an old playbook.
View from the Grasberg open-pit copper and gold mine in Papua province. The mine is largest gold mine and second largest copper mine in the world, but the nearest town, Timika, is notorious among indigenous people as a hotbed of crime and poverty.

Matteus Unawekla, a former adviser to the Bintuni Bay district mining department, says it has never been easy to start a coal business here. Any attempt to get a project started first requires navigating the complex system of customary communal land tenure prevalent in West Papua.

Traditionally, land is held communally by tribes rather than individuals, with ownership and usage rights based on local knowledge and traditions rather than paper titles. In West Papua, this communal tenure was granted official recognition with a 2016 decree issued by the Ministry of Agrarian Affairs and Spatial Planning, meaning that all decisions about exploration and resource extraction in communal lands must be approved by traditional community decision-making bodies.

To even begin discussions with local landowners, companies seeking to open a mine, plantation or timber concession usually have to pay what is colloquially known as a “door-opening” or “knock-knock fee.” Only then can negotiations begin over what royalties the tribe will earn from the total production.

These “knock-knock” fees are prohibited under Indonesian law but multiple sources confirmed to Mongabay they are common practice. The fees can reach 1 billion rupiah ($73,000), said Matteus, who is known in Bintuni Bay for acting as a middleman of sorts for mining companies.

After these fees have been settled, companies enter negotiations over compensation for customary landholders. These deals are negotiated with little effective oversight from local officials — and, in many cases, the officials themselves are closely linked to the companies seeking concessions. Communities are often not properly informed about the value of what they are signing away or the potential negative impacts of the projects planned for their land.

Appropriate compensation for indigenous people has been a concern in West Papua for decades, as the region has been opened up for mining, logging and agribusiness. The most famous case is Freeport’s Grasberg mine, where local leaders say they have received a few communal benefits like the construction of schools and houses of worship, but their communities remain afflicted by poverty.

A similar pattern seems to be taking shape with coal companies in Bintuni Bay.

The Sough tribe are the customary owners of the land that falls within the Horna concession, which is identified as having the highest-value coal in the province. Horna’s coal reserves have attracted interest from multiple investors, says Untung Wahyu Widodo, head of the provincial mining department’s minerals and coal division.

The Sough have already faced decades of dispossession. In 1971, as part of a broader effort by the Indonesian government to erode the authority of customary law, most of the Sough were relocated from their ancestral homeland to an urban neighborhood called Kampung Atibo on the outskirts of Manimeri subdistrict. They were given houses, but little else.

Mongabay visited Kampung Atibo, about an hour’s drive inland from the harbor, and met Korneles Mokiri, the head of the Sough tribe. The new village is situated in a migrant hub, and the government-built houses are made of brick and wood, completely different from the tribe’s traditional honai huts, made of wood with a thatched roof of straw or reeds.

The Sough used to live by hunting, gathering and gardening in the heart of Horna’s very remote forests. They grew tubers, bananas, durians, mangos and coconuts. They worshiped nature — the mountains, water, trees, stones, lakes — and their ancestors. There were no roads connecting the tribe to the city.

Now they have to adapt to an urban life; most of them no longer hunt or gather in the forest. They go to church or mosque, though a few still stick to their traditional beliefs.

They also struggle to feed their families. “In the past, if we didn’t have money, we were never in trouble, we just hunted a deer or wild boar near our house,” Dollina, a tribe member, tells Mongabay.

Food isn’t as freely available now, although Mongabay did witness one resident heading off for the forest with a bow and arrow. The alternative is to buy meat at the market. But for most of the Sough people, the lack of a steady job and income puts the price of items like pork out of reach. When they can’t afford meat, Dollina says, they buy instant noodles and vegetables.

She adds that the Sough people have never been satisfied with the government’s development projects for Papua’s indigenous people.

A well-connected company

In 2010, PT Horna Inti Mandiri was given the right to explore 63 square kilometers (24 square miles) in Horna, on land traditionally owned by the Sough.

According to Korneles, the Sough were not consulted, or even informed, before the local government granted the company exploration rights. “We didn’t know. Later, we knew it from the government,” he says. PT HIM did not respond to a formal interview request sent to their address of record.

Korneles says it’s possible the government overlooked the tribes due to a lack of formal governance. “At that time, we had no leadership among the tribes,” he says. The seven tribes of Teluk Bintuni only agreed to set up a customary council with a single leader in July 2017.

Korneles also points to politics. He says PT HIM was backed by members of Golkar, the political party to which the district chief at the time, Alfons Manibui, also belonged. This allegiance, Korneles suggests, could have smoothed the path for the company.

In Indonesia, the lines between politics and business are frequently blurred. High-profile businessmen recast themselves as politicians.

Perhaps the most famous example of a businessman-cum-politician is Aburizal Bakrie, the scion of the Bakrie Group, a conglomerate with interests in mining, agriculture, media, real estate and more. In his political career, Aburizal has served variously as the chairman of the Golkar Party, the coordinating minister for the economy and the coordinating minister for public welfare. Bakrie does not currently hold public office, but he maintains a powerful position within the Golkar Party, part of Indonesia’s ruling coalition.

Both Untung Wahyu Widodo of the provincial mining department, and Thaha Al Hamid, a prominent West Papua community leader who has long advocated for greater empowerment of the indigenous Papuans, told Mongabay that Aburizal was among a group of Golkar officials who traveled to Bintuni to pursue their interest in mining in Horna, and that Aburizal met in person with Alfons Manibui, the former district chief.

Dileep Srivastava, a spokesman for the Bakrie Group conglomerate, denied that Aburizal had any investments in coal in Bintuni, had visited potential mining sites in the district, or had any links with the district head.

But corporate records obtained by Mongabay reveal connections between Aburizal’s companies and PT HIM.

Amir Faisal was listed in 2010 on PT HIM’s board of directors, which in the Indonesian corporate structure is the executive team responsible for the company’s operations. From 2007 to 2015, Faisal also served as vice president of Bakrie Global Ventura, a Bakrie Group holding company with interests in mining. Faisal is also the financial director of PT Pembangkitan Jawa Bali (PJB), a subsidiary of state-owned power utility PLN. PT PJB is at the center of a corruption case in which a Golkar politician and a local businessman allegedly bribed officials to obtain a contract to build a coal-fired power plant in Sumatra.

Since 2011, Faisal has also been listed as director of PT Langit Timur Energy (PT LTE), a holding company that assumed control of PT HIM in 2009. Mongabay attempted to contact Faisal by phone and in writing via PT PJB, but did not receive a response

Faisal’s fellow directors at PT LTE include Bakrie associate Rizal Mallarangeng, a Golkar politician who also worked on President Joko Widodo’s 2019 re-election campaign. Rizal is the brother of Andi Alfian Mallarangeng, a former minister of sports who was imprisoned for corruption in 2013. Another Mallarangeng brother, Andi Zulkarnaen Mallarangeng, better known as Choel, was also convicted of graft in the same case. In 2010, Choel joined PT HIM’s board of commissioners, the Indonesian equivalent of the board that supervises the executive team.

In a telephone interview with Mongabay, Rizal Mallarangeng said he was deeply involved in exploration for coal, visiting Horna by helicopter, arranging to bring over geologists, and even sleeping in the forest. “We spent hundreds of millions [of rupiah] just to start the business,” Rizal said, adding Choel had no actual involvement in the business. “His name was only put on the paper,” Rizal said.

The company’s political connections also extend to the local level.

West Papua province’s most famous political and business dynasty are the Manibui brothers, the older of whom, Alfons, is a Golkar politician.

In 2005, Alfons won the district election in Bintuni. He was re-elected five years later. That same year, PT HIM was granted a permit to explore Horna. Also in 2010, company documents show that David Manibui, one of Alfons’s brothers, was listed as a commissioner of PT HIM.

Though his connection with PT HIM isn’t well known, David gained national notoriety in 2017, when Indonesia’s antigraft agency charged him with embezzling funds from a road-building contract won by PT Bintuni Energy Persada, a company in which he was the majority shareholder, in Papua’s Jayapura district. On March 30, 2020, David was sentenced to seven years in jail for his role in the corruption scheme, a conviction he can still appeal.

The third brother, Frans Manibui, has maintained a lower profile and was the only member of the family Mongabay was able to contact. No longer domiciled in Bintuni, Frans has lived in Jakarta for years and describes himself as an activist and fisherman. According to Frans, David’s involvement with PT HIM was strictly business, and neither David nor Alfons were involved in any collusion to award the company a permit. “Business is business. It has no relation with politics,” he says.

In 2011, PT HIM acquired an international investor: JX Nippon Oil and Energy Corp, which bought a 5% stake in the company. The company, a unit of Tokyo-based JXTG Holdings, estimated the Horna reserves contained 100 million tons of coal, but divested from the company in 2016.

Korneles, head of the Sough, says PT HIM paid a knock-knock fee of 100 million rupiah ($7,300) to be divided among the seven tribes claiming traditional land rights in the district. But Korneles said that until he was asked about it by Mongabay, he wasn’t aware that his region has substantial deposits of the highest caloric-value coal in the province. “I didn’t know that. Now I know,” he says. Without such knowledge, tribal leaders were in no position to negotiate a payment based on the true value of the mining rights they were being asked to sign away.

Rather than pointing the finger at local officials or company officials for not providing customary leaders with the necessary data, Korneles blames his own tribe for not pursuing the information more aggressively. “This is our weakness. We don’t go to school. If someone talks about something, we just follow them.”

Two events conspired to reduce the influence of Golkar politicians over the Bintuni Bay coal industry. First, in 2013, a change to Indonesia’s mining regulations stripped district heads like Alfons Manibui of the authority to issue mining licenses. Instead, authority over mining concessions was given to provincial governors, or, in the case of concessions that crossed multiple provinces, the ministry of mines in Jakarta.

The change in authority caused an uproar in districts across the archipelago, leaving pending agreements between companies and district officials up in the air. Matteus Unawekla, the former advisor to the Bintuni Bay mining office, says his district is no exception.

All the coal permits in Bintuni, including PT HIM’s, had to be reviewed at the provincial level before production could start. Progress has stalled, Matteus says. “They were about to start production, especially Horna, but then the price of coal fell and then [Jakarta] issued the new regulation that the permits have to be issued by the province, not at the district level,” he says.

Then, in 2015, Alfons stepped down as district chief after having served two five-year terms. Fellow Golkar politician Daniel Asmorom won the election to replace him, amid accusations of voting fraud. The result was challenged at Indonesia’s Constitutional Court, which overturned his victory and handed the district chair to rival candidate Petrus Kasihiw.

Despite the change in political fortunes and the downturn in the coal business, provincial officials have not given up their dreams of a coal industry. Provincial officials say they are eagerly anticipating final word from Jakarta on which areas will be opened up for coal mining. Once bids are opened, an influx of outside investors is anticipated.

This time around, however, the indigenous people are hoping for a seat at the negotiating table, now that the customary council is working to elect a leader to represent all seven tribes. Korneles says he has just one message before the “bidding show” begins: He wants the companies and government to include the customary council in the process. “Then we can discuss the compensation,” he says.

Home | About Us | Companies | Countries | Minerals | Contact Us
© Mines and Communities 2013. Web site by Zippy Info