Revision of Law on Mining and Coal: High Political and Economic Risks

Fahmi Alfansi P Pane

House of Representatives of Indonesia (DPR RI) has been formulating the Bill on Revision of Law on Mining and Coal. A key issue is legal basis of mining licence for non-government organizations (NGO) or civil society organizations (CSO), and higher education (university). Previously, Government of Indonesia under Jokowi administration had granted mining licence for two biggest Islamic society organizations, namely were Nahdlatul Ulama (NU) and Muhammadiyah.

Before discussing further, it is better to see what’s the mining area that granted to NU and Muhammadiyah. The areas are ex-coal mining area of bigger corporations. Because of that, there are many obligations for NU and Muhammadiyah to operate the areas, such as rehabilitation of a part of the ex-mining areas.

It means society organizations which has received mining licence must possess so much financial power as well as technical capability. There is option has been proposed by a member of parliament in a seminar several months ago to make cooperation with state-owned enterprises (BUMN), but BUMN is business entity. The entity desires to cooperate if and only if the option is financially and politically correct.

So, we can assume the similar fate will be gotten by other CSOs and universities. They must have so much money as well as human resources and technical capacity. Moreover, they should have sufficient experiences in mining operations.

About financial power, I believe CSOs and universities have no power at all. Almost all of universities, just not to mention every university, still depend on students, both single tuition fee and for half of students, entrance fee. There are so many CSOs still depend on grants, both from state budget and provincial/ regency budget. The other powers are similar.

Therefore, we can think easily there will be the real operators behind CSOs and universities. Then, the public organization just becomes the proxy.

Political Risk

The situation create new political risks. There will be competition between political actors to grant the licence, both finding the public organizations, and the real operator. It makes “political market”, and it destroys democracy and public interests gradually.

Moreover, it creates political reputation risks for government. The investors, especially foreign investors, will hesitate to invest in Indonesia. They can’t see free and fair competition in mining investment, as well as other sectors, because a part of actors have special treatment. Can you imagine if some MPs from ruling party support some CSOs to get mining licence, then bureaucrats still apply meritocracy?

Economic Risks

The situation creates economic risks, too. Investment climate will be worsening. Without?big investment, there is no possibility to drive Indonesia economic growth to 6%, even to reach 8% as President Prabowo’s goal.

Higher investment and operational cost are other risks. Then, the risks will be increasing because as mining areas for NU and Muhammadiyah, the areas for CSOs and universities will be ex-coal mining areas, too.

Moreover, it emerges other risk from environmental cost, both to rehabilitation of areas, and tackling climate change issues.