We want predictability, say mining firms

Ika Krismantari, The Jakarta Post, Jakarta

If one asks a mining firm what it wants more than anything from the upcoming new mining law, the likely answer will be "predictability".

"We want predictability. If something is predictable, we know the risks we will be taking. If you don't have predictability, your business is not going to move forward," Australian senior trade commissioner Rod Morehouse told The Jakarta Post on Tuesday.

He was speaking on the sidelines of a seminar on the future of Indonesia's mining industry, organized by the Australian Trade Commission.

According to Morehouse, however, the mining bill, which has been under deliberation by the House of Representative for more than a year, fails to address investor concerns over predictability and certainty, leaving them unable to forecast the costs and risks they are likely to face.

"Will the law be lex specialis or not? ... Will the license system guarantee both exploration and exploitation rights?

"If the country demands complete downstream manufacturing, will this include smelting, refining or even component manufacturing ... These are not yet a hundred percent clear," Morehouse said.

The seminar was held as part of the Australian Mining and Petroleum Exhibition and Conference 2007 (Ozmine 2007), which took place on the same day, and was participated in by 27 Australian mining and oil companies showcasing their latest projects and technologies.

Morehouse said that nine major Australian mining companies, representing a combined investment of more than US$10 billion, were currently waiting to see whether the new mining law -- in addition to the investment and taxation laws -- would address their concerns.

Among the nine firms were mining giant Rio Tinto, which was currently engaged in negotiations with the government for a Contract of Work for a nickel project in Sulawesi worth some $2 billion.

The others included mining heavyweight BHP Billiton, which had invested $77 million since 1998 on seven coking coal plants here, and Oxiana, an international mining and exploration company that was due to set up a joint venture with the Indonesian Kalimantan Gold Company.

Responding to the debate over the issuance of licenses and permits by local governments, as proposed under the new bill, Rio Tinto managing director Charlie Lenegan suggested the adoption of the system applied by the Western Australian government.

"If it involves small-scale projects, then the permits could be handled by the local government. But if it involves large-scale and long-term projects, the permits would be arranged by the central government," Lenegan said.

Many investors have voiced similar concerns over the granting of a bigger role to local government, fearing it would only further complicate the bureaucracy they have to go through to get their businesses going.

The government has set itself the target of having the new mining law on the statute books by March.

Telkomsel to invest $1.5 billion this year to enhance network

The Jakarta Post, Jakarta

The country's largest mobile phone operator, PT Telkomsel, plans to expand its network by building 5,000 new Base Transceiver Stations (BTS) this year at a cost of about US$1.5 billion.

With the new stations, Telkomsel hopes to penetrate every subdistrict in Kalimantan and up to 70 percent of all subdistricts in Sulawesi, according to media statement released by the company over the weekend.

Telkomsel currently has 15,000 cellular stations throughout the country, with a third of them being installed in 2006.

With the number of cellular phone users expected to increase by 25 percent from 64 million last year to about 80 million this year, Telkomsel is optimistic it will be able to pick up between 7.5 and nine million new users, or half of all new subscribers in the country.

About 63 percent of the country's total population of 240 million is between the ages of 15 and 50, Telkomsel corporate communications manager Suryo Hadiyanto said.

"These people have an acute sense for technology and a great deal of enthusiasm for technological developments," he said, in explaining the growth of the cellular industry in the country.

According to Telkomsel, the country's cellular penetration now stands at just 25 percent of the total population. However, the penetration rate grew at an average of 67 percent per year from 2001 through 2006.

Telkomsel invested about $1.5 billion last year in expanding its network and added 10.6 million new users, giving the company a total of 34.9 million customers. Its net profit in 2006 as of September increased by 43 percent year-on-year, from Rp 14.59 trillion to Rp 20.92 trillion.

Telkomsel is one of three cellular operators in the country that introduced third generation, or 3G, services last year. So far it has 1.5 million 3G customers nationwide, with services available in 25 cities.

Excelcomindo (XL) had some 130,000 3G customers as of December, while Indosat, which just launched its 3G services in late November, has no precise customer numbers yet, but has targeted 320,000 subscribers by early 2007.

Why does the haze come back every year?

The country emits 6.5 times as much CO2 from degraded peatland as it does by burning fossil fuels every year, the report said.

Alvin Darlanika Soedarjo, The Jakarta Post, Jakarta

Last year the annual haze in Sumatra and Kalimantan caused respiratory diseases, a month-long school holiday and an airplane accident. The haze is a continuing smoky gift that has spread itself across parts of Indonesia and neighboring countries for more than two decades.

It's led to huge economic losses for the region and been blamed on both negligence and dry weather. Malaysia, Singapore and to a certain extent Thailand and Brunei Darussalam are all regularly affected by it.

Certainly one significant contributor to the problem is the clearing of land for palm oil plantations.

The government offers low-interest loans to plantation companies, in the hope that 1.5 million hectares of new plantations can be added to the country over the next five years. The availability of peatland is attractive for those wanting to clear land for palm oil.

Palm oil can be processed into alternative energy source biofuel, although currently technology only allows it to be used in small amounts mixed with conventional fuel.

Many producers of palm oil, the price of which increased by 35 percent between January and November 2006 after fuel prices rose, have blamed the haze on local villagers, pointing to their traditions of burning land to clear it, combined with the hot weather.

Peatland fires are harder to extinguish than forest blazes. And occasional rainfall does little to diminish to smog.

A study by the Netherlands-based Wetlands International and Delft Hydraulics revealed earlier this year that during the last few decades, emissions from drained or burned peatland in Indonesia have reached 2 billion tons of carbon dioxide a year.

This shows that Indonesia has contributed to almost a 10th of global greenhouse gas emissions from human activities.

The country emits 6.5 times as much CO2 from degraded peatland as it does by burning fossil fuels every year, the report said.

Aside from the increasing role of palm oil producers, bad planning and ineffective forest management has contributed to the months of fires and smog.

Critics say the expansion of palm oil plantation land has been unnecessary, an easy way out rather than an effort to maximize available land.

Indonesian Forum for The Environment executive director Chalid Muhammad said the government had issued too many forest utilization licenses.

"Fifteen million hectares of land in Indonesia are in dispute for various reasons, so they cannot be utilized. That explains why there are so many forest concessions issued," Chalid said.

The government's plan to empower both civilians and officials to monitor the land has proved difficult -- even the governor in charge of one of the world's greatest tropical forest centers has expressed frustration.

"Many officials only care about the investors and neglect the ecological implications. Issuances of forest permits are rarely accompanied by an environmental impact assessment," said Central Kalimantan governor Teras Narang.

"Palm oil is important as an alternative fuel source. However, diversity in plantations is better for Kalimantan. There should be more rubber plants, meranti, jeruntu, and others," he added.

As for handling the annual smog problem, the government has been reactionary rather than take preventive measures.

Efforts to induce rain through cloud stimulation and "water bombing" have been costly and ineffective, particularly given the large scope of the haze and inadequate facilities.

Walhi says there are 40,000 hotspots, areas that have generated heat across Indonesia for the past five years.

Moreover, Indonesia has limited aircraft suitable for tackling the issue, although though it is aiming to buy more. This year the government used two Hercules aircraft from the Air Force. A larger and much more effective water bomber costs about Rp 400 billion (US$44 million).

Law enforcement in the affected areas is notoriously poor, to the disgust of neighbors Malaysia and Singapore.

Some critics have called for stronger legal instruments, such as a presidential decree to enable the instant revocation of forest permits or lawsuits against the company if the people are found guilty, apart from stricter enforcement.

"The Roundtable on Sustainable Palm Oil is also ineffective because the current law cannot revoke a plantation company's permit for land use if it is found guilty," said Chalid.

The Roundtable, grouping palm oil companies, environmentalists and other energy companies, aims to certify companies that adhere to sustainable ecology.

Many of the arrested culprits have been insignificant scapegoats, as the big players easily bribe their way out.

Governor Teras suggested a faster process of examination and gathering of evidence. The current legal process, the governor said, is long, arduous and costly.

Further, monitoring agents such as regents, public figures and kampong heads, had not really become aware of the importance of eradicating the haze, he said.

"Many of the community leaders are authorized to act but lack the will, facilities and funds," Teras said, adding that officials needed a detailed map marking smog-sensitive areas.

Indonesia has not even signed the Transboundary Haze Agreement, which has been ratified by a number of other Southeast Asian countries. This is despite the willingness of the Association of Southeast Asian Nations to allocate $50,000 to solving the problem from each country.

It's rather hard for Indonesians affected by the smog, let alone neighbors, to understand legislators' excuses that before signing, other regional environment problems should be handled -- except if locals and the elite of Java's major cities including Jakarta one day find themselves choking in smoke.

The costs incurred by the haze agreement are still seen to be a burden while, for instance, "Malaysia and Singapore have been accommodating and buying our smuggled logs," legislator and former environment minister Sonny Keraf said.

Neighbors are urging us to ratify the treaty to enable rapid deployment of assistance in event of fires.

Others say even if Indonesia doesn't ratify the agreement, ASEAN is reluctant to impose tough sanctions on Indonesia.

But nature can't wait for everyone to sort out priorities. Next year efforts to douse the smog could be even harder because of the forecast of a longer dry season, triggered by the El Ni¤o weather pattern in the Pacific Ocean.

Govt to maximize 'local potentials' in building power plants

JAKARTA (Antara): The government will maximize the use of local resources in building coal-fired power plants outside Java currently in bidding process, a senior official at the Ministry of Energy and Mineral Resources said Tuesday.

"The local potentials include goods, manpower as well as funding," said the ministry's director general of electricity and energy utilization J Purwono.

"We will ask the contractors to use local resources including machineries, construction materials and manpower although the funding come from foreign sources, which usually are binding ones," he added.

Purwono pointed to the construction of a foreign-funded 7 megawatts (MW) coal-fired power plant which could use up to 30 percent of local content.

He also called local financial institutions to be proactive in funding power plant projects saying it could be a market for local lenders.

"Indonesian banks should also compete to finance power projects. Don't be passive," he said.

The government has announced on Dec. 19 a tender for the construction of 25 coal-fired power plants outside Java.

Four power plants will have the capacity of 100 to 200 MW to be built in Aceh, North Sumatra, West Sumatra and Lampung provinces.

Another four power plants with 50-65 MW of capacity slated for West Kalimantan, South Kalimantan, Central Kalimantan and South Sulawesi provinces.

There are also 17 plants with smaller capacities of 7 to 25 MW scattered nation wide in Bangka Belitung, Riau, Riau Islands, West Kalimantan, Maluku, North Maluku, Papua, East Nusa Tenggara,West Nusa Tenggara, Gorontalo, Southeast Sulawesi and North Sulawesi provinces.

These power plants are part of the government's plan to generate additional 10,000 MW of electricity by 2009.

As for Java island, the government has started bidding process for 10 power plants. Seven power plants will the capacity of 300 to 400 MW while the remaining three with 600 to 700 MW of capacity.

Central Kalimantan to produce 1.4 million tons of CPO in 2007

Palangka Raya, C Kalimantan (ANTARA News) - Central Kalimantan province is expected to produce 1.4 million tons of crude palm oil (CPO) in 2007, an industry spokesman said.

"After the drop in CPO supply this year, we estimate that there will be high overseas demand for CPO next year. So, Central Kalimantan is ready to supply 1.4 million tons annually," Teguh Patriawan, chairman of Central Kalimantan`s Oil Palm Businessmen`s Association (Gapki), said here on Thursday.

He said in the past six months, there was a drop in CPO supply from two major exporting countries, namely Indonesia and neighboring Malaysia, due to an El Nino-induced prolonged drought affecting the two states` CPO production.

Patriawan expected that the CPO price would improve next year as demand for CPO, especially in China and European nations, would increase. CPO is among other things used as material to make bio-diesel energy.

China, which earlier needed CPO supply of around 1-2 million tons annually, would increase its demand to 5 or 6 million tons per year starting next year, he said.

Central Kalimantan has oil palm plantations covering a total area of 530,000 hectares and 24 CPO processing plants.

"Up to November 2006, CPO production reached 924,000 tons, an increase from last year`s 813,000 tons," he said.

The province was planning to plant oil palm in 14 districts on a total of 427,000 hectares of land over the next few years, he added.

He said he was optimistic that Central Kalimantan`s CPO production target of 1.4 million tons would be achieved in 2007 as four new CPO processing plants would become operational soon.

Having oil palm plantations on a total land area of 5.447 million hectares, Indonesia produces around 12 million tons of oil palm fruit per year. Malaysia which has a smaller oil palm plantation area turns out 15 million tons annually.

European countries ready to help rebuild C. Kalimantan peatland canal system

ANTARA News - 2006-12-08 10:22:53

Palangka Raya, Central Kalimantan, December 7, 2006 (ANTARA News) - Some European countries including Germany and the Netherlands are ready to help build a canal system in a network of neglected canals in a 1.45 million-hectare peatland area in Central Kalimantan, Governor A Teras Narang said here Thursday.

The two European countries would help rebuild, close and realign the old canals based on a master plan being drawn up by the Netherlands, he said.

The Netherlands would finalize the master plan in March next year, he added.

The combined length of the neglected canal network was 4,000 km, four times the length of Java island, but many of the canals had to be closed because they passed through a deep depression in the peat land area.

"The new canal system will hopefully reduce forest and bush fires during the dry season. The system will hopefully also serve as a water catchment area during the wet season," Narang said.

The master plan, he said, would also help the local people find alternative livelihoods.

The governor said the Dutch master plan to build a new canal system would not overlap the Indonesian government`s plan to develop the neglected peat land area.