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In May 1999, the Indonesian Government passed into law two bills on regional autonomy, Laws 22 and 25/1999. Under the laws the central government must return large portions of the revenue from mining, forestry or other resources to the government of the 'producing' district. It was hoped that this would ameliorate the tensions underlying many local conflicts.
Yet the process could have the reverse effect, actually causing instability or even igniting conflict. These laws have increased expectations at the village-level for greater financial rewards from local resources. However, no stipulation exists for dissemination of revenue below the district level, leaving village and sub-district level communities dependent upon the goodwill of district governments. The degree of ethnic nepotism and corruption within the government, as well as the size of the district may affect the chances of local communities receiving revenue.
For those communities who live adjacent to a resource site, grievances associated with not receiving the benefits of obviously lucrative resource extraction on their traditional land can be exacerbated by other factors such as environmental degradation.
This is the case on the island of Halmahera in North Maluku Province, where the Australian company Newcrest Limited runs several open cut goldmines in a joint venture with the Indonesian company, PT Aneka Tambang (operating as PTNHM). PTNHM recently ceased production at a mine at Gosowong after several years of operations, and has now resumed operations at a site to the west, Toguraci.
In late 2003, months of tension and protest culminated in approximately 2000 people occupying the mine site at Toguraci. On 7 January 2004, the company requested a Brimob (mobile brigade) unit employed by PTNHM to guard the mine, to clear the site of protestors. A member of the Brimob unit subsequently shot and killed one man. PTNHM representatives have argued that the protest leaders were illegal miners from outside Halmahera. However, Indonesian and Australian NGOs have argued that the disturbances were driven by local environmental concerns.
Both of these accounts of the tension are correct. There were numerous miners from outside Halmahera in the area. Forestry Law 41/1999 also forbade mining at Toguraci, as it was located within protected forest, even though PTNHM had a prior contract to mine in that area.
Protestors from outside Halmahera have now left the area. On 11 March, the Indonesian Government amended Law 41 to allow PTNHM to resume mining in protected areas. The tension appears to have been arrested by the intervention of local community leaders and police.
However, the primary motivation of most local protestors was the lack of compensation or revenue afforded to their communities after four years of mining at Gosowong despite financial decentralisation. In 2001, the central government was obliged to return $US700,000 in revenue from PTNHM to the North Maluku District government in Ternate. In 2002, this figure was approximately $US315,000.
However, neither the sub-district government nor the surrounding villages received any real revenue from the mine. This may be due to the vast size of the district, corruption or ill feeling toward the largely Christian community.
Feelings of deprivation and perceptions of unequal funding engender grievances and competition. A disenfranchised population is easily mobilised by individuals with broader agendas. In such situations, tension may emerge between one ethnic group at the sub-district level, and another that may dominate the district level government.
It was very similar issues in the same location that triggered the massive conflict in North Maluku in 1999 2000 that claimed the lives of over 3000 people. While designed to ameliorate local conflicts, the laws on financial autonomy may actually cause tension by not stipulating compensation for local communities.
WATCHPOINT: The size and ethnic diversity of many resource-rich districts means that this issue may cause instability in the future. The Indonesian Government may need to decentralise financial autonomy further, to the sub-district level, in order to circumvent corrupt district level governments.
About our company:
AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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