Wednesday 27 June 2012
Layoffs After New Indonesian Mine Rules Could Hit 3 Million
Mining companies in Indonesia have laid off more than 200,000 workers since a government ruling in May halted exports of some minerals, and total dismissals could swell to more than 3 million, a leading union said on Tuesday, providing fresh evidence of disruption in the major metals supplier.
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Layoffs After New Indonesian Mine Rules Could Hit 3 Million
Reuters
26 June 2012
Mining companies in Indonesia have laid off more than 200,000 workers since a government ruling in May halted exports of some minerals, and total dismissals could swell to more than 3 million, a leading union said on Tuesday, providing fresh evidence of disruption in the major metals supplier.
Southeast Asia’s largest economy is home to some of the world’s richest mineral deposits, and its fast-growing mining sector contributes about 12 percent of GDP, drawing nearly a fifth of foreign direct investment in the first quarter.
Last month, in a move designed to boost its share of mineral revenue, Indonesia imposed regulations and a tax of 20 percent on ore exports, and told miners to submit plans to build local smelters or process ore domestically by 2014.
Workers have been laid off in nickel, gold, iron and copper mines in six provinces on resource-rich Kalimantan and Sulawesi islands, data gathered by the union from mining companies shows.
“They (mining firms) have lost their financial potential ... because they’ve stopped exporting since the mining ministry regulations and the 20 percent export tax came into effect,” Juanforti Silahahi, spokesman of the National Mining Workers Union (Spartan), told Reuters.
One government lawmaker called for the cancellation of licenses held by mining firms that had laid off workers.
“There shouldn’t need to be layoffs,” said Totok Daryanto, a member of the government coalition and a lawmaker from PAN, a political party headed by Indonesia’s chief economic minister Hatta Rajasa, who some analysts believe is behind the mining policy changes.
“Mining has gained many benefits already, and has made big profits. Now there is a small obstacle and they immediately lay off workers. I don’t think this is fair. I propose that their (mining) licenses be cancelled,” he said, adding that several members of his family owned mines that were profitable.
The union on Monday submitted a report to parliament showing that 235,823 of its members had been dismissed from 499 companies and said the move would cause a potential loss to the firms of up to 47.6 trillion rupiah (around $5 billion).
It is also campaigning for compensation for the workers.
“We’re still checking data from around 5,500 more companies, which we predict will involve up to 3 million dismissed mining workers,” Silahahi said.
Data on total numbers employed in Indonesia’s mining sector were not immediately available.
Shockwaves
Earlier this month, the Indonesian Association of Mineral Entrepreneurs (Apemindo), a separate body of firms, estimated the new rules cost the industry $164 million a month in lost nickel and bauxite sales and put at least 50,000 people out of work.
Indonesia produced 14 percent of global nickel ore, as well as 15 percent of bauxite ore and 3 percent of copper ore in 2011, most of it exported, industry data show. Exports go to countries such as China, Japan and the United States.
But the export rule changes have sent shockwaves through the sector, triggering a spike in exports as Chinese buyers scrambled to import bauxite and nickel ore before the new curbs take effect.
Larger international mining companies with major operations in Indonesia, such as Newmont and Freeport, have been allowed to continue exporting and have escaped the brunt of the new rule changes.
The issue spotlights the deeper regulatory problems the government faces as competing interests battle for more of the pie.
Many of the problems date back to a 2004 regional autonomy law that gives local governments sway over mining, Silahahi said.
“It’s not just the mine workers who’ve been laid off but other links in the economic chain that support them,” he said.
“We have inventories of 30,000 boarding houses that have closed because they no longer have an income. The same goes for 20,000 food stalls and market traders, fishermen and farmers whose income has dropped because mining companies are not producing,” he said.
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