Escaping the ‘resource curse’: E. Kalimantan at the tipping point

Back to back: A coal mine adjacent to a rice field in Makroman, Sambutan district in Samarinda, the capital of Indonesia’s third-richest province. Its deputy mayor has said the municipality is determined to tighten supervision of the industry in the face of environmental degradation and “highly sensitive” issues regarding mines around the rapidly growing city. (JP/Prodita Sabarini)

Can East Kalimantan become the “center of growth for East Asia?” This is the claim made by the East Kalimantan governor in what is indeed a promising province, judging by its economic figures alone. But, how can East Kalimantan’s leaders and people overcome this province’s ills; most notoriously, its environmental degradation? Prodita Sabarini and Nurni Sulaiman report from the cities of Samarinda, Tarakan and Tenggarong for this first of a two-part series.

Tugboats pulling pontoons filled with towering piles of coal glide along the Mahakam River at 8 a.m. Each of the pontoons can carry between 6,000 and 8,000 tons of coal.

Within 10 minutes, nearly 48,000 tons of coal pass underneath the Mahakam Bridge and are transported out to the Makassar Strait where it will be shipped to fuel power plants in other countries, such as China, Japan and South Korea. Indonesia was the largest exporter of coal in 2010, mostly due to activities like this in East Kalimantan. Government figures show that in 2011, the province produced 204.99 million tons of coal, 45 percent more than 2010’s 140.75 million tons.

The date Jan. 9 marks East Kalimantan’s anniversary since the creation of the province in 1957, when Kalimantan was split into three regions 12 years after Indonesia’s independence. Today, East Kalimantan is at a tipping point between either escaping or falling into the “resource curse”, a condition of dependency on the extractive industry hampering development of other sectors, and where a region’s growth will stagnate or contract as non-renewable resource reserves deplete.

The province’s leaders are optimistic. “The province is no longer a ‘sleeping giant’,” Governor Awang Faroek Ishak told The Jakarta Post, recalling President Susilo Bambang Yudhoyono’s assessment of the province.

The assessment is true in two ways. Its size is less gigantic: in October 2012, the House of Representatives passed a bill to create a new North Kalimantan province, splitting the area of East Kalimantan into East and North Kalimantan. Previously, East Kalimantan was the second-largest province in Indonesia after Papua. The second truism in the assessment, which was what Yudhoyono was referring to, is development and the region’s potential.

“East Kalimantan is running fast,” Awang said. He added that in the long term, East Kalimantan would be the “center of growth for East Asia”, pointing to the region’s strategic location and natural resources.

The realization of Awang and Yudhoyono’s dream is yet to be seen as East Kalimantan plans a number of projects, such as a special industrial zone and international port in Maloy, East Kutai regency; 6 million hectares of oil palm plantations, also in Maloy; and a Balikpapan-
Samarinda toll road that will be the local equivalent of the Pantura (Java’s North Coast Road). “All these are long-term programs. The third governor after my tenure will enjoy the fruits of this,” Awang said.

A day before the province’s 56th anniversary, Awang stood before the provincial legislative council in Samarinda and listed the achievements of the province — the highest contribution to the country’s export output; third in competitiveness after Jakarta and East Java; third in the value of foreign and local incoming investment; and so on. Awang, 67, is a big man, whose public-speaking mannerisms resemble that of the President. His hands waved and bounced in the air as he spoke.

Awang’s speech highlighted that resource-rich East Kalimantan was a rising region in Indonesia. Millions of dollars of investment are pouring in and commodities, mostly oil, gas and coal, are pouring out. Awang mentioned that the province contributed the most in 2011 to the country’s export output with a value of US$37.97 billion. This was more than 50 percent higher than the previous year’s export output of $25.12 billion. As of October 2012, its export output stood at $27.71 billion. In 2011, it had the highest gross regional domestic product (GRDP) per capita in the country, standing at Rp 105.85 million (US$10,986) per year.

But East Kalimantan’s achievements are not without consequences. A ride around the capital shows the environmental destruction of Samarinda. Being the capital, it is a telling example of the shape of things to come in the rest of province’s regions. The city is surrounded and squeezed in by mines. In all directions from the city center, hills are sliced and chopped. Red and dusty barren land has replaced the once green jungle. The mines are very close to residential areas, causing in 2009 houses in a Samarinda district called Loa Kulu to subside due to a landslide, according to Said, a local resident.

Concerns are also mounting, given that the province’s coal reserves will eventually be exhausted, that East Kalimantan’s non-renewable-resource economy faces the inevitable risk of coming to a halt. The province is highly dependent on these resources with more than 70 percent of its GRDP coming from them.

The East Kalimantan Mining Advocacy Network (JATAM) likens the current mining boom to that of the logging boom two decades ago, when the timber industry thrived between the late-1970s to late-1990s. Coordinator for JATAM’s East Kalimantan chapter, Kahar Al Bahri, said that the timber industry, which had evicted indigenous people from their ancestral forestland, folded when the forest could no longer produce timber. “The same thing will happen with coal mining. We predict a 20-year cycle of a resource boom. It was 20 years for the timber industry, and we estimate the coal boom will not last longer than 20 years. By 2030, the coal resources will be depleted,” he said. Government figures estimated that East Kalimantan coal reserves in 2011 stood at more than 8 billion tons, lasting 50 years based on the assumption of 150 million tons being produced each year.

Kahar said that extractive industries showed the illusion of economic growth as they required millions of dollars worth of investment and yielded millions of dollars in profits for companies. “But they don’t create that many jobs,” he said. While the province’s GRDP is highly dependent on extractive industries, only 5.6 percent of the working population is employed in these industries. More than 50 percent of the population depends on agriculture.

“At the village level, there seems to be an effort to destroy village communities. People used to be able to live off the forest and have farms, but their yields have now halved and farming areas are shrinking to make way for mines,” he said.

On paper, the government appreciates the yawning gap between extractive industries and other sectors and the environmental degradation the industries are causing. The government is working to change the economic structure of the province by prioritizing agriculture and oleo-chemical industries.

However, skepticism is strong. The government’s plan for agriculture focuses on large-scale agriculture rather than on small landholdings, such as the 50,000-hectare Food Estate Delta Kayan Bulungan in Bulungan regency, now part of North Kalimantan. Margaretha Seting Beraan from the Alliance of Indigenous Peoples (AMAN) also doubts whether indigenous people’s rights will be respected during the establishment of industrial zones in Maloy.

Meanwhile, another sector that needs attention to escape the resource curse is human capital. East Kalimantan has allocated Rp 70 billion for scholarships since 2009, with more than 73,000 recipients through 2012. In collaboration with the Education and Culture Ministry, the province plans to also establish a Kalimantan Institute of Technology in Balikpapan. A hundred people were being sent to study at the Surabaya Institute of Technology (ITS), Awang said, and some 300 hectares of land would be allocated for the new school.

“We want to have our own ITB [Bandung Institute of Technology] and, hopefully, one that is better than that,” Awang said.

The Jakarta Post | Reportage | Thu, January 17 2013

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