The forests and farms of Indonesian Borneo are cratered with waterlogged pits left behind from the boom years of mining for bauxite ore, the primary source of aluminium. Now a series of new mining-friendly laws aim to revive those pits and carve out a higher-value role for Indonesia in the global aluminium sector.
But efforts to boost the country’s role in producing the key metal threaten to fail as they did seven years ago, leaving open-pit mines abandoned and promises of economic development unfulfilled.
In the process, villages like Meranggau feel their concerns are going unheard. With the new laws, a neighbouring mining company, PT Persada Pratama Cemerlang (PPC), has restarted and begun expanding its operations. In June last year, locals barricaded the road to the mine and hoisted a sign reading: “We do not approve.” It was a formal, traditional way to express local anger that PPC was pressing ahead with building a dirt road that has displaced rice farmers.
“We’re not opposed to investors, but the company’s presence here is impacting the environment,” village head Kristop told China Dialogue from a coffee shop near his home.
In August last year, PPC met with Kristop and local government representatives, but failed to resolve their concerns. “We’re asking for help to mediate the conflict. We don’t want this to go on until the impacts spread and trigger social problems, even social conflict,” said Kristop. A PPC spokesperson has not responded to questions from China Dialogue.
Kristop has formally reported the company to the district government, which he hopes will take legal action. “I’m tired of confronting this company.”
Mining-friendly policies
Less than a decade ago, most of Indonesia’s bauxite was exported to China, by far the world’s largest producer of aluminium. From the early 2000s, surging demand from China saw an explosion of mining across West Kalimantan, which holds Indonesia’s largest deposits of bauxite. This all stopped in 2014, when the archipelago nation banned exports of its raw ore.
The policy was an effort to develop local industry by encouraging Indonesia-based companies to refine the ore into alumina before export – alumina is a white powder that is smelted to produce aluminium, and is worth at least 10 times raw bauxite.
But many mining companies, including PPC, were unable to find a local refinery to buy their ore and had to shut down. Sutarmidji, the governor of West Kalimantan, recently told local media that 260 open-pit mines belonging to various companies were left abandoned after shutting down.
These old mines remain open to the elements, allowing heavy metals in the soil to be dispersed into the air and waterways. Unless top soil is replaced, the land cannot be used for farming. For Kristop, this has created an impossible dilemma for local farmers, who can no longer use many of their fields to plant rice, despite demands from central government to boost production for the sake of food security.
Despite relying heavily on Indonesian bauxite before 2014, Chinese companies easily adapted after they lost their main source. Instead of building refineries in Indonesia, as Jakarta had hoped, they found robust suppliers in Malaysia, and then Guinea, after Malaysia also banned bauxite mining. In Indonesia, the 2014 policy resulted in only one new refinery being built, so the government relaxed the ban in 2017, vowing to try again in 2022.
Due to the Covid-19 pandemic, the new ban has now been pushed back to June 2023. Laws have also been brought in to support the ban’s aims. Under a regulation issued in November, to gain the necessary permits to export bauxite, companies must now be building a refinery or partnering with a refiner. Earlier in the year, in May, many of the constraints on mining companies were also removed, including strict time limits on mine operating permits. And in October, parliament went further in redrawing the regulatory landscape: the so-called “omnibus law” amended thousands of articles in dozens of laws, including those governing mining. Indonesia’s government argued all these legal changes would promote economic growth and alleviate poverty.
“The government says it contributes to economic development, but they don’t use many workers and the skill levels of people [locally] don’t fit what the company needs,” said Yuyun Harmono, a campaigner with Walhi, an Indonesian environmental advocacy NGO.
The omnibus law limits formal complaints or legal action to residents who are directly affected by a business. As a result, the Jakarta-based Walhi may be unable to provide legal support to affected communities. Furthermore, the job of issuing environmental permits will be handed to the central government, and locals will no longer be able to challenge them after they are issued. The government has argued this is to professionalise the process.
The new pro-mining laws have been met with strong criticism and protests, despite Covid curfews and police violence, according to Amnesty International.
International investors and the World Bank have also objected. A group of 35 multinational companies signed a letter warning that mining-driven deforestation jeopardises commitments to combat global warming. “Failure to achieve the goals of the Paris Agreement poses a very real threat to the future stability and health of economies and society,” they wrote. Indonesia’s Deputy Foreign Minister Mahendra Siregar has responded that the concerns are understandable but baseless.
Meanwhile, as Malaysia reopens its bauxite mining industry and Guinea expands its mining and refining capacity, Indonesia has new competitors. The rainforest island nation holds far less power in global aluminium markets than it did in 2014. As such, some market observers are sceptical about Indonesia’s plans.
“Indonesia has lost the potential for exporting,” says Ahmad Syarif of Bower Group Asia, a consultancy.
Syarif forecasts that companies may well lose money, bringing greater risks of poor environmental management: “If the budget is limited the company will only conduct their obligations as written within the law by using the cheapest technology available.”
Flood risks and pollution fears
Heavy-duty trucks have returned to rural roads in West Kalimantan province, and barges haul ore down the sepia-tinted Kapuas River, Indonesia’s longest.
If the government’s policy to turn Indonesia into an alumina powerhouse succeeds, locals fear more farmers will be displaced and fertile topsoil lost into waterways. If it fails, mines may be abandoned with few benefits passed on to communities.
Anisa manages a smallholding in Meliau Hulu village, on the other side of the river from PPC’s mine. She believes oil palm could be a better bet for local economies. Even if an oil palm company goes bankrupt, smallholders can still continue to sell their own fruit. Clearing land for mining ruins it for farming, so although mining has been around for long time, she said there have been few benefits for locals.
“The mines just muddy the waters. It’s hard to find fish, and flooding is getting worse,” she said.
Bauxite mining often happens near farms and residential areas because bauxite-bearing soil can also be fertile. When land is cleared, dust can spread in air and water as wind picks up particles from mines and trucks travelling with ore.
In Malaysia, where bauxite mining spiked after Indonesia cut off exports, public health officials reported in the Malaysian Journal for Medical Sciences that the industry was associated with increased hospital visits for respiratory infections and spiking levels of iron and aluminium in rivers. Studies weren’t able to find a direct link with mining, but the government temporarily banned the industry anyway. Last year, with new rules in place to govern bauxite mining, it lifted the ban.
In West Kalimantan, bauxite dust has begun to build up again on roadsides. Some people, especially children, have developed rashes and boils, which they attribute to heavy metals polluting rivers and streams.
Sediment-rich run-off from the mines is also raising water levels and increasing the severity of floods. Governor Sutarmidji blamed deadly floods in June last year on the numerous mines. Despite this, October’s omnibus law scrapped regulations that had protected rivers and soils by requiring watersheds to be 30% forested.
Deforestation has long been a major issue with the mining industry. In 2016, a report from Eyes on the Forest, a coalition of NGOs, found four mining companies were collecting ore outside of their concession areas in protected forests.
PT Laman Mining, which is building a refinery and runs a mine, was charged in 2019 with clearing protected forest areas that are home to orangutans. The judge acquitted the company, prompting outrage from the prosecutor who told media he strongly disagreed and would appeal.
China invests in refineries
Despite China’s lack of interest in 2014, the country’s Belt and Road Initiative has now encouraged some Chinese investment in the bauxite refining industry in West Kalimantan. With a mixture of investment from Indonesian state-owned miner, Antam, private domestic enterprises and a handful of Chinese companies, six refineries are now being built or expanded, including three along the Kapuas River near Meranggau and Meliau Hulu. Construction, however, is taking place at slower-than-expected rates.
Well Harvest Mining, which is owned by the Indonesia-based Harita Group and already runs a refinery, is doubling its refining capacity in partnership with China’s Hongqiao Group, the world’s leading aluminium producer. And Borneo Alumina Indonesia plans to build a refinery with support from Antam and the China Aluminium International Engineering Corporation.
On the extraction side, most bauxite miners in West Kalimantan are Indonesian. However, according to the Indonesian government’s public registry, a Hong Kong-based company – PT Mineral Makmur Sejahtera – owns all seven foreign-owned mines, covering more than 10% of the land given to bauxite companies in the province.
Refineries, which wash and pulverise bauxite ore to dissolve out alumina, require a lot of energy. The new ones have been promised electricity solely from coal or diesel power plants, according to public statements and government documents.
For roughly every tonne of alumina, two to three tonnes of waste, called “red mud”, is created. It’s notoriously difficult to control and to prevent from contaminating nearby water bodies, says Kuan Seng How, an engineering professor at Tungku Abdul Rahman University in Malaysia who has written on bauxite mining standards.
“Especially when money is involved, some people may mine irresponsibly, and that leads to consequences for other people in the area,” Kuan says.
Kuan witnessed the boom-and-bust cycle of bauxite in Malaysia. When Chinese companies came looking for bauxite after Indonesia stopped selling in 2014, many turned their oil palm land into mines, ruining it for future farming. “Initially some of them made millions, not all of them, and as of now they are suffering,” Kuan says.
Heri Iskandar, the secretary of Meliau Hulu village, fears something similar will happen in West Kalimantan. He only learned PPC had begun operating again when heavy-duty trucks began hauling ore down his roads. Having a mine next door does not necessarily bring progress, he says.
“We can see economic growth maybe in the changing houses on the streets, but who knows how long it will last? Even state-owned businesses close down.”
