Capital City vs Business of East Kalimantan Elite

Name: Capital City vs Business of East Kalimantan Elite
Uploaded: 2019-09-28T06:49:04Z
Duration: 20 min 32 s
Description: President Joko Widodo has officially announced that the country\'s capital city will move from Jakarta to East Kalimantan on an area measuring 180,000 hectares.

President Joko Widodo has officially announced that the country\'s capital city will move from Jakarta to East Kalimantan on an area measuring 180,000 hectares.

· 10 minutes read

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President Joko “Jokowi” Widodo has officially announced that the country\'s capital city will move from Jakarta to East Kalimantan (Kutai Kartanegara and North Penajam Paser) on an area measuring 180,000 hectares.

The choice of the location, according to Jokowi, went through a thorough study by the National Development Planning Ministry/National Development Planning Agency (Bappenas). East Kalimantan, he said, was free of earthquakes and landslides. The infrastructure in East Kalimantan is also complete, so the development of cities and industries can move at a faster pace. The government is indeed aggressively developing infrastructure, including in East Kalimantan. State-owned toll road operator PT Jasa Marga, for example, is building the 100-kilometer Balikpapan-Samarinda toll road. Equitable development outside Java is another reason why the capital city will move to East Kalimantan.

Since the New Order era, Jakarta\'s burden has been heavy because its economic structure is concentrated on colossal investments. Economic development is also too centralized in Jakarta. As the center of government, all business affairs and the regional state administration are present in Jakarta. Even the headquarters of companies are in Jakarta. Industrial centers are also based in Jakarta, which means that equitable development with other regions is not balanced. The rate of urbanization in Jakarta is very high, making it overcrowded, congested and burdened by various other problems.

However, the choice of East Kalimantan is certainly not without its problems. Especially if the reason is disaster risk minimization and equitable development outside Java. Is it true that East Kalimantan is the capital of dreams for the future?

Business of powerful people

East Kalimantan is a region rich in natural resources in the form of coal, oil and gas. Based on data from the 2013 National Energy Council, East Kalimantan’s coal reserves reached 28.93 billion tons, petroleum reserves 670 MMSTB (11 percent of national petroleum reserves) and gas reserves 19.76 TSCF (24.3 percent of national gas reserves). In terms of contribution, East Kalimantan occupies the top position nationally. Overall, the contribution of petroleum from East Kalimantan nationally is 47.44 percent (670,000 MMSTB), natural gas contributes 24.30 percent (19.76 TCF) and coal (203.6 million tons production) or 65 percent of national coal production.

East Kalimantan’s potential wealth is what makes big business groups invest there. They include Bayan Resources, Kaltim Prima Coal (KPC), Harum Energy, Borneo Lumbung, Toba Group, Sinarmas Group, Kideco Jaya Agung and Tanito Harum. The coal concessions belonging to these large groups are included in the Coal Mining Concession Work Agreement (PKP2B), whose operations have been granted since the New Order era by referring to Law No. 11/1967 on foreign investment.

PKP2B covers a very large land area. PT Berau Coal, for example, has 121,589 ha, PT Indominco Mandiri (Kutai Kartanegara) 25,121 ha, PT KPC (East Kutai) 90,000 ha, PT Kideco Jaya Agung (Paser) 50,000 ha and PT Tanito Harum 35,757 ha.

Their coal production capacity is also very large. KPC, for example, produces 57 million tons per year, Berau Coal 24 million tons, Kideco Jaya Agung 30 million tons and Kartika Selabumi 67,483 million tons. The profit from the East Kalimantan mining businesses is huge. Harum Energy’s profit in 2014 reached US$1 billion and those of Bayan Resources with a market capitalization since 2014 are above Rp 80 trillion.

There are still many small coal mines with mining business permits (IUP) whose licenses are issued by local governments (regents/mayors) in the current era of regional autonomy. Many IUPs are legal, but many others are illegal or violate regulations. In Kutai Kartanegara, the local government has issued hundreds of mining concession permits in an area of 109,234.76 ha, Berau regency 25,445 ha, North Penajam Paser 25,000 ha and East Kutai 266,000 ha. Samboja district, the location of the new capital city, has 90 IUPs. Former quarries and mining pits in the would-be capital city are still left without mining reclamation. That has not included illegal IUPs whose areas are nearly as extensive as legal IUPs.

The above-mentioned data shows that the land in East Kalimantan has largely become a mining investment area. The line of mining players above shows that the natural resources in East Kalimantan are controlled by large business groups that are close to those in power. They have a business-political network starting from the local, national and global levels. The local network aims to strengthen production operations and secure company operations from demonstrations and protests by residents.

If there are residents who protest, they can easily pay the security forces to threaten the protesting residents so that their operations are safe. Meanwhile, the central political network starts from the bureaucracy up to political parties. This network at the center is the one that designs many business rules and regulations in the regions. Moreover, after the implementation of a regional autonomy, only the political parties can control regents/mayors in regions who are authorized to issue concession licenses.

Global business networks are equally important as they are financially very strong. These global networks are important to ensure that coal supplies have permanent buyers so that their production is not in vain. It is easy for us to trace their network on a global level if we are diligent in reading financial statements. In every financial statement, the names of their foreign buyers are mostly mentioned. The main buyers of Toba Bara Sejahtera coal, for example, are global commodity trading players such as Vitol Asia Pte Ltd, Mercuria Energy Group Ltd and Glendora International AG (TOBA, 2014).

PT Harum Energy, which produces 6.6 million tons of coal in East Kalimantan (2018) has very rich buyers, such as Korea Western Power Co. Ltd. (US$79.64 million), KCH Energy and Taiwan Power Company.

It would be impossible for them to get rich if they do not have a patron in central-regional power and do not have a global business network.

There are still many examples of other global buyers that cannot be reviewed in detail here. This piece of information shows that capital accumulation is only circulating to the ranks of wealthy entrepreneurs and does not flow downward. It would be impossible for them to get rich if they do not have a patron in central-regional power and do not have a global business network.

These business groups regularly enter the Forbes magazine\'s list of rich millionaires every year. Rich entrepreneurs are mostly rich from mining products. However, there are ups and downs of class depending on the valuation of their assets each year. See, for example, Bayan Resources and Sinarmas Group. Bayan Resources’ owner, Low, for example, is ranked fourth with a wealth of $3.7 billion in Forbes in 2013. Other names whose business base is in East Kalimantan are Kiki Barki ($1.7 billion) and Agus Lasmono Sudwikatmono ($845 million). Agus Lasmono, vice president of PT Indika Energi, has a wealth of Rp 7.6 trillion ($536.636 million). Indika Energi through PT Kideco Jaya Agung has long been operating in Paser.

So, East Kalimantan is home to extractive industries such as mining. Although East Kalimantan is rich in natural resources, only a group of business elites are getting wealthy, as the number of poor people remains high (4.1 percent in 2019). When compared with the natural wealth it has, East Kalimantan residents should not be in poverty. East Kalimantan\'s massive natural resources exploration damages the environment and the deforestation process is inevitable. East Kalimantan\'s forest area decreases every year. The mining areas are also prone to landslides and earthquakes. Residents become restless because mining waste can cause various diseases.

In East Kalimantan, there are 110 coal mining excavations without post-mining reclamation. In the location of the new capital city that the President has just determined, there are still former mining pits. Costs incurred by the government will swell because of the need to reclaim the mine pits.

It is difficult to imagine that the decision to move the capital city to East Kalimantan is free of interest. The business-political compromise behind it is certainly very high. Jokowi\'s decision to move the capital city as fast as lightning justifies the thesis of social scientist, Thomas Ferguson (1995), who said that the country is controlled by a coalition of investors. The partnership of capital and power has been very strong in East Kalimantan, from the New Order era to the Reform Era. Long before Jokowi announced that the capital city will be relocated, many business elite classes had enjoyed the benefits of East Kalimantan’s natural resources.

Moving a capital city can only benefit the elite, not the people.

Possibly, this elite class is the one behind the relocation of the capital city because their business space in Jakarta is already too narrow. East Kalimantan will later become an economic magnet, a wave of urbanization and a population explosion. The capital city being dreamed of will then be filled in with the government center, a business center and the extractive industry. Jokowi is only moving Jakarta’s problem to East Kalimantan. Moving a capital city can only benefit the elite, not the people.

Political consideration

If the dream of the future capital city does not mix with the extractive industry center, East Kalimantan is not the right choice. The Bappenas study needs to be discussed again in the political space.

The House of Representatives for the 2019-2024 period needs to concentrate on this issue. The political process in the House before the relocation of the capital city becomes law needs to accommodate the aspirations and voices that emerge in the public sphere.

Ecological aspects and the reasons for equitable distribution of development with the capital city’s relocation are not too strong. The capital city needs to be far apart from the center of extractive industries that damage the environment. Taking into consideration the potential of coal mining, the Jokowi government should think: What if East Kalimantan is used as a model for mining cities?

There, a diethyl ether (DME) processing plant is built to process coal into liquefied petroleum gas (LPG). Coal supply from East Kalimantan for the construction of the DME plant is adequate. By doing so, the government can reduce LPG imports so that the trade balance will be better.

If the choice remains in East Kalimantan, the government does not need to extend the contract permits for Coal Mining Concession Work Agreement companies, whose contracts will expire in the next few years, including PT Multi Harapan Utama (2022), Tanito Harum (2019), Kideco Jaya Agung (2023), KPC (2021) ) and Borneo Coal (2025). The law states that if the company\'s contract expires, the land is returned to the state. However, this requires the courage of the President because these mining companies belong to powerful people economically and politically. Jokowi must also be prepared to face the legal process if these companies sue the government for not extending their contract. Moreover, other alternatives must be sought to increase state revenues because these large companies make a significant contribution.

State electricity company PLN also has to find alternative coal from other regions to be supplied to power plants. The President then orders the governor and regents in East Kalimantan to stop all illegal mining operations and stop new concession licenses. The government then seeks a way on who will be responsible for post-mining reclamation. So, relocating the capital city should place the interests of the state above the interests of the elite.

Ferdy Hasiman, Researcher at Alpha Research Database Indonesia

Editor:

naranasrullah

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