Protecting Indonesia's Forests: Mine those rules

John McBeth, Straits Times 29 Mar 08;

IT IS always intriguing to hear Indonesian officials and environmental groups use the term 'protected forest', particularly when it comes to allowing mining in such supposedly pristine surroundings.

In the Moluccan island chain in eastern Indonesia, for example, part of French nickel producer Eramat's rich Weda Bay 950ha concession is in protected forest, yet all of it is little more than hilly scrubland.

Freeport Indonesia's main mining zone was never part of protected forest, but much of its surrounding 2,000 sq km concession is - if you ignore the broad swathes of terrain laid bare by the shifting agriculture practices of tribal farmers.

The fact is 'protected forest' has little to do with soaring tropical hardwoods and fragile eco-systems.

Struggling to explain all this to foreign journalists recently, senior Forestry Ministry official Syaiful Anwar acknowledged there was a flaw in the widely used interpretation of hutan lindung, the Indonesian term for protected forest.

What it really applies to is tracts of land classified as 'protected' for hydrological reasons: to preserve upland watersheds, the catchment basins that feed rivers and streams. Protected is basically land above 2,000m with a slope of more than 45 deg, well-defined soil characteristics and a minimum level of rainfall.

Is this important? Absolutely. But if the authorities are incapable of protecting Jakarta's watershed from developers - the reason for the city's ever- worsening flood problem - why should they have any more success in far-flung places where loggers have already laid waste to the landscape?

Hardline environmental groups, whose claims often go unchallenged in the media, have used the 'protected forest' categorisation as a mechanism to manipulate public opinion against the mining industry and blame it for much of the rampant deforestation over the past three decades.

The issue erupted again recently with a controversial new Forestry Ministry rule that at first glance appears to further relax a provision in the 1999 Forestry Law - passed in the blush of the reform era - that prohibited open-cut mining in protected areas. There was never going to be a good time to introduce the new regulation. But coming only two months after the UN Climate Change Conference in Bali, where saving forests was a major issue, it drew a predictable response from activists.

The main antagonists are the Indonesian Forum for the Environment and the Mining Advocacy Community Network, which claim that mining over the past seven years has ravaged 11.4 million ha of protected forest. But that refers to areas open to exploration, which has only a minimal impact on the environment.

It also belies a more important fact that has been lost in the emotion-charged debate: Mining is not a major contributor to the loss of forests.

'Mining is not a serious driver of deforestation,' says Mr Krystof Obidzinski, an experienced researcher with the Centre for International Forestry Research, an independent think-tank based in Bogor.

The government's rowback on the issue began when former president Megawati Sukarnoputri issued a decree, later made part of the Forestry Law, allowing 13 mining companies with existing contracts to resume open-pit operations in protected areas.

Industry sources say that in 11 of the 13 cases, they occupy areas previously classified as 'production forest' but since converted to 'protected forest' after being logged over by timber concerns.

The rule, issued last month, requires miners - along with the builders of highways and electricity towers - to cough up an annual tariff of between 1.8 million rupiah and 3 million rupiah (between S$270 and S$450) a ha for the forest land they occupy.

The Forestry Ministry hopes to recover up to 1 trillion rupiah from the new fee structure to compensate for a slide in revenue resulting from a corresponding decline in legal logging. But critics claim it will open the door to a flood of other mining companies.

Forestry experts share those fears and say that in addition to the new fees, far higher than those imposed on timber firms in the past, miners should also be charged a hefty deposit to guarantee their adherence to environmental rehabilitation and regeneration. After all, in areas where loggers have been at work, little has been done to return watersheds to their natural function - one of the main causes of a growing number of fatal landslides.

The tariff obligation replaces an earlier rule under which mining companies in 'protected' and also 'production' forest had to provide land double the size of their concession as a form of compensation.

Executives believe the new system will not make it any easier to acquire mining permits, noting the rigid conditions that apply and the fact that companies already have to pay nine different fees - with a new export tax coming down the pike.

The 2008 PricewaterhouseCoopers' survey of the industry shows mining contributed 3 per cent to Indonesia's GDP last year, with taxes and royalties alone rising to US$4 billion (S$5.5 billion) - more than at any time in recent memory.

For all that, 80 per cent of local mining companies which contributed to the survey say the conflict between mining and forestry regulations and the slow passage of a long-debated mining law hold the key to any real surge in investment.

Three world-class nickel projects - Papua's Gag Island (BHP Billiton), Weda Bay (Eramat) and Central Sulawesi's La Sampala (Rio Tinto) - are in various stages of development, with a potential combined annual output of 168,000 tonnes.

Meanwhile, annual exploration investment in Indonesia is around the US$160 million mark, a fraction of the US$7.5 billion spent worldwide in an industry seeing a remarkable bull run on the back of historically high prices for copper, gold and nickel.

Given its geological potential, one recent study found that global players would rate Indonesia among the world's 10 top destinations if a 'best practice' investment regime was put in place. It is now languishing in the bottom 10.