'Coal mining plays major role in East Kutai economy'

The Jakarta Post, Jakarta

Mining activities have become a major factor in economic growth in remote areas of the country after regional administrations obtained greater power in managing natural resources through the autonomy policy, according to a survey.

The Institute for Economy and Society Research (LPEM) of the University of Indonesia said in its survey on the impact of activities of coal mining giant PT Kaltim Prima Coal (KPC) on the local economy that the mining operation, along with other mining activities, contributed some 74 percent to the gross domestic product (GDP) of the East Kutai regency in East Kalimantan.

KPC's operation is located in the regency's Sangatta jungle.

The LPEM report said that in 2000, the contribution of mining activities to the GDP of the East Kutai regency amounted to Rp 2.56 billion (US$287.64 million) out of the regency's total GDP value of Rp 3.60 billion.

"KPC's coal exports are a stimulus for the East Kutai economy," LPEM said in the report, a copy of which was obtained by The Jakarta Post.

According to the regional autonomy policy launched in 1999, regional governments obtain 80 percent of the royalties paid by mining firms, while the remaining 20 percent is given to the central government.

KPC pays 13.5 percent of its net sales in royalties to the government.

In 2001, East Kutai received some Rp 177 billion in royalty revenue from KPC alone. More than 63 percent of the revenue obtained by the regency came from its natural resources through the revenue split mechanism with the central government.

KPC is owned by Anglo-Australia mining giant Rio Tinto and Anglo-American energy giant BP. The two investors have been locked in a dispute with the local government over an obligation to divest a stake of up to 51 percent to Indonesian investors.

The company produced some 15.6 million tons of coal last year, all of which were exported.

The LPEM survey said that the KPC mining operation had increased the income of locals, both those working with the company or in other sectors related to the coal mining operation.

KPC employs 5,923 people, but LPEM said that some 70,921 people were working in various other sectors linked to the coal mining operation.

In addition to royalties, KPC also pays rent to the East Kutai government, which last year amounted to Rp 515 million, for land concessions covering some 91,000 hectares.