Rethinking benefit of Indonesia's sand exports

Yohanes Yansen, Batam

For three decades or more, great volumes of sand have been dug up in the Riau Islands and sold at dirt-cheap prices to foreigners. Environmental damage from mining sand is immense. Indonesia's main market for sand is the neighboring island Republic of Singapore, which has no remaining sand of its own, having used up it own reserves in the 1980s.

Sand mining continues to destroy the environment on scenically beautiful islands such as Sugi, Moro, Parit and Bintan. Local villagers hate it. Water-filled sandpits breed mosquitoes; malaria is rife.

Most of Batam's usable sand was dug up and sold in the 1970s and 1980s. Nowadays, sand to construct Batam's many new buildings is dug illegally and destructively from the Nongsa peninsular -- an area designated for tourism and natural beauty. Batam has no more legally obtainable sand.

The situation in Bintan is worse. There is a continuous area, stretching 20km from the Lobam Industrial Estate to Simpang Busung, which sand mining has reduced to a wasteland of bare soil and stunted scrub.

In spite of it's social and environmental costs, sand mining is hard to eradicate. Key players such as sand businessmen and those government officials who issue permits can personally enrich themselves with millions of dollars.

The pressure is driven by enormous demand; Singapore wants to make more land and it wants to make more concrete.

Singapore is one of the few cities in the world that does not have to take responsibility for it's immediate hinterland, because the land, sea and sky that surrounds this tiny city state are owned by it's neighbors: Indonesia or Malaysia.

In fact, this is fortunate, as the resources of it's neighbors are still easily obtainable, often at bargain prices only marginally above the costs of extraction. Prices that are too low to cover the costs of supporting infrastructure such as towns, roads, schools, ports, power, administration or defense.

Examples include not only sand but also granite, fish, raw logs and manpower. The latter is a particular bargain. Foreign workers only need to be paid a few dollars per day.

Indonesia's sand exports fall into two categories: First, sand mined from the land, which contains no salt. This sand caters to Singapore's annual requirement for tens of millions of tons of concrete. The sand is dug from the most convenient nearby islands, loaded onto flat top barges that typically hold about 2,000 tons of sand and towed to Singapore by an Indonesian crew on Singapore-owned tugboats.

The business is huge. Stand on a high point overlooking the Strait of Malacca and you will see several of these tug-barge combinations at any one time. The two largest cost components of concrete are sand and granite -- Singapore gets these ingredients at such a low price that the cost of concrete in the republic is half that of Europe.

The second category is sand mined from the seabed, which at first glance may seem to cause less environmental damage than land sand. Sea sand is sucked from the seabed using huge dredgers. For several years, mining of sea sand for the Singapore market was the largest dredging operation the world has ever seen.

In the early 2000s, there was more dredging capacity working in the Riau Islands than the rest of the world put together. A single large dredger could suck up 80,000 tons of sand in as little as four hours, sail five hours to Singapore and spray the sand ashore using a huge 12,000hp pump in another four hours.

Ironically much of the sand is used by Singapore to build facilities that further exploit Indonesia's resources, including Jurong Island, which uses Indonesian gas to make plastics and petrochemicals. Another chunk of newly reclaimed land is earmarked to extend the city's financial district, a favored place for Indonesian corrupters to hide their ill-gotten gains.

Changi Airport Runway 2 and Terminals 2 and 3 are built on top of Indonesian sand. The same reclaimed landmass also hosts a world class naval base, big enough to moor America's largest aircraft carriers. The Port of Singapore Authority's newest container terminals are built on reclaimed land, which handle some 70 percent of Indonesian non-oil exports. And the giant Kranji Sungei Kadut timber processing complex, where hundreds of factories process Indonesian logs.

In view of the marginal returns, many Riau Islanders believe that sand exports should be totally banned. But banning things for which there is a strong demand is rarely successful, especially in Indonesia. Instead, Indonesia should turn this demand into an opportunity to reap some reasonable royalties. The existing system of farming out sand concessions to many small businessmen is a failure that plays exactly into Singapore's negotiating hand: One single (rich) buyer deals with many small (poor) sand concessionaires.

It would be more effective if future negotiations were undertaken on a government-to-government level in a fully public debate. Indonesia should insist that past social and environmental damage should be taken into account and quantified in all future negotiations. The specific terms of government-to- government sand concessions should be aired and debated in a public arena, where affected citizens can make their views known.

So far, Singapore has managed to buy Indonesian sand for just a tiny amount above the costs of digging and transporting the goods. That small amount covers little more than the bribes and kickbacks needed to allow the business to run "smoothly".

Indonesia should adopt OPEC's post 1973 oil pricing strategy, where a product is priced by the supplier at it's value to the user, not it's cost of production. A starting point to find the value to the buyer of Riau sand can be found at it's replacement cost -- the cost to land non-Malaysian/Indonesian sand onto Singapore's shores, e.g. sand from Myanmar or Vietnam. This value is closer to S$45 per cubic meter than today's $7 or $8.

What if Singapore says it refuses to pay these prices? No problem, as Indonesia would be better off if all sand mining were stopped now and forever.

The writer is an environmental activist.