Copyright @ 2013 Lembaga Penyelidikan Ekonomi dan Masyarakat - FEUI
Final Report
Extractive Industry and Local Economy:
A Case of PT Newmont Nusa Tenggara in Kabupaten Sumbawa Barat
Lembaga Penyelidikan Ekonomi dan Masyarakat
Fakultas Ekonomi Universitas Indonesia
Kampus UI Salemba, Jl. Salemba Raya 4, Jakarta 10430
Final Report
Extractive Industry and Local Economy
1
Acknowledgements
The authors listed below gratefully acknowledge the financial grant provided by SEADI-USAID.
Constructive feedback and comments from Tim S. Buehrer, Ashok Menon, and Hery Kameswara are
gratefully acknowledged. We greatly thank PT NNT for providing us with the access to the company’s
information. Last but not least, we also thank Uka Wikarya, Nurkholis, Hamdan Bintara and Bisuk A.S
Gultom for their excellent assistance during the project. All remaining errors are our responsibility.
Authors
Institute for Economic and Social Research Faculty of Economics (LPEM FEUI)
University of Indonesia
Widyono Soetjipto
Agus Salim
Cita Wigjoseptina
Lembaga Penyelidikan Ekonomi dan Masyarakat
Fakultas Ekonomi Universitas Indonesia
Kampus UI Salemba, Jl. Salemba Raya 4, Jakarta 10430
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TABLE OF CONTENS
Page
TABLE OF CONTENS............................................................................................... i LIST OF TABLES ...................................................................................................... ii LIST OF FIGURES .................................................................................................... iv
Chapter 1. INTRODUCTION ................................................................................. 1 1.1. Background.................................................................................. 1 1.2. Objective of the Research ........................................................... 2 1.3. Methods of the Research ............................................................ 2
Chapter 2. REGIONAL PROFILE ............................................................................ 3 2.1. WEST NUSA TENGGARA PPROVINCE........................................... 3
2.1.1. NTB Economic Profile ........................................................ 3 2.1.2. Demographic Profile.......................................................... 6 2.1.3. Fiscal Profile ...................................................................... 9
2.2. WEST SUMBAWA DISTRICT ......................................................... 10 2.2.1. Economic Profile................................................................ 11 2.2.2. Demographic Profile.......................................................... 14 2.2.3. Fiscal Profile ...................................................................... 16
Chapter 3. THE CONTRIBUTION OF PT NNT......................................................... 18 3.1. ECONOMIC CONTRIBUTION OF PT NNT..................................... 18 3.2. FISCAL CONTRIBUTION OF PT NNT.............................................. 26 3.3. CSR CONTRIBUTION OF PT NNT .................................................. 31
Chapter 4. SURVEY RESULTS ............................................................................... 34 4.1. STAKEHOLDER INTERVIEWS ........................................................ 34
4.1.1. Economic Aspects.............................................................. 34 4.1.2. Employment Aspect .......................................................... 36 4.1.3. Fiscal Aspect...................................................................... 38
4.2. SUPPLIER’S SURVEY ..................................................................... 39
Chapter 5. SOCIO ECONOMIC ANALYSIS ............................................................. 43 5.1. SOCIO-CULTURAL CHANGES........................................................ 43 5.2. ECONOMIC IMPACT..................................................................... 45
Chapter 6. CONCLUSION AND RECOMMENDATIONS .......................................... 49 6.1. CONCLUSION ............................................................................... 49 6.2. RECOMMENDATION.................................................................... 50
REFERENCES .......................................................................................................... 51
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LIST OF TABLES
Page
Table 2.1 GRDP of NTB by Economic Sectors In Current Prices 2006-2011
(Rp billions)....................................................................................... 4
Table 2.2 The Growth of NTB GRDP by Economic Sector In Current Price,
2000-2011 (%) .................................................................................. 5
Table 2.3 Population by Districts/Cities in NTB Province, 2011....................... 6
Table 2.4 Population 15 Years of Age and Over Who Worked by Economic
Sector in NTB, 2006 – 2011 (person)............................................... 7
Table 2.5 Percentage of Population 15 Years of Age and Over Who Worked
by Field in NTB, 2006 – 2011 (Percent) ........................................... 7
Table 2.6 Population 15 Years of Age and Over Who Worked by Level of
Education in NTB, 2006 – 2011 (Person) ......................................... 8
Table 2.7 Percentage of Population 15 Years of Age and Over Who Worked
by Level of Education in NTB, 2006 – 2011 (Percent) ...................... 8
Table 2.8 Realization Revenue of NTB Provincial Budget, 2008-2011 (Rp
million and %) ................................................................................... 9
Table 2.9 Realization Expenditure of NTB Provincial Budget, 2008-2011 (Rp
million and %) ................................................................................... 10
Table 2.10 GRDP of KSB by economic sectors in current prices 2000-2011
(Rp billions)....................................................................................... 12
Table 2.11 Growth Rate of KSB GRDP in Constant 2000 Price by economic
sector, 2006-2011 (percent)............................................................. 14
Table 2.12 Percentage of Population 15 Years of Age and Over Who Worked
by Field in KSB, 2010 – 2011............................................................ 15
Table 2.13 Percentage of Population 15 Years of Age and Over Who Worked
by Level of Education in KSB, 2006 – 2011....................................... 16
Table 2.14 Realization Revenue of KSB, 2008 – 2011 (Rp million and %).......... 16
Table 2.15 Realization Expenditures of KSB, 2008 – 2011 (Rp million and %)... 17
Table 3.1 The Proportion of Primary Inputs of NTB Province in Mining
Sector based on 2005 IRIO Table...................................................... 23
Table 3.2 Employment Generation of PT NNT across sector and region in
Indonesia based on IRIO Model in 2011........................................... 24
Table 3.3 PT NNT’s Direct and Indirect Employee based on Nationality ......... 26
Table 3.4 Fiscal Impact Scheme of PT NNT to Central and regional
Government ..................................................................................... 27
Table 3.5 The Distribution of Tax and Revenue Sharing, Local Tax and
Retribution Related to Mining Industry........................................... 28
Table 3.6 PT NNT Fiscal Contribution to Central and Regional Budgets,
2005-2012 (Rp billions)..................................................................... 29
Table 3.7 PT NNT Spending for Community Development, 2006-2012 (in
thousands US$)................................................................................. 32
Table 3.8 PT NNT Spending for Community Development, 2006-2012
(percent) ........................................................................................... 32
Table 3.9 The Five Years Goal Indicator of Success.......................................... 33
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Table 4.1 Distribution of Respondent by Location and Type........................... 40
Table 4.2 Year of Established of Respondents ................................................. 40
Table 4.3 Respondent’s Type of Business ........................................................ 40
Table 4.4 Percentage of Workers Origin by Respondent................................. 41
Table 4.5 The outputs of respondents and their input sources....................... 42
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LIST OF FIGURES
Page
Figure 2.1 West Nusa Tenggara (NTB) Province................................................ 3
Figure 2.2 Distribution of NTB GRDP by economic sector in current price,
2000-2011 (%) .................................................................................. 5
Figure 2.3 Population of NTB Province, 2006 – 2011 (person) ......................... 6
Figure 2.4 Unemployment Rate in NTB, 2006 – 2011....................................... 8
Figure 2.5 West Sumbawa District .................................................................... 11
Figure 2.6 Distribution of KSB GRDP by economic sector in current price,
2000-2011 (%) .................................................................................. 13
Figure 2.7 Population in KSB, 2006 – 2011 (person) ......................................... 14
Figure 3.1 PT NNT sales, 2006-2011.................................................................. 19
Figure 3.2 NTB GRDP with and without PT NNT, 2006-2011 ............................ 20
Figure 3.3 Contribution of PT NNT to NTB GRDP, 2006-2011........................... 20
Figure 3.4 KSB GRDP with and without PT NNT, 2006-2011............................. 21
Figure 3.5 Contribution of PT NNT to KSB GRDP, 2006-2011............................ 21
Figure 3.6 Growth of PT NNT sales, KSB GRDP, and West Nusa Tenggara
GRDP................................................................................................. 22
Figure 3.7 The Accumulation of PT NNT Fiscal Contribution, 2005-2012 (Rp
billions) ............................................................................................. 29
Figure 3.8 PT NNT’s Fiscal Contribution to NTB budget, 2005-2012 (Rp
millions and percent)........................................................................ 30
Figure 3.9 PT NNT’s Fiscal Contribution to KSB budget, 2005-2012 (Rp
millions and percent)........................................................................ 30
Figure 4.1 Procurement Spending of PT NNT in 2012 (percent)....................... 37
Figure 4.2 Type of Survey Respondents ............................................................ 39
Figure 4.3 Source of Input of Respondents....................................................... 41
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Chapter 1
INTRODUCTION
1.1. BACKGROUND
Resistance of local community over the activities of extractive industries has been
continually growing in recent years in resource rich districts of Indonesia. This is due to the
fact that local community feels that these industries do not bring significant benefit. This
seems to be supported by the low Human Development Index (HDI) of related district. Most
of natural resource extractive industries are located in remote area, where local community
is commonly poor due to limited economic and social access, thus contributing to low HDI.
The benefit of extractive industry to local economies is actually quite significant. In the case
of mining, for example, the contribution of PT Newmont Nusa Tenggara in 2009 to National
GDP and GRDP of West Nusa Tenggara were estimated to reach 0.12% and 15% respectively.
While the fiscal contribution to budget of West Nusa Tenggara province, and budget of West
Sumbawa district are projected to reach 3.74% and 16.73% respectively in 2009 (LPEM-FEUI,
2007).
Similar pattern of significant contribution to local economy will be found in other resource
rich districts where extractive industries operated. Yet, the expected “trickling down” effect
is felt to be slow. Therefore, the condition of local people seems to be slowly improving.
Sources of problem may be hypothesized, among others are, first, there is very limited
connection of extractive industry to the local economy. Second, the fiscal revenue from
extractive industry in local budget is dominantly disbursed for routine expenditure, such as
salary, creating limited fiscal space for government program and investment. Third, local
people do not have the capability and skill to be involved in skilled activities required by this
kind of industry. Other causes are also possible.
According to the World Bank and IFC (2002) there are often substantial social and economic
benefits to local communities from mining operations, but that these do not come
automatically. Lesson learned from several mining companies in South America reveals some
important aspects: (i) benefits have to be sustainable, and outsource is the key; (ii)
companies need a “social license” to operate, and a trilateral dialogue with open
communication is key to achieving this; and (iii) a successful community development
process will build social capital, but it needs management and funding. First aspect needs
special attention. It means that outsourcing is the key and will create huge multiplier effects
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to the local economy, thus more employment may be created and is expected to bring
wealth to the region. This research addresses the extractive industry and local community.
PT Newmont Nusa Tenggara (PT NNT) in West Sumbawa District is used as a case.
1.2. OBJECTIVE OF THE RESEARCH
The objectives of the study in general are to identify economic contribution of extractive
industry to the local economy and to identify some problems related to extractive industry
and the local economy.
1.3. METHODS OF THE RESEARCH
The method of the research consists of three phases:
Phase 1: Conducting descriptive data analysis. In this initial phase, the research focuses on (i)
conducting regional data analysis, based on secondary data; (ii) estimating economic and
identifying fiscal impact of PT NNT to the local economy as well as the employment creation
of PT NNT by using Interregional Input Output Method, (ii) developing relevant instruments
for analysis, such as questionnaires which will be used as guidelines for in-depth interviews
and local FGDs to capture stakeholder perception on local employment creation.
Phase 2: Conducting survey, in depth interviews, field study and observation to selected
district. During this secondary phase, the research conducted field survey by interviewing
local stakeholder on local employment created by PT NNT. The stakeholders may include
Bappeda, Office of Mining and Energy, Office of Trade and Industry, Small and Medium
Enterprises, Office of Labor, and PT NNT. Field survey was done in mid-end of May 2013.
Phase 3: Analyze the findings and provide recommendation. In this final stage, the findings
from the first two phases will be presented for further analysis. Some recommendations will
also be provided to address the problems.
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Chapter 2
REGIONAL PROFILE
2.1. WEST NUSA TENGGARA PPROVINCE
West Nusa Tenggara has a provincial status by the Law No. 64/1958 on the Establishment of
Bali, West Nusa Tenggara (NTB), and East Nusa Tenggara Provinces (NTT). Two largest islands
in this province are Lombok island in the west and Sumbawa island in the east (Figure 2.1).
the capital of the province is Mataram located in Lombok island.
The NTB consists of 8 districts and 2 cities. The districts are (i) Bima, (ii) Dompu, (iii) Lombok
Barat, (iv) Lombok Tengah, (v) Lombok Timur, (vi) Lombok Utara, (vii) Sumbawa, and (viii)
West Sumbawa. While cities are (i) Mataram, and (ii) Bima.
Figure 2.1
West Nusa Tenggara (NTB) Province
Source: NTB dalam Angka (BPS, 2012)
2.1.1. NTB Economic Profile
Mining and quarrying dominates the GRDP of NTB Province, even though 50 percent of NTB
population still works in agricultural sector (Table 2.1). Since 2006, mining and quarrying has
contributed consistently about 30 percent of GRDP. It is followed by agriculture and trade,
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hotel, and restaurant as the second and third major contributors to the GRDP. Their
contributions are approximately 25 percent and 13 percent respectively.
The contribution of agricultural sector has been declining for the last seven years (except in
2008 and 2011). This indicates that NTB experience structural transformation from
agriculture-based economy to manufacturing and services in the long term. It is supported
by the fact that the contribution of services, financial, and trade sectors have increased in
GRDP composition.
Table 2.1
GRDP of NTB by Economic Sectors In Current Prices 2006-2011 (Rp billions)
Description 2006 2007 2008 2009 2010 2011
1. Agriculture 6,505 7.181 8.319 9.117 10.038 11.350
2. Mining and quarrying 10,104 12.669 10.870 15.851 18.048 12.888
3. Manufacturing 948 1.083 1.279 1.491 1.638 1.758
4. Electricity, gas, and clean water 112 130 153 178 204 226
5. Construction 1,649 1.917 2.299 1.854 3.086 3.473
6. Trade, hotel and restaurant 3,384 3.951 4.625 5.411 6.264 7.215
7. Transportation and Communication 2,236 2.456 2.772 3.027 3.270 3.545
8. Financial, real estate, rent, services 1,141 1.315 1.590 1.878 2.159 2.486
9. Other services 2,512 2.816 3.403 4.203 4.849 5.785
TOTAL GRDP 28,596 33.522 35.314 44.014 49.559 48.729
Source: NTB dalam Angka (BPS, various years)
GRDP of NTB nominally increased significantly from approximately Rp 28.60 trillion in 2006
to Rp 48.73 trillion in 2011. During the same period, average GRDP growth was 11.58
percent per annum. The growth of NTB’s GRDP is mostly supported by the growth in mining
and quarrying sector and financial, real estate and rental services which grow about 68.56
percent per annum and 3 percent per annum respectively.
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Figure 2.2
Distribution of NTB GRDP by economic sector in current price, 2000-2011 (%)
0% 20% 40% 60% 80% 100%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011y
ea
r
%
Agric Mining Manuf Electr Construct Tra de, hotel Tra nsport Fina nce serv other serv
Source: NTB dalam Angka (BPS, various years)
In fact, there is strong correlation between the growth of NTB’s GRDP with the growth of
mining and quarrying sector. Table 2.2 shows that during the period of 2006 and 2011 the
mining sector of NTB experienced negative growth twice, in 2008 and 2011 respectively. In
those years the growth of GRDP is low, reaching 5.35 percent and even -1.67 percent in 2008
and 2011 respectively. While the other sectors of the economy have positive growth. This
indicates that mining and quarrying has a strong impact to NTB’s economy.
Table 2.2
The growth of NTB GRDP by economic sector in current price, 2000-2011 (%)
Description 2006 2007 2008 2009 2010 2011
1. Agriculture 11.87 10.39 15.85 9.59 10.10 13.07
2. Mining and quarrying 8.79 25.39 -14.20 45.82 13.86 -28.59
3. Manufacturing 9.22 14.24 18.10 16.58 9.86 7.33
4. Electricity, gas, and clean water 13.13 16.07 17.69 16.34 14.61 10.78
5. Construction 12.18 16.25 19.93 -19.36 66.45 12.54
6. Trade, hotels, and restaurant 15.77 16.76 17.06 16.99 15.76 15.18
7. Transportation and communication 12.14 9.84 12.87 9.20 8.03 8.41
8. Finance, real estate, and rent Services 14.33 15.25 20.91 18.11 14.96 15.15
9. Other services 13.00 12.10 20.85 23.51 15.37 19.30
TOTAL GRDP 11.35 17.23 5.35 24.64 12.60 -1.67
Source: NTB dalam Angka (BPS, various years)
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2.1.2. Demographic Profile
The population of NTB in 2011 was 4,540,060 person (Figure 2.3). Given NTB’s total area of
20.153 km2, the population density was about 225 person/km2. The population of NTB is
mostly concentrated in Lombok island in which three districts are densely populated (Table
2.3).
Since 2006, the population of NTB has shown an increasing trend. Population growth is
about 1.32 percent per year. Given increasing trend of population growth, employment
opportunity has become a major challenge for the local government.
Figure 2.3
Population of NTB Province, 2006 – 2011 (person)
Source: NTB dalam Angka (BPS, various years)
Table 2.3
Population by Districts/Cities in NTB Province, 2011
District/City Jumlah Penduduk
Lombok Timur 1.116.745
Lombok Tengah 868.895
Lombok Barat 606.044
Bima 443.663
Sumbawa 419.987
Kota Bima 406.910
Dompu 221.184
Kota Mataram 202.092
Lombok Utara 144.018
Sumbawa Barat 116.112
Source: NTB dalam Angka (BPS, 2012)
About 45 percent of the population works in agriculture (Table 2.4 and 2.5). It is followed by
trade, hotel, restaurant (about 17.5 percent) and financial real estate, and rent (about 12
percent), as the second and third largest sectoral employments. Even though the agriculture
sector employs highest worker, the trend is declining toward 2011. Employment in
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agriculture sector declines about 0.19 percent per year. This fact supports the argument
above that the economy of NTB is experiencing structural transformation.
Table 2.4
Population 15 Years of Age and Over Who Worked by Economic Sector in NTB,
2006 – 2011 (person)
Description 2006 2007 2008 2009 2010 2011
1. Agriculture 899.526 929.975 866.695 884.215 1.005.240 872.088
2. Mining and quarrying 42.772 30.895 41.475 33.068 62.373 49.587
3. Manufacturing 190.271 195.357 209.940 213.099 204.111 169.577
4. Electricity, gas, and clean water 1.176 1.407 4.688 6.430 4.926 2.508
5. Construction 65.587 92.263 96.900 93.951 85.007 89.284
6. Trade, hotel and restaurant 346.017 350.279 326.537 347.247 372.560 370.239
7. Transportation and Commu-
nication 114.523 121.228 122.575 127.792 109.118 85.578
8. Financial, real estate, rent,
services 14.864 17.539 16.167 14.220 15.307 29.560
9. Other services 232.080 217.239 219.804 247.358 274.291 293.819
TOTAL 1.906.816 1.956.182 1.904.781 1.967.380 2.132.933 1.962.240
Source: NTB dalam Angka (BPS, various years)
If we analyze the employment figures for the last two years (2010 and 2011), the number of
people working in financial, real estate and rental services has increased significantly.
Number of people working in this sector in 2011 increased 93.11 percent compared to the
subsequent year. In the same time, sector experiencing significant decline in number of
worker is electricity, gas, and clean water by 49.09 percent.
Table 2.5
Percentage of Population 15 Years of Age and Over Who Worked by Field in NTB,
2006 – 2011 (Percent)
Description 2006 2007 2008 2009 2010 2011
1. Agriculture 47,17 47,41 45,5 44,94 47,13 44,44
2. Mining and Quarrying 2,24 1,58 2,18 1,68 2,92 2,53
3. Industry 9,98 10,01 11,02 10,83 9,57 8,64
4. Electricity, Gas, and Water Supply 0,06 0,07 0,25 0,33 0,23 0,13
5. Construction 3,44 4,73 5,09 4,78 3,99 4,55
6. Trade, Hotels, and Restaurants 18,15 17,95 17,14 17,65 17,47 18,87
7. Transportation and Communication 6,01 6,21 6,44 6,5 5,12 4,36
8. Financial, Rental, and Business Service 0,78 0,9 0,85 0,72 0,72 1,51
9. Services 12,17 11,13 11,54 12,57 12,86 14,97
TOTAL 100 100 100 100 100 100
Source: NTB dalam Angka (BPS, various years)
Level of open unemployment in NTB is low (Figure 2.4). In 2011 the level is 3.52 percent.
Since 2006-2011, the level of open unemployment in NTB has shown a decreasing trend, i.e.
approximately 10.07 percent per year. It might be interpreted that employment opportunity
has increased during the period resulting in higher labor absorption in the economy.
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Figure 2.4
Unemployment Rate in NTB, 2006 – 2011
Source: NTB dalam Angka (BPS, from various years)
Labor education level in NTB is not too good (Table 2.6). Highest level of education achieved
by most of working population in NTB is primary school, i.e. approximately 27 percent.
Ironically, percentage of working population who are not graduated from primary school is
higher than those who graduated from high school, diploma, or even university. Since 2006-
2011, number of working population who do not graduated from primary school does not
show a declining trend.
Table 2.6
Population 15 Years of Age and Over Who Worked by Level of Education in NTB,
2006 – 2011 (Person)
Description 2006 2007 2008 2009 2010 2011
1. No Schooling 301.856 326.415 289.241 298.058 303.359 327.392
2. Not Completed Primary School 309.618 327.814 452.386 468.827 466.397 359.862
3. Primary School 613.309 603.875 475.052 506.404 499.961 452.497
4. Junior High School 289.468 300.995 280.765 307.403 342.311 273.453
5. Senior High School 290.995 298.151 266.765 303.173 391.084 376.830
6. Diploma 47.445 38.294 32.096 28.625 40.948 44.364
7. University 54.125 55.638 108.192 54.791 88.873 127.842
Total 1.906.816 1.951.182 1.904.781 1.967.380 2.132.933 1.962.240
Source: NTB dalam Angka (BPS, various years)
Table 2.7
Percentage of Population 15 Years of Age and Over Who Worked by Level of Education in
NTB, 2006 – 2011 (Percent)
Description 2006 2007 2008 2009 2010 2011
1. No Schooling 15,83 16,73 15.19 15.15 14,22 16,68
2. Not Completed
Primary School 16,24 16,8 23.75 23.83 21,87 18,34
3. Primary School 32,16 30,95 24.94 25.74 23,44 23,06
4. Junior High School 15,18 15,43 14.74 15.62 16,05 13,94
5. Senior High School 15,26 15,28 14.01 15.41 18,34 19,2
6. Diploma 2,49 1,96 1.69 1.45 1,92 2,26
7. University 2,84 2,85 5.68 2.78 4,17 6,52
Total 100 100 100 100 100 100
Source: Calculated from Table 2.6
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Low level of labor education in NTB becomes major challenge to local government,
especially when the economy undergoes structural transformation. The uncompetitive level
of labor education in NTB will minimize the employment opportunities in labor market.
Furthermore, the low level of labor education could pose a disincentive to investor who
wants to recruit local worker.
2.1.3. Fiscal Profile
During 2008 – 2011, the government of NTB applied budget surplus policy. In
macroeconomic theory, budget surplus policy is good for suppressing demand pressure to
slow down overheating economy. It is not clear however whether this budget policy is
directed to slow down economic growth or not. The regional budget of NTB nominally also
shows an increasing trend.
The level of dependency of regional government to central government to obtain financial
support is relatively high (Table 2.8). More than 50 percent of NTB budget revenue is from
balancing fund (dana perimbangan) given by central government. Own regional revenue
(pendapatan asli daerah/PAD) is about 40 percent of budget revenue. PAD of NTB however
has been increasing since 2008. The increase is due to management of local wealth
(kekayaan daerah), averaging 8,462.2 percent per year. Local tax revenue and retribution –as
part of PAD- also increase averaging 13.81 percent and 18.21 percent respectively. Increasing
tax revenue indicates that tax incidence in NTB is relatively good.
Table 2.8
Realization Revenue of NTB Provincial Budget, 2008-2011 (Rp million and %)
value % value % value % value %
I. Own Regional Revenue 413,161 39.36 474,454 40.35 515,340 40.51 741,291 43.88
1. Local Tax Revenue 348,568 33.21 369,172 31.39 391,690 30.79 506,909 30.01
2. Local Retribution 36,680 3.49 50,047 4.26 54,900 4.32 59,556 3.53
3. Separated Wealth Management revenue 100 0.01 25,192 2.14 40,937 3.22 135,639 8.03
4. Other Legal Revenue 27,812 2.65 30,041 2.55 27,812 2.19 39,185 2.32
II. Balancing Funds 626,994 59.73 701,179 59.63 756,256 59.44 855,310 50.63
1. Tax and Non Tax Revenue Sharing 78,492 7.48 98,723 8.39 158,426 12.45 162,674 9.63
2. General Allocation Funds 511,286 48.71 554,431 47.15 573,065 45.04 646,671 38.28
3. Specific Allocation Funds 37,215 3.55 48,024 4.08 24,764 1.95 45,964 2.72
4.Contingency Funds 0 - 0 - 0 - 0 -
III. Other Legal Revenue 9,500 0.91 341 0.03 620 0.05 92,749 5.49
1. Revenue from Grants - - - 5,449 0.32
2. Emergency and Special Autonomy Funds 9,500 0.91 341 0.03 620 0.05 87,300 5.17
3. Other Revenue - - - -
TOTAL 1,049,655 100.00 1,175,974 100.00 1,272,216 100.00 1,689,350 100.00
2011201020092008Description
Source: NTB dalam Angka (BPS, various years)
From expenditure side, the regional spending is relatively good. During 2008 – 2011,
realization of local expenditure was more than 92 percent. It means that 92 percent of
planed expenditure for government programs was able to be implemented. It is only once
that expenditure realization in NTB is below 90 percent.
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Expenditure consists of indirect and direct expenditures. Indirect expenditure is government
spending which does not relate to implementation of government programs and activities.
Direct expenditure is the opposite of indirect expenditure. The expenditure that has great
impact to the economy is direct expenditure, since it is intended for purchasing goods and
services, and capital locally thus creating multiplier effect. The expenditure of NTB budget
tends to prioritize indirect than direct expenditures (Table 2.9). More than 50 percent of NTB
budget expenditure is spent on indirect expenditure.
Table 2.9
Realization Expenditure of NTB Provincial Budget, 2008-2011 (Rp million and %)
value % value % value % value %I. Indirect Expenditure 590,847 56.82 724,553 65.84 859,304 67.36 886,085 53.68
1. Public Services Expenditure 284,952 27.40 357,906 32.52 385,403 30.21 426,228 25.82
2. Subsidy Expenditure 8,902 0.86 6,542 0.59 4,929 0.39 2,994 0.18
3. Grants Expenditure 55 0.01 29,666 2.70 116,432 9.13 138,283 8.38
4. Social Expenditure 107,416 10.33 847 0.08 96,006 7.53 99,291 6.02
5. Expense of Sharing Holder 118,225 11.37 164,138 14.91 201,232 15.77 176,666 10.70
6. Expense of Financial Aid 163 0.02 80,725 7.34 53,986 4.23 40,632 2.46
7. Unpredicted Expense 5 0.00 872 0.08 1,315 0.10 1,988 0.12
II. Direct Expenditure 449,099 43.18 375,984 34.16 416,441 32.64 764,516 46.32
1. Public Services Expenditure 58,036 5.58 45,188 4.11 44,205 3.47 37,987 2.30
2. Goods and Services Expenditure 217,322 20.90 196,983 17.90 227,678 17.85 276,464 16.75
3. Capital Expenditure 173,739 16.71 133,813 12.16 144,557 11.33 450,063 27.27
Total Expenditure 1,039,946 100.00 1,100,537 100.00 1,275,746 100.00 1,650,601 100.00
Description2008 2009 2010 2011
Source: NTB dalam Angka (BPS, various years)
2.2. WEST SUMBAWA DISTRICT
West Sumbawa district (Kabupaten Sumbawa Barat/KSB) is located in Sumbawa island, West
Nusa Tenggara (Figure 2.5). The district was originally part of Sumbawa district and formally
split out on December 18, 2003 to form a new district called KSB according to Law Number
30 Year 2003 on the Establishment of West Sumbawa District in West Nusa Tenggara
Province.
The district is headed by a definitive Bupati in 2005. The capital of KSB is in Taliwang. The
district consists of 8 sub districts, namely Brang Ene, Brang Rea, Jereweh, Maluk, Poto Tano,
Sekongkang, Seteluk, and Taliwang.
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Figure 2.5
West Sumbawa District
Source: KSB dalam Angka (BPS, 2012)
2.2.1. Economic Profile
Macroeconomic condition of KSB could be analyzed from Gross Regional Domestic Product
(GRDP) perspective. GRDP represents incomes of all economic agents in KSB. Before PT NNT
operated in the district in 2000, agricultural sector dominates the district economy,
especially crops to meet local needs. In same time, local community also raises cattle as part
of their farm activities and catch fish in the sea1.
GRDP of KSB by economic sectors in nominal term and percentage are presented in Table
2.10 and Figure 2.6 respectively. Mining and quarrying has dominated KSB economy since
2000. The contribution was more than 90% each year. This is primarily due to the
contribution of PT NNT. The mining, mills, and infrastructure projects were completed in
1999 and PT NNT fully operated in 2000.
1 LPEM-FEUI (2007)
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The contribution of mining and quarrying in KSB tends to increase overtime in nominal
terms. In 2000 the contribution was Rp 2.98 trillions or 92.3% of GRDP while in 2011 the
contribution reached Rp 12.00 trillions or 92.4% of GRDP2. It is clear that the KSB economy
reflects the intensity of PT NNT activities.
Total contribution of the other 8 sectors in GRDP of KSB only accounted about 10 percent.
Second largest contributor of KSB GRDP is agriculture sector which contribute about 2
percent. With no significant change during 2006-2011, it can be said that diversification of
economic sector has not occurred in KSB. Mining and quarrying has been engine of growth
in KSB and it is very risky to the local economy, especially when the mining and quarrying
production or product price are declining.
Table 2.10
GRDP of KSB by economic sectors in current prices 2000-2011 (Rp billions)
Description 2006 2007 2008 2009 2010 2011
1. Agriculture 175.646 190.993 216.480 231.775 257.380 288.272
2. Mining and quarrying 9.527.789 12.163.942 10.271.273 15.097.359 17.098.138 12.002.526
3. Manufacturing 14.369 15.820 16.987 19.075 20.067 21.711
4. Electricity, gas, and clean water 1.897 2.258 2.605 3.075 3.507 3.922
5. Construction 62.705 85.864 109.661 145.084 176.252 202.631
6. Trade, hotel and restaurant 111.756 123.445 144.946 170.180 194.277 226.420
7. Transportation and Communication 69.159 74.150 85.028 90.895 99.121 110.746
8. Finance, real estate, rent, ser 14.974 16.670 18.536 21.234 23.754 26.527
9. Other services 48.077 52.221 63.150 77.671 89.726 103.797
Total GRDP 10.026.376 12.725.366 10.928.669 15.856.352 17.962.226 12.986.557
Source: LPEM-FEUI (2007) and KSB dalam Angka (BPS, 2012)
During the last six years all sectors show an increasing GRDP contribution in absolute term. It
seems logical to say it is a result of NNT activities. For example, the absolute contribution of
agricultural sector has been increasing from Rp 104.51 billions to Rp 288.27 billions. Average
annual growth of the sector is 9.7%. Its relative contribution to GRDP however is decreasing
from 3.23% to 2.22%. This is mainly due to higher contribution of PT NNT to GRDP of KSB
overtime.
2 Based on Head of Bappeda’s interview, the mining and quarrying sector contributes about 88.0% of GRDP
in 2011 in constant price.
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Figure 2.6
Distribution of KSB GRDP by economic sector in current price, 2000-2011 (%)
0% 20% 40% 60% 80% 100%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
year
%
Agric Mining Manuf Electr Construct Trade, hotel Transport Finance serv Other serv
Source: LPEM-FEUI (2007) and BPS (2012)
During 2006 – 2011, KSB experienced an economic stagnation (Table 2.11). It could be
detected from the slow growth of KSB real GRDP which was only 0.83 percent per year on
average. During that period the growth of GRDP frequently fluctuates from positive to
negative growth. Slow growth of GRDP might potentially hinder the effort to accelerate the
unemployment and poverty reduction in KSB.
The GRDP fluctuation in KSB is caused largely by fluctuation in the growth of mining and
quarrying sector. Mining and quarrying sector only grow 0.43 percent per year on average. In
the mean time, the other 9 sectors showed a positive growth during the same period.
Construction has the highest growth rate averaging 15.97 percent per year.
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Table 2.11
Growth Rate of KSB GRDP in Constant 2000 Price by economic sector, 2006-2011 (percent)
LAPANGAN USAHA 2006 2007 2008 2009 2010 2011
1. Agriculture 2.97 -0.25 5.38 0.55 3.39 4.49
2. Mining and quarrying -6.02 5.29 -10.45 29.82 12.96 -29.00
3. Manufacturing 5.25 4.81 3.78 5.62 4.03 4.62
4. Electricity, gas, and clean water 7.41 7.65 10.61 12.22 8.63 9.65
5. Construction 12.12 28.82 13.34 21.74 12.21 7.59
6. Trade, hotels, and restaurant 9.77 4.53 5.60 9.31 8.22 7.65
7. Transportation and communication 7.31 4.54 5.10 3.78 5.91 6.39
8. Finance, real estate, rent services 6.10 4.52 4.21 6.36 4.24 5.15
9. Other services 3.51 4.29 3.45 15.05 5.26 7.05
GRDP TOTAL -5.13 5.34 -9.09 27.76 12.46 -26.33
Source: LPEM-FEUI calculation (2013)
2.2.2. Demographic Profile
Population of KSB in 2011 was 116.112 person (Figure 2.7). Given total area of 1,849.02 km2,
population density in KSB was 62,8 person/km2. Since 2006, population of KSB tends to
increase with population growth of 1.84 percent per year.
Rate of open unemployment in KSB fluctuates during 2007 to 2011. It was increasing in until
2009, but decreasing toward 2011. Unemployment rate in KSB is considered low, it is about
4.99 percent in 2011.
Figure 2.7
Population in KSB, 2006 – 2011 (person)
Source: KSB dalam Angka (BPS, various years)
Observing by economic sector in KSB, agricultural sector dominantly employs labor (Table
2.12). More than 30 percent of KSB labor working in agricultural sector. Even though many
people working in the agricultural sector, the sector does not contribute significantly to local
economy, i.e. only about 2-3 percent of GRDP. It is suspected that inefficiency occurs in
human resource allocation at farm level. Service is the second largest sector that employs
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labor in KSB.
Percentage of labor who works in the mining sector was 4.79 percent in 2011. For a single
mining company, like PT NNT, the percentage is quite meaningful. Some workers outside KSB
might be also worked for PT NNT. The decision to recruit non KSB labor is probably due to
education background of labor in KSB which will be explained in the next section.
Table 2.12
Percentage of Population 15 Years of Age and Over Who Worked by Field in KSB,
2010 – 2011
Economic Sector 2010 2011
1. Agriculture 33.32 37.7
2. Mining 6.28 4.79
3. Trade 19.9 16.05
4. Services 24.2 25.43
5. Others 16.3 16.03
Total 100 100
Source: KSB dalam Angka (BPS, various years)
Labor level of education in KSB is not good (Table 2.13). During 2007- 2011, about 30
percent of labor in KSB is primary school graduated. Percentage of labor who never goes to
school or graduated from primary school is higher than those who graduated from senior
high school, diploma, or university. Toward 2011, there is no tendency for improvement in
the percentage of labor whose never goes to school or graduated from primary school.
Given the data on labor education background, the employment opportunities is very
limited, especially in sector which needs skilled worker. This could be the reason why only
small number of worker could be employed by PT NNT in production and managerial
position. As the result, local labor who graduated from high school might end up working in
agricultural sector or equip herself with courses that may improve their skill, such as driving,
computers, etc. to work in services industry.
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Table 2.13
Percentage of Population 15 Years of Age and Over Who Worked by Level of Education in
KSB, 2006 – 2011
Description 2007 2008 2009 2010 2011
1. No schooling and Not Completed Primary School 16.76 17.74 20.49 23.24 22.98
2. Primary School 40.56 36.37 31.09 25.81 30.03
3. Junior High School 14.39 15.02 15.51 16.01 14.24
4. Senior High School 23.52 23.94 24.99 26.05 22.45
5. Diploma and University 4.76 6.94 7.91 8.89 10.3
Total 100 100 100 100 100
Source: KSB dalam Angka (BPS, various years)
2.2.3. Fiscal Profile
During 2008 - 2011, source of KSB revenue has been mostly from balancing fund (Table
2.14). Balancing fund is fund transferred by central government. Therefore KSB budget
revenue depends on central government transfer. Percentage of balancing fund is more than
50 percent each year.
An interesting feature of KSB budget is that the contribution of other legal revenue is quite
large. It contributed approximately 22 percent of total revenue which was higher than own
regional revenue with 19 percent. Other legal revenue might consist of revenue from share
in PT DMB and scrap metal given by PT NNT. The share of NTB province and KSB on PT NNT
will be presented in the next chapter.
Table 2.14
Realization Revenue of KSB, 2008 – 2011 (Rp million and %)
value % value % value % value %
I. Own Regional Revenue 16,559 4.80 22,058 5.05 8,937 2.78 122,933 18.94
1. Local Tax Revenue 1,864 0.54 1,665 0.38 1,935 0.60 11,767 1.81
2. Local Retribution 1,091 0.32 1,020 0.23 907 0.28 3,439 0.53
3. Separated Wealth Management revenue 923 0.27 1,090 0.25 613 0.19 21,094 3.25
4. Other Legal Revenue 12,679 3.67 18,283 4.19 5,481 1.70 86,123 13.27
II. Balancing Funds 294,743 85.39 314,597 72.07 271,660 84.39 384,301 59.21
1. Tax and Non Tax Revenue Sharing 77,124 22.34 95,164 21.80 94,779 29.44 144,229 22.22
2. General Allocation Funds 180,749 52.37 173,465 39.74 147,770 45.90 214,927 33.12
3. Specific Allocation Funds 36,869 10.68 45,967 10.53 29,110 9.04 25,143 3.87
III. Other Legal Revenue 33,862 9.81 99,861 22.88 41,328 12.84 141,765 21.84
Total Revenue 345,164 100.00 436,517 100.00 321,925 100.00 649,000 100.00
2011Description
2008 2009 2010
Source: KSB dalam Angka (BPS, various years)
KSB expenditure showed an increasing trend in 2008-2011 (Table 2.15). The highest
expenditure was for direct expenditure. Based on Minister of Interior Regulation No 13 Year
2006, the indirect expenditure is local government spending not related to government
programs and activity implementation (apparatus spending), while direct expenditure is the
opposite (public spending). In addition, capital expenditure within direct expenditure is an
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expenditure intended for the provision or development of fixed asset for long term use, such
as infrastructure facilities.
Table 2.15 below shows that the highest direct expenditure was for capital expenditure,
followed by good and services expenditure and public services expenditure. This proportion
of spending in the expenditure is quite good, since capital expenditure will support capital
formation which is required to expand the local economy. However further information on
how direct expenditure was spent based on sectoral activities –such as education, health,
etc- was not available when this study is conducted. That kind of information will provide an
explanation on the quality of expenditure.
Table 2.15
Realization Expenditures of KSB, 2008 – 2011 (Rp million and %)
value % value % value % value %
I. Indirect Expenditure 126,558 41.40 144,749 27.61 208,474 45.46 243,085 37.46
1. Public Services Expenditure 108,456 35.48 115,716 22.08 147,052 32.07 196,463 30.27
2. Subsidy Expenditure 0 0.00 0 0.00 835 0.18 4,900 0.76
3. Grants Expenditure 0 0.00 0 0.00 33,259 7.25 9,224 1.42
4. Social Expenditure 4,903 1.60 12,381 2.36 9,640 2.10 10,497 1.62
5. Expense of Sharing Holder 0 0.00 13,102 2.50 0 0.00 0 0.00
6. Expense of Financial Aid 11,932 3.90 0 0.00 15,836 3.45 19 0.00
7. Unpredicted Expense 1,266 0.41 3,550 0.68 1,853 0.40 3 0.00
II. Direct Expenditure 179,109 58.60 379,440 72.39 250,071 54.54 405,914 62.54
1. Public Services Expenditure 12,786 4.18 31,161 5.94 30,845 6.73 20,556 3.17
2. Goods and Services Expenditure 59,799 19.56 83,870 16.00 80,116 17.47 127,569 19.66
3. Capital Expenditure 106,523 34.85 264,407 50.44 139,110 30.34 257,788 39.72
Total Expenditure 305,667 100.00 524,189 100.00 458,545 100.00 649,000 100.00
2011Description
2008 2009 2010
Source: KSB dalam Angka (BPS, various years)
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Chapter 3
THE CONTRIBUTION OF PT NNT
PT Newmont Nusa Tenggara (PT NNT) has signed Contract of Work Agreement in 1986 with
the Government of Indonesia to conduct exploration and exploitation in the Contract area of
West Nusa Tenggara Province. In 1990 PT NNT found copper reserve, which is later called
Batu Hijau (green rock).
After the find, technical and environmental studies were done for 6 years. The studies were
approved by the government in 1996 and served as the basis for the development of Batu
Hijau Mining Project valued at US$ 1.8 billions. The mining, mills, and infrastructure projects
of PT NNT were done in 1999 and PT NNT was fully operational in 2000. Newmont and
Sumitomo serve as operators of PTNNT's Batu Hijau mine. Batu Hijau is a copper-gold mine
located in the south west region of the Island of Sumbawa, Sekongkang sub-district, West
Sumbawa district, West Nusa Tenggara province, Indonesia. More specifically the project and
its facilities cover Maluk, Sekongkang, and Jereweh sub districts.
Under the terms of a contract signed in 1986, the company’s shareholders -Newmont Mining
Corp. and Sumitomo- must divest 51 percent of their shares in PT NNT to local investors after
five years of commercial operation. The firms have divested 24% of their shares to PT Multi
Daerah Bersaing, a joint venture of PT Multicapital -a business unit of PT Bumi Resources,
which owns 18 percent share- and PT Daerah Maju Bersaing -consisting of three regional
governments which own 6 percent share, i.e. the provincial government of West Nusa
Tenggara, district of Sumbawa, and district of West Sumbawa. Therefore PTNNT is currently a
joint venture company that is owned by Nusa Tenggara Partnership (Newmont and
Sumitomo) 56 percent, PT Multi Daerah Bersaing (PTMDB) 24 percent, and PT Pukuafu Indah
20 percent. A further divestation of 7 percent from 56 percent Nusa Tenggara Partnership
share is expected in the current year.
3.1. ECONOMIC CONTRIBUTION OF PT NNT
The economic contribution of PT NNT to the local economy relates to the sales of PT NNT.
Higher sales growth will have positive impact to local economy, and vice versa. Historical
data on PT NNT sales –in term of shipment- is presented in Figure 3.1.
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Figure 3.1
PT NNT sales, 2006-2011
-
500
1,000
1,500
2,000
2,500
2006 2007 2008 2009 2010 2011
year
US$
mil
lio
n
sales
Source: PT NNT, 2013
Note: sales is approximated by the value of shipment
The figure shows a fluctuating value of PT NNT sales. During 2006-2011, the highest sale was
in 2010 where shipment reached 831,177 dmt (dry metric ton). However in 2011, when the
price of copper was higher than in 2010, the shipment was only 537,505 dmt. It created a
slow down in sale in 2011.
From theoretical perspective, economic impact of PT NNT to GRDP is transmitted by copper-
gold concentrate export in the mining sector at national, provincial, and district levels. In IO
and IRIO models, the copper-gold concentrate shipment/sales will act as final demand
shifter that increases GRDP through inter-industry and/or inter regional linkages. These
direct and indirect effects might be analyzed by multiplier effects.
The economic impacts of PT NNT to NTB province (by using IRIO3 analysis) and KSB (by using
IO4 analysis) are presented in Figure 3.2 – 3.5. The contribution of PT NNT to NTB GRDP
ranges from 25 – 37 percent of the total GRDP. While the contribution to KSB GRDP ranges
from 75 – 99 percent.
3 IRIO model is presented in the Appendix
4 IO model is presented in the Appendix
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Figure 3.2
NTB GRDP with and without PT NNT, 2006-2011
-
10,000
20,000
30,000
40,000
50,000
60,000
2006 2007 2008 2009 2010 2011
year
IDR
bil
lio
n
GRDP with PT NNT GRDP without PT NNT
Source: LPEM-FEUI calculation, 2013
Figure 3.3
Contribution of PT NNT to NTB GRDP, 2006-2011
37 37
28 28
34
25
0
5
10
15
20
25
30
35
40
2006 2007 2008 2009 2010 2011
year
perc
en
t (%
)
Source: LPEM-FEUI calculation, 2013
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Figure 3.4
KSB GRDP with and without PT NNT, 2006-2011
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
2006 2007 2008 2009 2010 2011
year
IDR
bil
lio
n
GRDP with PT NNT GRDP without PT NNT
Source: LPEM-FEUI calculation, 2013
Figure 3.5
Contribution of PT NNT to KSB GRDP, 2006-2011
99
9287
75
89 91
-
20
40
60
80
100
120
2006 2007 2008 2009 2010 2011
year
perc
en
t (%
)
Source: LPEM-FEUI calculation, 2013
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Based on economic profile and economic impact analysis by using IRIO table, it is clear that
the mining sector, i.e. PT NNT, has been the major contributor of NTB and especially KSB
economies. Its share in KSB GRDP has been more than 90 percent on average during period
of 2006-2011. It can be said that the economy of KSB depends heavily on the PT NNT
activity.
Figure 3.6 shows further that the growth of West Nusa Tenggara GRDP and KSB GRDP
correspond to the growth of PT NNT sales. The reduction of production capacity of PT NNT
due to mining expansion site in 20115, for example, has lowered the contribution of mining
sector to the local economy. A 26 percent decrease in PT NNT sales growth was followed by
a decrease in KSB GRDP growth about 28 percent. In the same, growth of NTB’s GRDP
growth declined about 1.7 percent, since KSB GRDP contributes significantly to NTB GRDP.
Figure 3.6
Growth of PT NNT sales, KSB GRDP, and West Nusa Tenggara GRDP
-40
-30
-20
-10
0
10
20
30
40
50
60
2006 2007 2008 2009 2010 2011
year
%
growth of PT NNT sa les growth of KSB GRDP
growth of WNT GRDP
Source: LPEM-FEUI calculation from BPS (2012) and PT NNT (2012)
From economic model construction, IO/IRIO model provides three methods of GRDP
calculation. The methods include the calculation from (i) expenditure/final demand
approach, (ii) income/primary input approach, and (iii) production approach. Those three
approaches should yield the same number.
5 http://www.thejakartapost.com/news/2010/01/07/ri-copper-gold-output-fall-2011.html
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To estimate how much percentage of GRDP that stays in NTB, we may use income/primary
input approach. The income approach measures gross domestic product by summing
incomes originating from production within the geographical boundaries of NTB. Factor
incomes, so named because in a general way they correspond to the economic factors of
production, labor and capital. In IRIO table, they are represented by (i) wages and salary; (ii)
surplus; (iii) depreciation; and (iv) indirect tax. According to 2005 IRIO table, the proportion
of each primary inputs are presented in Table 3.1.
Table 3.1
The Proportion of Primary Inputs of NTB Province in Mining Sector based on 2005 IRIO
Table
No Description % Explanation6
1 Wages and salary 29.9 income paid to labor, either in cash or in kind
2 Surplus 55.2 include property rent, nett interest, and gross firm profit
3 Depreciation 7.5 allocating firm profit to replace capital good that wears of
4 Indirect tax 7.4 Tax levied by the government for every firm's sales
Total 100.0
Source: 2005 IRIO Table (BPS and Bappenas, 2006)
Wages and salary comprise about 30 percent of NTB GRDP from income approach. Assuming
68 percent of PT NNT workers are NTB’s origin7, it means about 21 percent of wages and
salary paid is enjoyed by NTB province.
Firm’s surplus is the highest contributor of NTB GRDP from income approach. It contributes
more than a half of GRDP, about 55 percent. As explained in the table, surplus may consist of
several items, such as property rent, net interest and gross firm profit. While gross firm
profit consist of before tax profit and shareholders right (dividend). After all payment
obligation is deducted, the share of NTB in firm’s surplus is likely to be small. As already
mentioned, the three local governments of NTB – Provincial government, Kabupaten
Sumbawa Barat, and Kabupaten Sumbawa- only own 6 percent of PT NNT share. Therefore
NTB only receives a small amount of income from firm surplus.
Depreciation will go to the owner of capital good used in PT NNT activities. Since most of
capital goods used are machinery imported from other regions or even abroad, this income
from capital is slightly received by NTB province.
6 Daryanto and Hafizrianda (2010)
7 Data from PT NNT
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Indirect tax will most likely be collected by central government. So tax revenue will go to
central government. The tax revenue is used for financing national development. However
tax revenue may be redistributed again to local governments across Indonesia as part of
fiscal balance mechanism between central and local governments. Therefore, some of
indirect tax revenue will be enjoyed by NTB province.
Another economic impact of PT NNT operation is employment generation. Using the latest
and verified Indonesian Interregional Input-Output (IRIO) Table in 20058, the research tries
to estimate the employment generation by using the production value of PT NNT in 2011 as
shock to regional economy. Table 3.2 shows employment generation due to PT NNT activity
in KSB. The production value of PT NNT in 2011 has created direct and indirect employment
about 57,687 jobs across Indonesia. The total job is resulted from inter-industry and inter-
regional linkages.
Table 3.2
Employment Generation of PT NNT across sector and region in Indonesia based on IRIO
Model in 2011
No Description SumatraJava and
BaliNTB* Kalimantan Sulawesi Others** Total
1 Agriculture 7,522 5,992 3,783 518 186 864 18,865
2 Mining: oil and gas 28 135 - 31 - 1 195
3 Mining: non oil and gas 59 2 3,556 - - - 3,617
4 Manufacture 1,453 4,870 1,711 127 21 5 8,187
5 Electricity, gas, and clean water 14 12 20 1 - - 47
6 Construction 47 115 784 4 1 1 952
7 Trade, hotel and restaurant 845 1,989 9,579 119 53 35 12,620
8 Transportation and communication 161 440 5,616 31 7 5 6,260
9 Financial institution, real estate, and rent services 143 243 3,633 22 6 5 4,052
10 Public, social, and private services 127 394 2,348 19 3 1 2,892
Total 10,399 14,192 31,030 872 277 917 57,687
Percentage by region 18.03% 24.60% 53.79% 1.51% 0.48% 1.59% 100.00%
Source: LPEM-FEUI calculation based on 2005 IRIO table
Note: * including West Sumbawa district
** Others consist of Papua, Maluku, North Maluku, and East Nusa Tenggara Provinces
The highest employment is created in NTB (including KSB), followed by Java and Bali; and
Sumatra. Total employment created in NTB is about 31,030 jobs or approximately 54 percent
of total national employment creation. Despite mining sector itself, the highest employment
generations in NTB are in (i) trade, hotel and restaurant; (ii) transportation and
communication; (iii) agriculture; and (iv)financial institution, real estate, rent services
sectors.
In the production activity of PT NNT, the mobility of goods and services (people) to and from
8 Methodology for IRIO is presented in the Appendix.
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PT NNTs mining site will be frequent. The mobility of goods and service will increase
transportation activities and at the same induce trade activities. People mobility also relates
to higher demand for food and accommodation (hotel and restaurant).
PT NNTs employee and their family concentration in KSB will also create demand for goods
and services. The demand for financial and housing services will increase the financial
institution and real estate sectors. Furthermore, the demand for agricultural products will be
supplied by agricultural sector in the region. All increase in those sectors will create job
opportunities.
The second and third largest employment generations related to PT NNT are in Java and Bali;
and Sumatra which account about 14,192 persons and 10,399 persons respectively. They
work on agriculture and manufacturing sectors. Agricultural products in Indonesia are mostly
produced in Java and Bali (crop, fruit, meat, etc.) and Sumatra (fruit, palm oils, etc.). They
are distributed to other provinces, including NTB province. A mining activity in KSB will
demand food products to feed their employee. As the result agricultural activities in
producing regions will increase and creating employment opportunity in the sector.
The same analogy applies to high employment generation in manufacturing sector. For
example, the need for steel of PT NNT is supplied from a vendor in Medan, North Sumatra.
Further demand of steel due to PT NNT production activities will induce steel production
which employs additional worker.
The actual number of employee of PT NNNT however is higher than the ones predicted by
the IRIO model. PT NNT’s data in Table 3.3 shows that the company directly employs 4,297
workers compared to 3,566 workers generated by the model. Based on Table 3.3, PT NNT
employee who is NTB residents is about 68 percent of total Indonesian Nationality of which
37 percent are specifically KSB resident.
The slight discrepancy between two figures might be caused by the definition of PT NNT
employee. It might be that there is PT NNT workers who are hired from local labor services,
such as security, cleaning services, driver, etc. So these kinds of workers are calculated as
employment generated in services sector, and not in the mining sector. The number of
workers in the IRIO model calculation is worker of PT NNT actually working in the mining
sector.
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Table 3.3
PTNNT’s Direct and Indirect Employee based on Nationality
No Description worker
I PT NNT Employee
a. Indonesian Nationality
(i) KSB 1,572
(ii) West Nusa Tenggara province, non KSB 1,333
(iii) Non West Nusa Tenggara province 1,350
Sub total 4,255
b. Expatriate 42
Total PT NNT Employee 4,297
II PT NNT Contractor and Sub contractor employee
a. Indonesian Nationality 4,363
b. Expatriate 55
Total PT NNT Contractor and Sub-con employee 4,418
Source: PT NNT (2012)
In the mean time, the number of workers working for PT NNT Contractor and Subcontractor
are obviously distributed in sectors other than mining. They may work in services,
transportation, trade sectors, etc.
3.2. FISCAL CONTRIBUTION OF PT NNT
As business entity, PT NNT pays tax and non tax revenues to central governments under
prevailing tax law. Taxes and non taxes payments will become domestic revenue in state
budget (APBN). Then part of state revenue will be transferred to regional governments as
regional expenditure. These transfers include tax and natural resource revenue sharing (BHP
and BHSDA), general allocation fund (DAU), and specific allocation fund (DAK). These will
become revenue in regional budget (APBD). Therefore the taxes and non taxes payment of
PT NNT will benefit central and regional governments (Table 3.4).
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Table 3.4
Fiscal Impact Scheme of PT NNT to Central and regional Government
Source: Law No.33/2004, Law No. 28/2009, and Government Regulation PP No. 55/2005.
Despite taxes and non taxes paid to central government, PT NNT also pays local tax and
retributions to regional governments, both provincial and district governments. Local taxes
and retribution include surface water tax, public road lights tax, vehicles tax, building license
permit, etc. Thus local government will obtain benefit from PT NNT. Table 3.5 shows the
distribution of tax and natural resource sharing, local tax and retribution related to the
mining industry.
FISCAL IMPACT CENTRAL GOVERMENT
REGIONAL GOVERNMENT
PRODUCING REGIONNON-PRODUCING
REGION
DIRECT IMPACT I. Domestic Revenue I. Regional Revenue I. Regional
Revenue
1. Tax revenue 1. Own Revenue (PAD)
a. Domestic Tax a. Regional tax
i. Income tax b. Retribution
ii. Value added tax
iii. Land and building tax (PBB)
iv. Excise 2. DP (Direct) 1. DP (Direct)
v. Other tax a. Revenue sharing a. Revenue sharing
b. International trade tax i. PBB iii. SDA
i. Import duty ii. PPh Ps 21, Ps 25, Ps 29
ii. Export tax iii. SDA
2. Non Tax Revenue
a. Natural Resource Revenue
b. State Owned Enter. Profit
c. Other non tax revenue (PNBP)
INDIRECT IMPACT II. Regional Expenditure 3. DP (Indirect) 2. DP (Indirect)
1. Balancing fund (DP) a. DAU a. DAU
a. Revenue sharing fund b. DAK b. DAK
i. PBB
ii. PPh PS 21, Ps 25, Ps 29
iii. SDA
b. General Allocation Fund (DAU)
c. Specific Allocation Fund (DAK)
TOTAL IMPACT Domestic Revenue – Regional
Transfer/Expenditure
PAD+DP (DIRECT) + DP
(INDIRECT)
DP (DIRECT AND
INDIRECT)
FISCAL IMPACT CENTRAL GOVERMENT
REGIONAL GOVERNMENT
PRODUCING REGIONNON-PRODUCING
REGION
DIRECT IMPACT I. Domestic Revenue I. Regional Revenue I. Regional
Revenue
1. Tax revenue 1. Own Revenue (PAD)
a. Domestic Tax a. Regional tax
i. Income tax b. Retribution
ii. Value added tax
iii. Land and building tax (PBB)
iv. Excise 2. DP (Direct) 1. DP (Direct)
v. Other tax a. Revenue sharing a. Revenue sharing
b. International trade tax i. PBB iii. SDA
i. Import duty ii. PPh Ps 21, Ps 25, Ps 29
ii. Export tax iii. SDA
2. Non Tax Revenue
a. Natural Resource Revenue
b. State Owned Enter. Profit
c. Other non tax revenue (PNBP)
INDIRECT IMPACT II. Regional Expenditure 3. DP (Indirect) 2. DP (Indirect)
1. Balancing fund (DP) a. DAU a. DAU
a. Revenue sharing fund b. DAK b. DAK
i. PBB
ii. PPh PS 21, Ps 25, Ps 29
iii. SDA
b. General Allocation Fund (DAU)
c. Specific Allocation Fund (DAK)
TOTAL IMPACT Domestic Revenue – Regional
Transfer/Expenditure
PAD+DP (DIRECT) + DP
(INDIRECT)
DP (DIRECT AND
INDIRECT)
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Table 3.5
The Distribution of Tax and Revenue Sharing, Local Tax and Retribution Related
to Mining Industry
Percentage Sharing (%)
No Type of Payment Central Province
Producing
district
Neighbor.
districts Total
Explanation
1 Profit tax: PPh 4, 14, 23 100 0 0 0 100
2 Individual income tax: PPh 21,
25/29
80 8 8.40 3.6 100
3 Corporate income tax: PPh 22, 27 100 0 0 0 100
4 Deviden interest and royalty
income tax: PPh 26
100 0 0 0 100
5 Value added tax and Luxury good
value added
100 0 0 0 100
6 Imported goods tax 100 0 0 0 100
Collected by
central
government
7 Land rent 20 16 64 0 100
8 Royalty 20 16 32 32 100
Applied in general
mining
9 Surface water rent tax 0 100 0 0 100
10 Vehicle tax 0 100 0 0 100
11 Vehicle ownership 0 100 0 0 100
12 Public road light tax 0 0 100 0 100
13 Land and Building tax 10 16.2 64.8 0 91
14 Betterment tax 0 0 100 0 100
15 Other regional tax 0 0 100 0 100
Regional tax
16 Regional retribution 0 0 100 0 100
17 Building license permit 0 0 100 0 100
18 Other regional retributions 0 0 100 0 100
Regional
retribution
Source: Law No.33/2004, Law No. 28/2009, and Government Regulation PP No. 55/2005.
By using the formula stated in Table 3.5, the accumulation of fiscal contribution of PT NNT to
central and regional budgets during 2005-2012 can be traced. The result is presented in
Table 3.6 Figure 3.7. Total payment of PT NNT amounted to about Rp 31.85 trillion. The
payment to central government alone was about Rp 31.55 trillion or on average about 0.4%
of domestic revenue of central budget.
Figure 3.7 shows that about Rp 9.55 trilion of Rp 31.55 trilion is spent by central government
for regional expenditure, such as DAU, DAK, etc9. While central government developed a
fiscal distribution formula with the intention to reduce disparity among regions, the result
however shows that NTB region only received Rp 2.02 trillion (22 percent), while other
regions (provinces) across Indonesia enjoyed the rest of Rp 7.52 trilion (78 percent). Looking
more detail, during 2005-2012 the producing region (NTB, KSB, and other regencies/cities in
9 The figures presented in this part of analysis are estimated figures based on the fiscal model. The actual
figures may differ from the estimated ones.
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NTB) received about Rp 675 billion, Rp 703 billion, and Rp 638 billion respectively from PT
NNT fiscal contribution.
Table 3.6
PT NNT Fiscal Contribution to Central and Regional Budgets, 2005-2012 (Rp billions)
Source: PT NNT (2013)
Figure 3.7
The Accumulation of PT NNT Fiscal Contribution, 2005-2012 (Rp billions)
Source: LPEM-FEUI calculation, 2013
At regional level, the contribution of PT NNT fiscal payment to NTB budget was ranging from
4.2–9.9 percent during 2005-2012. On average it was about 7 percent of NTB budget (Figure
3.8). While the fiscal contribution of company to KSB budget was higher, ranging from 10.7 –
59.9 percent, or 24 percent in average during the same period (Figure 3.9).
NO. Description 2005 2006 2007 2008 2009 2010 2011 2012 2005-2012
IPTNNT Payments to Central and Regional
Govts1,163.34 1,444.33 2,621.79 4,575.53 3,931.52 8,512.99 8,080.53 1,524.02 31,854.05
II Domestic Revenue in APBN 1,162.18 1,406.57 2,587.23 4,507.11 3,897.74 8,480.40 8,041.86 1,466.99 31,550.07
III Regional Transfer/ Expenditure in APBN 427.5 513.8 872.6 1,127.3 1,328.5 2,434.1 2,312.4 530.4 9,546.7
IV Revenue in APBD of NTB Region*) 198.2 202.3 224.3 231.5 314.7 354.3 296.1 194.9 2,016.4
V
Revenue in APBD of other province in Indonesia
**)230.5 349.3 682.9 964.2 1,047.6 2,112.4 2,054.9 392.5 7,834.3
VI Revenue in APBD NTB Province 45.0 73.4 75.6 103.7 93.3 97.4 93.3 93.2 675.0
VII Revenue in APBD of Kab. Sumbawa Barat 83.7 71.2 79.0 68.0 114.4 123.2 100.5 63.0 703.1
VIII
Revenue in APBD of other Reg/city in NTB
Province69.5 57.6 69.7 59.8 107.0 133.6 102.3 38.8 638.3
*) Consolidated for NTB Region (Province + Regency/City)
**) Consolidated for regions outside NTB (Province + Regency/City)
NO. Description 2005 2006 2007 2008 2009 2010 2011 2012 2005-2012
IPTNNT Payments to Central and Regional
Govts1,163.34 1,444.33 2,621.79 4,575.53 3,931.52 8,512.99 8,080.53 1,524.02 31,854.05
II Domestic Revenue in APBN 1,162.18 1,406.57 2,587.23 4,507.11 3,897.74 8,480.40 8,041.86 1,466.99 31,550.07
III Regional Transfer/ Expenditure in APBN 427.5 513.8 872.6 1,127.3 1,328.5 2,434.1 2,312.4 530.4 9,546.7
IV Revenue in APBD of NTB Region*) 198.2 202.3 224.3 231.5 314.7 354.3 296.1 194.9 2,016.4
V
Revenue in APBD of other province in Indonesia
**)230.5 349.3 682.9 964.2 1,047.6 2,112.4 2,054.9 392.5 7,834.3
VI Revenue in APBD NTB Province 45.0 73.4 75.6 103.7 93.3 97.4 93.3 93.2 675.0
VII Revenue in APBD of Kab. Sumbawa Barat 83.7 71.2 79.0 68.0 114.4 123.2 100.5 63.0 703.1
VIII
Revenue in APBD of other Reg/city in NTB
Province69.5 57.6 69.7 59.8 107.0 133.6 102.3 38.8 638.3
*) Consolidated for NTB Region (Province + Regency/City)
**) Consolidated for regions outside NTB (Province + Regency/City)
31,854 31,550
9,547
2,016
7,834
675 703 638
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Pembayaran PTNNT
ke Negara dan
Daerah
Penerimaan Dalam
Negeri APBN
Transfer/Belanja
Daerah dalam APBN
Penerimaan APBD
Wilayah Provinsi
NTB*)
Penerimaan APBD
Wilayah Lain di
Indonesia **)
Penerimaan APBD
Provinsi NTB
Penerimaan APBD
Kab. Sumbawa Barat
di Prov. NTB
Penerimaan APBD
Kab/Kota Lain di
Prov. NTB
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Figure 3.8
PT NNT’s Fiscal Contribution to NTB budget, 2005-2012 (Rp millions and percent)
Source: LPEM-FEUI calculation, 2013
Figure 3.9
PT NNT’s Fiscal Contribution to KSB budget, 2005-2012 (Rp millions and percent)
Source: LPEM-FEUI calculation, 2013
From producing region perspective, the percentages of fiscal contribution to NTB and KSB
budgets from the total fiscal payment accumulation from 2005-2012 paid by the company
were 2.11 percent and 2.21 percent respectively. Some say that fiscal payment returned to
producing regions are very small. While at the same time local people believe that
company’s fiscal contribution is very huge. The discrepancy between expected and actual
contribution has not been publicly discussed.
45
73 76
104
93 97
93 93
8.5
9.9 8.8
9.9
7.9 7.7
5.5
4.2
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
-
20
40
60
80
100
120
140
2005 2006 2007 2008 2009 2010 2011 2012
(%)
(Rp
. M
ilia
r)
Kontribusi Fiska (Rp. Miliar)l Share (%)
84
71 79
68
114
123
101
63
59.9
32.5
26.4
19.7
28.8 28.7
19.0
10.7
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
-
20
40
60
80
100
120
140
2005 2006 2007 2008 2009 2010 2011 2012
(%)
(Rp
. M
ilia
r)
Kontribusi Fiska (Rp. Miliar)l Share (%)
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3.3. CSR CONTRIBUTION OF PT NNT
PT NNT commits to contribute on community development especially for people living
surrounding the mining activities and PT NNT believes that taking part on social
responsibility is important to do their business. Hence PT NNT developed the Strategic Plan
of Community Development Program. First phase of strategic plan was done for period 2005
– 2009, and it is continued to the second phase of Strategic plan 2009 - 2013. The program
focuses on three subdistricts. Those subdistricts are Maluk, Sekokang and Jereweh. The
vision and mission of community development program of PT NNT is shown in Box 1 below.
Box 1
Community Development Program Strategic Plan (2009-2013)
Vision: Develop a healthy, smart, self-sufficient, prosperous and religious community.
Mission:
1. Improve the quality of health human resources.
2. Improve the quality of smart and productive human resources.
3. Encourage and facilitate the creation of business opportunity and community
economic activities.
4. Develop the natural potential of the area to an optimal, competitive and
sustainable level.
5. Develop art, cultural and religious values in the effort of attaining a
harmonized civil society.
Source: “Social Impact Assessment – Batu Hijau Project Sumbawa Indonesia”, PT NNT and AMEC
Geomatrix, 2010
To implement the missions, based on the presentation from community development
(comdev) PT NNT (2013) the community development programs focuses on five main sectors
namely health sector, education sector, business of economy sector, agriculture, fishery and
tourism sector and religion, social and cultural sector. The program was planed based on
participatory method. To do those programs PT NNT involved the local government, NGOs,
contractors and consultants, universities and schools and also community groups/societies.
PT NNT has allocated large amount of fund for community development program. Table 3.7
shows that during 2000 – 2012, PT NNT has spent US$ 107.4 million or US$ 8.3 million per
year in average.
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Table 3.7
PT NNT Spending for Community Development, 2006-2012 (in thousands US$)
Source: PT NNT (2013)
Table 3.8
PT NNT Spending for Community Development, 2006-2012 (percent)
Source: PT NNT (2013)
Infrastructures development receives the highest portion of PT NNT community
development spending (Table 3.8). The total share of infrastructure expenditure in PT NNT’s
community development from 2006 – 2012 was about 38 percent compared to capacity
building that only received 19 percent. The high percentage of infrastructure expenditure
has created criticism. The company is expected to allocate more fund for capacity building,
preparing the local community to participate in economic activities created by PT NNT and
also to deal with post mining era. It is local government’s role to finance infrastructure
development, not the company. However, PT NNT argued that infrastructure development is
important since it could create access for local people to education, health, and
transportation. Furthermore, local government is lack of funding ability to finance local
infrastructure projects due to limited budget.
The infrastructures development in comdev programs could in fact stimulate additional
economic impact to the local economy through construction sector, thus creating additional
job. This study, however, does not estimate the employment generation due to
infrastructure development in comdev programs.
Based on the presentation from community development of PT NNT (2013), the progress of
the CD programs in 2012 is more than 90% and the program has some good achievements.
Type of works 2006 2007 2008 2009 2010 2011 2012Total
2000-2012
Infrastructures 1,769 1,731 1,832 2,430 5,387 12,703 3,566 41,117
Capacity Building 1,167 1,176 1,587 1,415 2,599 5,946 2,873 20,345
Contribution/donation 1,102 925 1,316 749 1,171 2,918 11,694 24,140
Operational cost 1,621 1,842 2,059 1,538 1,946 2,155 6,227 21,837
Total in thousand US$ 5,660 5,675 6,796 6,133 11,104 23,724 24,361 107,440
Type of works 2006 2007 2008 2009 2010 2011 2012Total
2000-2012
Infrastructures 1,769 1,731 1,832 2,430 5,387 12,703 3,566 41,117
Capacity Building 1,167 1,176 1,587 1,415 2,599 5,946 2,873 20,345
Contribution/donation 1,102 925 1,316 749 1,171 2,918 11,694 24,140
Operational cost 1,621 1,842 2,059 1,538 1,946 2,155 6,227 21,837
Total in thousand US$ 5,660 5,675 6,796 6,133 11,104 23,724 24,361 107,440
Type of works 2006 2007 2008 2009 2010 2011 2012Total
2000-2012
Infrastructures 31.26% 30.51% 26.97% 39.62% 48.51% 53.55% 14.64% 38.27%
Capacity Building 20.62% 20.73% 23.36% 23.08% 23.41% 25.07% 11.80% 18.94%
Contribution/donation 19.47% 16.30% 19.37% 12.21% 10.55% 12.30% 48.00% 22.47%
Operational cost 28.64% 32.46% 30.31% 25.09% 17.53% 9.08% 25.56% 20.33%
Type of works 2006 2007 2008 2009 2010 2011 2012Total
2000-2012
Infrastructures 31.26% 30.51% 26.97% 39.62% 48.51% 53.55% 14.64% 38.27%
Capacity Building 20.62% 20.73% 23.36% 23.08% 23.41% 25.07% 11.80% 18.94%
Contribution/donation 19.47% 16.30% 19.37% 12.21% 10.55% 12.30% 48.00% 22.47%
Operational cost 28.64% 32.46% 30.31% 25.09% 17.53% 9.08% 25.56% 20.33%
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The key performance indicator of PT NNT community development program is presented in
Table 3.9. In health sector, PT NNT claims that the program done by CD program contributes
to reduce malaria incident rate. In education sectors, PT NNT states that the study assistance
program for students on junior secondary level and senior secondary level has contributed
to increase graduation rate. Besides there was IDR 18 billion scholarship fund distributed to
3,242 students. Furthermore PT NNT also built some health and education infrastructures
such as drainage, clean water facility, some community health centre and schools.
Table 3.9
The Five Years Goal Indicator of Success
Source: PT NNT (2013)
In agriculture sector, the intensification program using SRI (System of Rice Intensification)
method done in 10 villages in three targeted districts has resulted in the increasing rice
production from 4.59 ton per hectare in 2005 to 6.40 ton per hectare in 2012. Infrastructure
of irrigation built by PT NNT also supported the improvement of agriculture productivity. In
business sector, PT NNT has stimulated the growth of SMEs in KSB and NTB. From 2001 to
2012 PT NNT spent USD 313,318,000 for procurement to the local vendors and contractors.
Major Field Indicators of Success 2013 Target 2012 Progress
Health Numbers of malnutrition children in Sekongkang, Maluk, Jereweh,
monthly average
<1% 0.33%
Numbers of people with clean and healthy behaviour in 15 RT > 90% 89.19%
Malaria SPR in Sekongkang, Maluk, Jereweh < 2% 1.47%
Education Graduation rate at Junior High School level in KSB 85% 99.66%
Graduation rate at Senior High School level in KSB 80% 99.90%
Graduation rate at Vocational School level in KSB 80% 99.66%
Enrollment rate at Elementary School level in KSB *) n/a 99.68%
Enrollment rate at Junior High School level in KSB*) n/a 96.79%
Enrollment rate at Vocational and Senior High School level in KSB*) n/a 75.39%
Economy Income per capita at Sekongakng, Maluk, Jrwh (/day) Rp30,000 Rp35,742
Employment Rate in Sekongkang, Maluk, Jereweh (%) >90% 93.21%
Omzet/capita/month of local SME labor under NNT supervision
(xRp1000)
1,000 901
Agriculture, Marine, and Tourism
Farm income (xRp1000/HH/month) 1,500 1,163
Fisheries income (xRp1000/HH/month) 1,500 1,733
Growth of tourism arrival (/th) 20% -
Religion and Social-Culture
Number of preserved NTB traditional culture 3 -
Religious conflict 0% 0%
Major Field Indicators of Success 2013 Target 2012 Progress
Health Numbers of malnutrition children in Sekongkang, Maluk, Jereweh,
monthly average
<1% 0.33%
Numbers of people with clean and healthy behaviour in 15 RT > 90% 89.19%
Malaria SPR in Sekongkang, Maluk, Jereweh < 2% 1.47%
Education Graduation rate at Junior High School level in KSB 85% 99.66%
Graduation rate at Senior High School level in KSB 80% 99.90%
Graduation rate at Vocational School level in KSB 80% 99.66%
Enrollment rate at Elementary School level in KSB *) n/a 99.68%
Enrollment rate at Junior High School level in KSB*) n/a 96.79%
Enrollment rate at Vocational and Senior High School level in KSB*) n/a 75.39%
Economy Income per capita at Sekongakng, Maluk, Jrwh (/day) Rp30,000 Rp35,742
Employment Rate in Sekongkang, Maluk, Jereweh (%) >90% 93.21%
Omzet/capita/month of local SME labor under NNT supervision
(xRp1000)
1,000 901
Agriculture, Marine, and Tourism
Farm income (xRp1000/HH/month) 1,500 1,163
Fisheries income (xRp1000/HH/month) 1,500 1,733
Growth of tourism arrival (/th) 20% -
Religion and Social-Culture
Number of preserved NTB traditional culture 3 -
Religious conflict 0% 0%
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Chapter 4
SURVEY RESULTS
4.1. STAKEHOLDER INTERVIEWS
4.1.1. Economic Aspects
Despite so many economic contributions of PT NNT to the local economy, Bappeda of KSB
said that the economic benefit did not stay in KSB10
. He suspected that regional leakage has
occurred in KSB, i.e. the economic benefit of PT NNT went to other regions. He estimated
that only 5% economic benefit stays in KSB.
Bappeda already identified several factors that contributed to regional leakages, among
others are:
a. Lack of PT NNT’s backward and forward linkages with local economic sectors
Most of PT NNT inputs are imported from other regions and the concentrate produced
is exported. It means that there is no linkage with local economic sectors. While
forward linkage is not possible due to the exported copper concentrate, backward
linkage of PT NNT activity with local economic sector is expected.
b. Wage and salary spent in KSB is relatively small
Wage and salary is payment to input factor which is labor. It is one component of GDP
from income approach. Theoretically, spending of wage and salary locally will
stimulate the local economy. Bappeda KSB estimated that only 34% of PT NNT current
workers are KSB residents who spend their wage and salary locally. The remaining 66%
will potentially spend their wage and salary outside KSB, thus creating regional
leakage.
c. The extractive industry surpluses go out of the KSB region
Other component of GDP from income approach is surplus received by the company
for entrepreneurship. In the input-output table, surplus is translated as profit. In this
case, profit will be enjoyed by the company and distributed to the shareholders. The
majority of shareholders of PT NNT are foreign companies and non KSB companies.
Therefore the surpluses of extractive industry will go out of KSB region.
10 Based on the interview with the Head of Bappeda of KSB
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d. Tax revenues mostly go to central government
Tax revenues could be used to finance government programs. The important and high
valued taxes are collected by central government (see Table xx). They include profit
tax, individual income tax, corporate tax, and value added tax.
Bappeda has been thinking of how to solve these regional leakage problems and take more
benefit from PT NNT. First, concerning the local economic sector involvement in PT NNT, the
most promising sector is agriculture, since other sectors in KSB have not developed yet.
Agriculture is the second largest contributor to GRDP of KSB and expected to be able to
supply the need for agricultural products of PT NNT. However there has to be serious and
continuous effort to develop the sector, since continuity and quality of local supply to PT
NNT are still the major issues.
Staple food in KSB –such as rice, maize, and sweet potato- is currently adequate. In some sub
districts rice consumption is larger than production. However, horticultural products are
quite limited. Some horticultural products like fruits and vegetables are rarely grown locally.
Plantation product is dominated by coconut and cashew nuts. Local people raise cows,
buffalo, goat and horses. They also catch fish in the sea. Pedigree chicken is not so popular
until it has just recently been opened. It seems that agricultural sector requires a further
boost.
Secondly, to increase the wage and salary locally, the KSB government has issued Bupati
Regulation Perbup No.9/2010 on the policy to employ local residents. The regulation said
that PT NNT and its contractors should hire KSB residents at least 50% of their total workers.
The regulation is implemented by coordination with PT NNT. There is no explicit punishment
if the company could not accomplish the target.
The local government declares that Local Economic Development Plan of KSB has been
developed through cooperation with several institutions, such as PT NNT, CPR-Indonesia,
and PSP3 IPB. The strategy is directed toward the development of: (i) micro scale agri
business, (ii) micro scale non agri business, (iii) small enterprises, (iv) small medium
enterprises (SME) in ecotourism, and (v) Green SME.
For local economic sustainability post mining closure, local government has developed the
Master Plan of Community Based Area Development in the Year 2010-2014. The plan
specifies 6 packages to accomplish the objectives:
a. Policy package, which consists of (i) blue print of KSB local economic development, (ii)
community empowering institution, (iii) marine culture and coastal area, (iv)
optimizing forest area use for low emission(REDD)
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b. Human resource package, which consists of (i) community empowerment etos, (ii)
entrepreneurship design and strengthening education
c. Business package, directed toward (i) seaweed, (ii) shrimp pond, (iii) SME in
food/animal husbandry, (iii) agro forestry industry based on rattan and ecotourism.
d. Financing packages, aimed at micro and small scale business, and investment in
business and industry,
e. Cluster development package, intended for (i) export oriented sales, (ii) household
based partnership and cooperation, and (iii) infrastructure
f. Management package, in the form of (i) central management office in 3 locations, and
(ii) Expert workshop.
4.1.2. Employment Aspect
There is no economic sector that can employ new labor force that come into market in KSB,
since the economy has not developed yet. Their only hope is working for PT NNT that is seen
as big company in KSB. Every student graduated from high school thinking of working in PT
NNT. Bappeda estimated that the growth of labor force is 0.55 percent per year.
In the mean time non mining wage is very uncompetitive compared to mining wage. The
wage in non mining activity is Rp 30.000/personday, while wage in mining activity is Rp
75.000/personday. It almost two times the difference. Therefore, it is unattractive for
younger generation to work in non mining activity, such as agriculture sector.
There is also concern on income disparities in the community due to PT NNT operation. A
general perception has also been formed that financial status of PT NNT and PT NNT
contractor workers is better compared to other occupation. This creates jealousy and at the
same time pressure to work in PT NNT.
To lift the pressure on the obligation of PT NNT to recruit local labor, a strategy should be
employed. One strategy is through community empowerment by providing training given in
Balai Latihan Kerja (BLK/Vocational Training center). The curriculum for the training is
adjusted so participant may become PT NNT worker or independent worker. However, Local
Labor Office said that this strategy has not been effective yet, since the BLK is built in wrong
location (by the sea).
Local Labor Office also urges PT NNT to apply one door policy when recruiting local worker.
Both of them form an institution called Batu Hijau Recruitment Committee (BHRC). This
institute is managed by Human Resource Division of PT NNT and supervised by Local Labor
Office in the process of local recruitment. The decision to hire local worker should be
approved by Local labor Office.
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As already mentioned, at the same time local government issued Regulation Perbup
No.9/2010 on the policy to employ local residents. The regulation said that PT NNT and its
contractors should hire KSB residents at least 50% of their total workers. While the spirit is
understandable, the regulation seems to be not effective. First, there is no explicit
punishment by violating the regulation, since local government prefers to prioritize
communication and negotiation on the implementation of the regulation. Secondly, the
regulation said that who is meant by local resident is people who already live in KSB for 5
years. If the definition is literary translated, then it must be more than 50% of current worker
of PT NNT are KSB resident. Thus, PT NNT already complies with the regulation.
There is also issue of low capacity of business actors in KSB, both at individual and
institutional level. Most individual business actor is in the stage of trial and error, while
business institutions in KSB mostly are co-op, CV, and PT that need empowerment and
coaching. Government regulation to empower these business actors has not been effective
either. For example, local government has issued Bupati Regulation Perbup No.5/2010 that
provides economic stimulus to local business actor by establishing cooperation between
government and banking sector. However the result is not there yet.
Due to the nature of commodities supplied and the capability of the companies to supply PT
NNT, the procurement spending of PT NNT in 2012 was about 50 percent from foreign
companies (Figure 4.1). About 47 percent was procured from national company located
outside NTB, whereas 2 percent was from KSB and 1 percent was from NTB.
Figure 4.1
Procurement Spending of PT NNT in 2012 (percent)
2% 1%
47%
50%
KSB NTB non KSB National Off-shore
Source: PT NNT, 2013
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Purchases that were made locally in KSB dan NTB provinces have the same characteristic,
they are small scale general services which can be easily found locally, such as vehicle
vendors, general contractors, general procurement, employment agencies, printing and
advertisement agency, office supply/equipment, limestone quarry, and transportation
services.
While purchases made from other regions (nationally) is mostly for specific products that
can not be produce/found locally, such as coal, heavy equipment, iron and steel foundry,
mining equipment, fuel provider (PT Pertamina), medical evacuation, survey instruments,
etc.
4.1.3. Fiscal Aspect
When discussing PT NNT in KSB, it should be understood that it administratively involves
three levels, i.e. central government, provincial government, and district government (KSB).
Since PT NNT has a contract with central government, the obligation related to fiscal terms is
largely directed to central government.
Bappeda identifies potential additional revenue for KSB budget. For example, corporate tax
which 100 percent collected by central government. The local government seems to be
interested to take some shares from this tax revenue. Secondly, the role of local government
has been acknowledged in the Law No 4/2009 on Minerals and Coal which give authority to
local government to issue mining permit. Third, KSB government demands higher
percentage of allocation fund from NTB government when discussing regional budget
allocation. Since KSB GRDP contributes 26 percent of NTB GRDP, government of NTB should
apply affirmative policy for KSB.
The government of KSB is pleased that they currently have shares in PT NNT, by joining
consortium of PT Daerah Maju Bersaing (PT DMB). It means that the regional government
will receives part of the surplus. In 2009 three regional governments as members of the
consortium received US$ 38 millions as share compensation. The fund is distributed 40% for
NTB, 40% for KSB, and 20% for Sumbawa.
KSB government and PT NNT cooperate in managing the fund for local empowerment
program. KSB provides the fund and PT NNT evaluates business proposal sent by local
entrepreneur to be financed. The fund is called DPPM (Dana Pengembangan dan
Pemberdayaan Masyarakat) or Community Development and Empowerment Fund.
Last year KSB also received grant from PT NNT valuing US$ 9 million in metal scrap. The grant
is recorded and added as additional revenue to the KSB budget.
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Having understood the important role of direct expenditure in stimulating the economy,
Bappeda also tries to allocate more budget to indirect expenditure. Currently the allocation
of direct and indirect expenditures ranges between 35-40 percent and 60-65 percent,
respectively. For example, if the budget of KSB is Rp 661 billion, then indirect and direct
budget would be Rp 280 billion and Rp 380 billion or 42 percent and 58 percent respectively.
In the mean time, the local government offices (SKPD) demand Rp 2 trillion for financing
their programs. Bappeda has to allocate budget wisely on local programs that stimulate the
economy.
4.2. SUPPLIER’S SURVEY
To verify the model estimation and stakeholder interview, this study conducted a small
survey to the vendors or suppliers of PT NNT in NTB. The objective of the survey is mainly to
verify a pattern of local content and local job creation generated by the vendors and their
supplier.
The respondents are divided into three categories (Figure 4.2), i.e. (i) the vendor that
directly supply goods and services to PT NNT; (ii) layer 1 respondent which is the
supplier of PT NNT’s vendor, and (iii) layer 2 which is the supplier of layer 1
respondent. The source of data on vendor is provided by PT NNT, while layer 1 and
layer 2 respondents are generated directly from the interview with the vendor.
Figure 4.2
Type of Survey Respondents
Source: LPEM-FEUI Survey 2013
The survey took sample of vendor and their suppliers in KSB, Mataram city and West Lombok
District which represent the impact of PT NNT in NTB region (local economy). The total
respondents are 39 companies. Sometimes vendor respondent does not want to share
information on layer 1, since it is confidential. As the result, only small number of layer 1 and
layer 2 respondents could be obtained. The distribution of respondent by location and type
of respondent is presented in Table 4.1.
PT NNT
Vendor/
Supplier
Supplier of
Vendor
(layer 1)
Supplier of
supplier
(layer 2)
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Table 4.1
Distribution of Respondent by Location and Type
Survey Location
KSB
Mataram
City
West
Lombok
Total
14 11 0 25 Vendor
56% 44% 0% 100%
7 4 1 12 Layer 1
58% 33% 8% 100%
1 1 0 2
Type of
Respondent
Layer 2 50% 50% 0% 100%
22 16 1 39 Total
56% 41% 3% 100%
Source: LPEM-FEUI Survey 2013
Based on the year of established, 75 percent respondents in Mataram city have started
before year 2000 (Table 4.2). Those respondents already operated before PT NNT started its
operation in 2000. However, 82 percent of respondents in KSB were established after the
year 2000. It means that the respondents in KSB have strong correlation with PT NNT which
started to operate in 2000. Even 37 percent of the respondents in KSB just established after
year 2008.
Table 4.2
Year of Established of Respondents
Year of Establishment
< 2000 2000 - 2008 > 2008
Total
KSB 4 10 8 22
Mataram City 12 3 1 16 Survey
Location West Lombok 1 0 0 1
Total 17 13 9 39
Source: LPEM-FEUI Survey 2013
Most of respondents surveyed are not only specialized in one type business. Some of them
provide two or more type of business. Table 4.3 presents type of business of the
respondents. The highest type of business is in trading which accounts about 37 percent of
the respondents. It is then followed by services (31 percent), production (22 percent), and
agriculture (10 percent).
Table 4.3
Respondent’s Type of Business
Type of business
Trading Services Production
Agriculture/
Animal
production
Total
Vendor 12 16 7 1 36
Layer 1 5 0 4 4 13 Type of
Respondent Layer 2 2 0 0 0 2
Total 19 16 11 5 51
Source: LPEM-FEUI Survey 2013
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Table 4.4 presents the origin of worker of respondents. Total respondents employ 98 percent
of their worker from NTB province in which 40 percent of worker from KSB. Only 2 percent
of workers are originated from other province. This pattern is also found from respondent by
type. Approximately between 96 – 100 percent of worker of respondent are from NTB
Province. It means that PT NNT created local employment for local worker within the
province significantly. It does not necessarily in the mining sector, but also in other sectors in
the economy.
Table 4.4
Percentage of Workers Origin by Respondent
Worker’s Origin
KSB NTB
Other
Province Foreign country
Total
Vendor 39% 59% 1% 0% 100%
Layer 1 30% 66% 4% 0% 100% Type of
Respondent Layer 2 76% 24% 0% 0% 100%
Total 40% 58% 2% 0% 100%
Source: LPEM-FEUI Survey 2013
Source of input used in the production process of respondent is presented in Figure 4.3.
About 67 percent of production input of the respondent is from NTB province, in which 26
percent is specifically from KSB. Production inputs used from KSB are generally from (i)
quarrying and construction materials, such as sand, brick, etc.; and (ii) agricultural products,
such as woods, seeds, and manure. These kinds of products are available locally in KSB.
Figure 4.3
Source of Input of Respondents
41.2%
31.2%
1.2%
26.5%
KSB NTB non KSB Other Provinces Others
Source: LPEM-FEUI Survey 2013
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Some illustrations on the outputs of respondents and their input sources are presented in
Table 4.5. For some specific outputs, such as safety equipments and building materials, the
inputs definitely come from other regions outside NTB, since the local economy could not
produce those inputs, such as helmed, wearpack, shoes, and building materials. However for
food services, the inputs should have been produced by local sources/economy, such as rice
and fruits. In fact, some of these products are still imported from other regions outside NTB.
Table 4.5
The outputs of respondents and their input sources
Source: LPEM-FEUI survey, 2013
Goods and Services produced by respondents
input from KSB inputs from NTB inputs from other region outside NTB
Brick Sand, woods, hoe clay sand
Limestone heavy equipment rental, fuel fuel
Fruits fertilizer fertilizer plastic bag
Roof tile clay Clay, coconut fiber
Wood trader wood wood
Construction services Sand, brick Cement, sand, brick
Ferilizer: compost terpaulin processing pot
Food services Vegetables, fruit, rice vegetables Fruit, rice
Building material sandSteel, sand, plat, cement Steel, plat, cement
Furniture tools Wood, tools Wood, tools
Paving block Sand, wood sand Cement, wood
Trading services: livestock knife Cow, cement, knife Cow, cement
Safety EquipmentHelmet, wearpack, shoes
Helmet, wearpack, shoes
Cow cow cow
Fish supplier Fish, vessel fish, vessel fuel
Employment agency Labor Labor Labor
Brick Sand, wood cement
House Keeping services Labor labor
Construction services Cement, labor, sand, brick fuel
General contractor LaborLabor, project material project material
Nursery Seed Fertilizer, plastic pot
Goods and Services produced by respondents
input from KSB inputs from NTB inputs from other region outside NTB
Brick Sand, woods, hoe clay sand
Limestone heavy equipment rental, fuel fuel
Fruits fertilizer fertilizer plastic bag
Roof tile clay Clay, coconut fiber
Wood trader wood wood
Construction services Sand, brick Cement, sand, brick
Ferilizer: compost terpaulin processing pot
Food services Vegetables, fruit, rice vegetables Fruit, rice
Building material sandSteel, sand, plat, cement Steel, plat, cement
Furniture tools Wood, tools Wood, tools
Paving block Sand, wood sand Cement, wood
Trading services: livestock knife Cow, cement, knife Cow, cement
Safety EquipmentHelmet, wearpack, shoes
Helmet, wearpack, shoes
Cow cow cow
Fish supplier Fish, vessel fish, vessel fuel
Employment agency Labor Labor Labor
Brick Sand, wood cement
House Keeping services Labor labor
Construction services Cement, labor, sand, brick fuel
General contractor LaborLabor, project material project material
Nursery Seed Fertilizer, plastic pot
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Chapter 5
SOCIO ECONOMIC ANALYSIS
As extractive industry presence ‘dominates’ local economy and surpasses the role of regional
government, local expectations to the company in managing natural resources and relation
with local community surrounding mining area has increased. These expectations are at least
motivated by two aspects. First, mining activity has a potential damage to the environment
that may affect local community. Therefore managing natural resources responsibly and
sustainably and maintaining a good community relation should become the main priority of
company. Secondly, increasing domestic and international pressure groups in monitoring
mining practices and conflicts demand an active role of the company to respond
appropriately.
In the mean time, local community feels that they directly bear the negative impact and only
obtain little benefit from mining activity, especially related to employment where local
workers may have been less hired by the company due to capital-intensive nature of the
industry. This chapter will review some socio-economic impacts of PT NNT mining activities
to local economy/community, especially in KSB. The materials have been summarized from
in-depth interview with stakeholders and some previous studies on the issues.
5.1. SOCIO-CULTURAL CHANGES
PT NNT presence has obviously brought good and bad cultural changes in terms of values
and norms of local community. Values are beliefs that guide people’s life, while norms are
rules how people should conduct (code of conduct). Changes in norm occurred at individual
as well as community levels.
Company’s presence has an impact on changes in community values, especially in economic
ones. For example, industrial culture brought by the company has increased how community
valued their land higher than before, especially in areas related directly or indirectly to
mining activities. The land value increase is caused by the expectation that the opportunity
cost of land for agriculture uses is lower than that of (mining) industry.
Industrial culture also causes an increasing wage. It is supported by the expectation that
wage in industrial sector is higher than other sector (such as in agricultural sector). New
value also emerges that payment for labor should be in terms of monetary values (wage)
which once may be paid in kind. It should be acknoweldged that these facts are also driven
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by massive information and new culture. However, it can not be denied that the company
presence is the main triger and accelerating the value changes.
Industrial transformation has also driven mobilization from agricultural sector to industrial
(mining) sector. This is caused by the belief that working industrial sector is more prestigious
and rewarding. This fact produces an impact that new generation start leaving the old
tradition of working in agricultural and forestry sectors. This is also accelerated by the fact
that agriculture land decreases caused by land conversion which seek higher return.
At the same time, the behavioral changes also happened in consumption pattern. Increasing
income is followed by less expenditure for food and more on non food consumption, i.e.
tertiary goods such as motorcyles (LPEM-FEUI 2007 and AMEC Geomatrix, 2010).
Entertaining services then grows around mining area to cater consumption pattern changes,
such as restaurant, hotel, café, bar, etc. While these establisment enjoy the economic benefit
from company presence, they have disturbed traditional cultural value which give negative
stigma, especially from religious perspective professed by the majority of the community.
The company presence also changes levels of cooperation and conflict in the region. LPEM-
FEUI (2007) reported that level of cooperation in local community surrounding mining area is
quite good. However, the cooperation between the company and local community based on
social status tends to benefit middle-high income group of the community (village elite
group). The company usually uses village elite group to approach local community for
community development programs. Therefore, this village elite grup may benefit individually
and/or their communities (see also Welker, 2007).
Socio-cultural impact that has been directly felt by local community after the company
presence is the jealousy among community members (LPEM-FEUI, 2007 and AMEC
Geomatrix, 2010). There are at least two factors creating social jealousy. First, elite group
due to their position could tap greater opportunities from the company related to job
recruitment information and funding for program implementation. Second, some
community members are recruited by the company. As company workers, they received
relatively high fixed income compared to local standard and are guaranteed a decent living.
The income inequality between the company workers and other community members
clearly appeared from their homes, lifestyles, consumption pattern, etc. Social jealousy
among community is at least sourced from income inequality.
Social jealousy also emerges among subdistrict levels. As already set by the standard
operating procedures, community development program of the company are focused on the
areas surrounding mining operation, meaning only three subdistricts of Maluk, Sekongkang,
and Jereweh. Substantial amount of fund has been allocated for comdev programs in these
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subdristricts. The results are better infrastructures, health, education, and economic
opportunities compared to other subdistricts in KSB. These facts create a demand for equal
treatment of the company by the other subdistricts. Even the Bupati once said that the
comdev programs should be better coordinated with local government programs.
The LPEM-FEUI report (2007) also stated that conflict was rarely happened in mining area.
Perception survey found that 24 percent of respondents said that conflict frequently
occursed in his/her area against 76 percent who said there was no conflict in his/her area.
The conflict occurred due to interaction between local community and the company, and
interaction among community members (horizontal conflicts). The top three sources of
conflict between company and local community are caused by lack of PT NNT contribution
to village development, lack of compensation for (agricultural) land taken over by the
company, and lack of local employment opportunity in the company.
On the others side, there is however good cultural changes due to the company presence
(LPEM-FEUI, 2007). Local community has increased their awareness on the importance of
formal education. Again, this value transformation is the impact of industrial culture,
especially in the areas surrounding mining activities. People clearly begin to understand that
formal education and training could produce skilled labor needed by the industry. Therefore
by attending formal education, they expect to be able to participate in the company as
worker.
5.2. ECONOMIC IMPACT
Mining activities in NTB certainly has an impact at national, regional, and local levels. It
creates additional economic and fiscal impacts, directly through input demand for mining
activities or indirectly or multiplier effect through demand for food and services to meet
mining workers needs.
The economic impact of PT NNT has been discussed in the previous chapter. The analysis
rested on GRDP contribution and employment generation by the company. Yet, some say
that the benefit of employment generation is relatively small in KSB. LPEM-FEUI (2007)
reported that the impact of PT NNT presence in KSB to the employment creation consisted
of two parts. First, PT NNT certainly needs big amount of workers for its operation, including
local workers which has been targeted to 60 percent of total labor as part of corporate social
responsibility. The problem is that few local workers can only be employed due to the
qualification of local workers who are dominated by unskilled-labor and do not match the
company’s qualification. In addition the number of job offered is limited.
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As the result, this employment problem frequently trigers conflict between the company
and local community. In addition, jealousy between those who works and do not work for
the company has become community internal problem which indirectly impact the
relationship between community and company. In an occasion, the company has to accept
the unqualified worker and considered them as reserve workers to lower local labor tension.
This action does not eliminate the problem when these reserve workers demand the same
right with PT NNT workers.
Secondly, PT NNT presence has reduced the access of local community to their livelihood,
due to limited access to the forest, especially those who depend on forest products. People
who used to have an easy access to forest products –such as rattan, enau, wood, etc.- could
not benefit from the forest any more since the forest has became mining area which is
protected by working contract between Government of Indonesia and the company. Some
cases emerge from this problem.
Therefore, small number of employment creation do not necessarily means that the
company do not largely employ local workers, but more on the final result of two forces. The
number of local workers employed by the company is about the same as those who lost
their livelihood.
Another problem on the economic impact is due to lack of backward linkage with local
economy. It does not mean that the company is not aware on this problem. Welker (2007)
stated that dominant wisdom of CSR in mining holds that companies whose presence is
depended on the exhaustible resources must avoid creating relation of dependences of local
people, i.e. they should empower local people. Rather than spending large money on
unsustainable projects and infrastructures, the company should work through
“participatory” mechanism to “empower” people to help themselves towards modest goals
of improved education, agriculture practice, and small enterprises.
Based on those premise, the company launched comdev program on agricultural practices.
However, the programs was not sustainable and not properly designed (LPEM-FEUI, 2007).
For example, fruit planting program was done up to production process only, while the
product marketing was not facilitated. The result was excess of supply. Program participants
were only taught how to produce but not how to market the product. Furthermore, the
most important thing is that the program was not directed to supply the company need for
fruit, while at the same time local content for the company’s input from local economy is still
low.
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The company should extend the program up to coaching stage. It will ensure company’s
target cooperation or small enterprise to be able to meet the rquirements set by the
company in the bidding process. Without coaching, they would lost against more
experienced suppliers. In other word, they would face same level playing field. This kind of
affirmative action is needed to create linkage between the company and local economy.
The company’s CSR also need further criticism. It is shown in the previous chapter that about
38 percent of CSR fund is allocated for infrastructure development while only 19 percent for
capacity building. Following Welker (2007) argument, the practice is against the wisdom of
CSR that avoid large spending on unsustainable projects or infrastructure. She believed that
CSR spending for capacity building will assist local community to better prepare for future
condition, thus creating more sustainable and diversified economy.
However, the company argued that it is good intention of the company to assist regional
government developing infrastructure. Under current Laws, only small fraction of fiscal
contribution paid by the company returned to producing region as revenue budget. In
addition to finance infrastructure development, regional government should also finance
routine expenses, such as civil servant salaries. This creates limited fiscal space in regional
budget to finance infrasructure development. While at the same time local community
expect more infrastructure services as the large company operates in their region. Not
surprisingly, local community sometimes directly asks the company. Regional government
also tries every effort to get extra revenues from the company, central, and provincial
governments. Therefore local community should know that Fiscal Balance Law does not
favor producing region.
Welker (2007) provided another explanation that village elites regard the company as the
potential conduit of modern development. Village elites may mobilize young men, and
sometimes women and children, to demonstrate for mine jobs, contracts for local
businesses, new community infrastructures, and other material flows. Because a one day
mine shut-down would cost severely to the company, village elites can force the company to
respond to their understanding of development and the mine’s social obligation.
However village elite plays a dual role. Despite forcing the company to fulfill their demand,
they also cultivate relations of interdepence with the company by defending it against village
critics as well as external activists who attack the company’s social and environmental
records.
She added further that in response to village elite’s demand, the company has become
primary agent of development in KSB, building, maintaining, or subidizing roads, health
facilities, schools, dam, tourist facilities, mosques, power generators, etc. Thus the company
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is caught between sustainable development trends and the economic rationale that
legitimizes its presence in the region, i.e. acquiring social licence to operate.
From discussion above it is imperative that the long term interest of global investor, central
government, regional government, and local community should be harmonized. Global
investor need a conducive environment in doing business locally to earn sufficient profit.
Central and regional governments’ interests are to have economic and fiscal benefits from
global investor presence to accelerate national development. While local community expect
that they can participate in the economic changes brought by the global investor and
improve their livelihood.
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Chapter 6
CONCLUSION AND RECOMMENDATIONS
6.1. CONCLUSION
a. The economy of NTB and KSB corresponds with PT NNT sales production. An increase
in sales of PT NNT will have positive impact to the economy of NTB Province and KSB,
and vice versa.
b. Mining has dominated KSB economy by contributing more than 90 percent annually
to GRDP since 2000. The same pattern also found in NTB province where mining
sector contributed more than 30 percent in total GRDP. However, NTB begins to
diversify its economy and experiences structural transformation, while KSB still
heavily depends on mining sector.
c. In economic perspective, PT NNT has contributed nationally to national GDP, and
especially regionally to NTB’s GRDP, and locally to KSB’s GRDP. In addition, PT NNT
has also created employment opportunities in 2011 to approximately 57.687 workers
across Indonesia in which 54 percent of the total occurs in NTB province.
d. PT NNT also pays taxes and non taxes to central government and local governments
(taxes and retribution). The taxes and non taxes paid to central government will
become domestic revenue in state budget where part of it will be distributed to local
governments as balancing fund. Furthermore NTB and KSB get additional revenue
from their membership in the PT DMB consortium as shareholder of PT NNT. Thus
there is fiscal benefit received by central and local governments to finance their
development programs.
e. PT NNTs Community Development program within CSR activity has benefit local
people in KSB in terms of infrastructure development, economic, health, and
education status.
f. The domination of PT NNT in KSB economy has been considered as the main job
provider for local employment. At the same time, other economic activities slowly
grow and provide salary lower than mining sector (PT NNT). It makes other sector
unattractive compared to mining sector. Furthermore, from labor perspectives,
working at industrial sector (mining) will leverage their social status compared to
agriculture sector or other non-formal sectors, in addition to higher rewards.
g. In terms of supply chain, local economy is limited by its capacity and capability in
connecting with PT NNT activities.
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h. Social jealousy exists after PT NNT presence among community members (those who
working vs. not working for PT NNT) and subdistricts (around vs. outside mining area)
6.2. RECOMMENDATION
a. Fiscal revenue received from non renewable resource extraction should be invested in
productive sector for future economy. Thus, the improvement of local government in
planning and budgeting becomes important.
b. KSB should focus on strategies on how to develop its economy sustainably based on
its comparative advantage. For example, the operation of PT NNT in KSB should be
considered as an opportunity to diversify its economic sectors, for example improving
agriculture sector to be able to integrate with PT NNT activity. Therefore KSB should
provide continuous efforts to increase the capability of agricultural sector.
c. KSB should not attempt to issue local regulations, i.e. affirmative policies, which may
not be effective and have negative impact to local investment climate.
d. Local education and training should be encouraged to open further opportunities for
local labor to work in other sectors.
e. KSB and PT NNT should foster local entrepreneurship by providing empowerment,
coaching, and business opportunities, so they are able to compete with other non
local companies and meet the requirement set by PT NNT.
f. Comdev programs need redefinition by putting capacity building as the main
objective and avoiding polarization between areas around and outside of the mine
g. A good existing cooperation and communication between Local government and PT
NNT has to be continued and intensified.
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REFERENCES
AMEC Geomatrix. 2010. Social Impact Assessment Batu Hijau Project, Sumbawa Indonesia.
AMEC Geomatrix and PT NNT, Batu Hijau.
Daryanto, Arief and Yundy Hafizrianda. 2010. Analisis Input-Output dan Social Accounting
Matrix: untuk Pembangunan Ekonomi Daerah. IPB Press, Bogor.
Bappeda Kabupaten Sumbawa Barat. 2005. Rencana Pembangunan Jangka Panjang Daerah
(RPJPD) Tahun 2005-2026 Kabupaten Sumbawa Barat Provinsi Nusa Tenggara Barat.
Bappeda Kabupaten Sumbawa Barat, Taliwang.
Bappeda Kabupaten Sumbawa Barat. 2005. Rencana Pembangunan Jangka Menengah
Daerah (RPJMD) Tahun 2005-2010 Kabupaten Sumbawa Barat Provinsi Nusa
Tenggara Barat. Bappeda Kabupaten Sumbawa Barat, Taliwang.
Bappeda Kabupaten Sumbawa Barat. 2011. Rencana Pembangunan Jangka Menengah
Daerah (RPJMD) Tahun 2011-2015 Kabupaten Sumbawa Barat Provinsi Nusa
Tenggara Barat. Bappeda Kabupaten Sumbawa Barat, Taliwang.
BPS. 2012. Kabupaten Sumbawa Barat dalam Angka. Bappeda and BPS Kabupaten Sumbawa
Barat, Taliwang.
___. 2012. Provinsi Nusa Tenggara Barat dalam Angka. Bappeda and BPS provinsi Nusa
Tenggara Barat, Mataram.
Hadi, Agus Purbathin. 2001. Hubungan antara Komunikasi Publik Perusahaan dan Sikap
Komunitas Setempat (Kasus Perusahaan Pertambangan di Nusa Tenggara Barat).
Tesis Master Program Pasca Sarjana Institut Pertanian Bogor.
LPEM-FEUI. 2007. Dampak Ekonomi PT NNT. Laporan Penelitian tidak dipublikasikan
kerjasama LPEM-FEUI dengan PT Newmont Nusa Tenggara, Jakarta.
_________. 2007. Dampak Sosial PT NNT. Laporan Penelitian tidak dipublikasikan kerjasama
LPEM-FEUI dengan PT Newmont Nusa Tenggara, Jakarta.
Malanuang, Lukman. 2009. Model Daerah Berkelanjutan Melalui Transformasi Struktur
Ekonomi Berbasis Sumberdaya Pertambangan ke Sumberdaya Lokal Terbarukan
(Studi Kasus Tambang Tembaga dan Emas Proyek Batu Hijau PT Newmont Nusa
Tenggara di Sumbawa Barat NTB). Disertasi Program Doktor, Program Pasca Sarjana
Institut Pertanian Bogor.
Miler, Ronald E. and Peter D. Blair. 1985. Input-Output Analysis: Foundation and Extensions.
Prentice-Hall, New Jersey.
Lembaga Penyelidikan Ekonomi dan Masyarakat
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Welker, Marina A. 2007. The Rationality of Corporate Social Responsibility in Indonesia.
Mimeo, Cornell University.
______________. 2009. Corporate Security Begins in Community: Mining, the Corporate
Social Responsibility Industry, and Environmental Advocacy in Indonesia. Cultural
Anthropology, Vol. 24, Issue I, pp. 142-179 ISSN 0886-7356.
World Bank and Intenational Finance Corporation. 2002. Large Mines and Local
Communities: Forging Partnership, Building sustainability. World Bank, Washington
DC.
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Appendix
Method of PT NNT Impact Estimation
1. IO and IRIO Analysis
In estimating the economic impact of PT NNT in NTB, this study basically applies a modification of
Input-Output (IO) Analysis. IO analysis is the name given to an analytical framework developed by
Professor Wassily Leontief in the late 1930s, work for which he received the Nobel Prize in Economic
Science in 1973 (Miler and Blair, 1985). It is a method, also known as inter industry analysis that allow
us to:
a. characterized economic activity of a region in a certain time of period
b. predict reaction of a regional economy to stimulation resulting from:
• increased consumption
• changes in government policies (spending, tax policy, etc.)
• market oriented demand changes
• production by given sector
c. provides an important tool to address questions of “economic impact”
Originally, applications of the IO model were carried out at national level. More recently, interest in
economic analysis at the regional level –such as a group of provinces, metropolitan area, etc- has led
to modifications of IO model which attempts to reflect peculiarities of regional (subnational) problem.
Single region model as initially developed represents one approach to modeling a regional economy in
input-output terms. What they fail to do is to recognize in any operational way the interconnections
between regions. For a country made up of several regions, such as Indonesia, a number of important
questions have several–region implications. A production activity of PT NNT in Nusa Tenggara Barat
(NTB) province will have ramification not only within the (NTB) province where the work is done, but
also in other provinces. The total economic effect is therefore likely to be greater than regional effect
in NTB province. Firms outside NTB will produce goods that will be imported to NTB for copper
production; those firms, in turn, may import goods from other provinces for their production.
This study used input output model that attempt to capture these interregional linkages as well as the
regional aspects of production. This is interregional input-output (IRIO) model. Table 1 presents the
framework of IRIO Table.
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Table 1
The Framework of IRIO Table: Two Regions
Intermediate Demand Final Demand
Region A :
Economic Sector
Region B :
Economic Sector
Region-A Region-B Export ROR
Total
Output
1 …… n 1 …… n
Region-A :
Economic
Sect
or
1
…
n
AA
ijX
XijAB
AA
iF
AB
iF
A
iE
A
iX
Intermediate
Inputs
Region-B :
Economic
Sector
1
…
n
BA
ijX
BBij
X BA
iF
BB
iF
B
iE
B
iX
Import ROR MA
jX
MB
jX
MAF
MBF
Total Intermediate Inputs ∑=A
ij
A
j XX ∑=
B
ij
B
j XX
Total Primary Inputs (VA) A
jV
B
jV
Total Input A
jX
B
jX
Source: LPEM-FEUI, 2013
The study used 2005 National IRIO Table published by BPS (National Statistical Office) and Bappenas
(National Planning and Development Agency) in 2006. The original 2005 IRIO table consists of 30
provinces and 35 economic sectors for each province. For simplicity of the analysis, the IRIO Table was
aggregated into 6 regions and 10 economic sectors (Table 2).
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Table 2
Regional and Economic Sector Aggregation of 2005 IRIO Table
Regional Aggregation Economic Sector Aggregation
1 Sumatra NAD, North Sumatra, Riau
Island, Riau, Jambi,
Bengkulu, West Sumatra,
South Sumatra, and
Lampung provinces
1 Agriculture Paddy, other food ingredient
plant, plantation, livestock,
forestry, and fishery
2 Java and Bali Banten, DKI, Jakarta, West
Java, Central Java,
Jogjakarta, East Java, and
Bali provinces
2 Mining: Oil and Gas Mining: Oil and Gas
3 NTB West Nusa Tenggara (NTB)
province
3 Mining: Non Oil and Gas Mining: non Oil and Gas
4 Kalimantan West Kalimantan, East
Kalimantan, South
Kalimantan, and Central
Kalimantan provinces
4 Manufacture Petroleum refining; palm oil
industry; seafood processing
industry; food and beverage
industry; textile and textile
product; footwear industry;
industry of goods timber,
rattan, and bamboo; pulp and
paper industry; rubber and
rubber goods industry;
petrochemical industry;
cement industry; basic iron
steel and base metal non
ferrous industry; metal
product; machinery and
electrical equipment repair
industry; other industry
5 Sulawesi North Sulawesi, Gorontalo,
Central Sulawesi, Southeast
Sulawesi, and South
Sulawesi provinces
5 Electricity, city gas, and
water
Electricity, gas, and heat supply
6 Others North Maluku, Maluku,
Papua, and East Nusa
Tenggara provinces
6 Construction Construction
7 Trade, Hotel, and
Restaurant
Commerce, hotel and
restaurant
8 Transportation and
communication
Land transport, sea transport,
air transport, and
communication
9 Financial, real estate,
and rent services
Financial and insurance
10 Other services Public administration and
defense services
Source: LPEM-FEUI, 2012
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The stimulus to the IRIO model was the value of PT NNT shipment each year in Rupiah and nominal
terms to NTB province only (Table 3). It is treated as final demand shock to the local economy. The
period of analysis started from 2006–2011.
Table 3
The Value of PT NNT Shipment in 2006-2011
Item Unit 12/2006 12/2007 12/2008 12/2009 12/2010 12/2011 12/2012
Shipment US$ 1,424,489,341 1,623,358,585 1,086,685,572 1,624,398,095 2,299,934,541 1,687,539,333 655,440,997
Exchange Rate IDR/USD 9,087 9,334 11,325 9,457 9,023 9,088 9,646
Shipment Million IDR 12,944,049.74 15,151,779.69 12,306,542.52 15,362,582.54 20,751,433.20 15,337,161.05 6,322,311.03
Source: PT NNT, 2013
Note: exchange rate was from CEIC Databank, 2013
The indicators of economic impact to NTB province due to PT NNT operation were (i) output impact;
(ii) GRDP/Value added generated; and (iii) employment generation. Central to calculation was Leontief
inverse matrix which produced multipliers and was used to estimate all the economic impact
indicators. The results of last two indicators estimation have been presented in Chapter 3.
Output impact relates to the change in total sales in the economy due to PT NNT operation. The value
added generated can be estimated through a change in primary input rows. These rows represent
GRDP calculation from income approach, i.e. income of production factors owned by household, firm,
and government. In IO table, these primary inputs consist of wage and salary, trade surpluses,
depreciation, and indirect tax. While employment generation is a change in employment due to final
demand stimulus in the region, such as PT NNT activity, and calculated from employment multiplier.
Despite using IRIO analysis, the study also tried to estimate the economic impact of PT NNT to West
Sumbawa District (Kabupaten Sumbawa Barat/KSB). However, KSB does not have an IO Table. The
study therefore developed a KSB IO table based on the characteristic of NTB province production
technology. The purpose of the IO analysis is to estimate the economic impact in terms of economic
sector in KSB, with and without PT NNT.
2. Limitation of Method
There are limitations of the IO and IRIO methods which source from their basic assumptions:
a. IO table characterized economic activity of a region in a given period. In this case, the 2005
IRIO represent economic activity in 2005. Since there is no updated version of IRIO yet for
economic impact estimation, we use 2005 IRIO table to estimate the economic impact of PT
NNT in 2006 until 2011. It means that we use a strong assumption that there is no
technological change during 2005 until 2011, i.e. all multipliers remain the same.
b. The IO model assume fixed price. The stimulus therefore can not differentiate whether a
shock is due to quantity or price changes. The stimulus therefore is taken from the value of
transaction, which is a product between price and quantity.
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