Land sand ban hits Riau mining companies hard

The Straits Times, March 5, 2007
By Azhar Ghani, Indonesia Bureau Chief


Land sand ban hits Riau mining companies hard
Industry group's 24 firms could start laying off workers soon



HALTED: The Riau sand export industry hires about 1,800 workers and relies almost totally on exports to Singapore for business. -- AZHAR GHANI





JAKARTA - A MONTH after Jakarta's ban on land sand exports, Indonesian sand mining companies in the Riau islands say the move is starting to take its toll.

Industry players had earlier said they could survive the ban, which took full effect on Feb 6, for about a month, beyond which they would have to start reconsidering their future.

The chairman of the Riau Sand Exporters Business Association (Hipepari), Mr Ficky Zulfikar Zazoeli, told The Straits Times it would not be long before the 24 companies under his group start laying off workers.

The industry, which operates on concessions over tracts of land of 50ha each, hires about 1,800 workers. The industry on Kepri, the Indonesian acronym for the Riau islands, is almost totally reliant on exports to Singapore for business.

Based on average selling prices, this business was worth more than $45 million a year, with at least 6 million tonnes to 8 million tonnes of sand exported to Singapore annually.

Official Indonesian statistics, however, showed that sand exports to Singapore in 2005 hit just $9.6 million.

Officers at the Trade Ministry were at a loss to explain the discrepancy, but different explanations had been heard elsewhere.

These ranged from under-reporting of sales either by sellers seeking to avoid Customs duties or by local Customs officials pocketing the difference, to poor information gathering by the central government.

Indeed, if all the sand going to Singapore were properly accounted for, the industry would have put a total of at least $15 million a year in duties and other related taxes into the coffers of the local and central governments.

Domestic consumption - restricted to within the province - has always been less than 10 per cent, given that construction activities there have never been anywhere near that of Singapore.

And even though average export prices in 2005 - excluding shipping, which is mostly covered by the buyers - at $6 to $7 per tonne were lower than the domestic asking price of about $8 to $9, the miners preferred the export market as payment was more immediate.

Finding a market elsewhere in Indonesia is not an option in an industry where proximity to buyers determines how profitable the business is, if at all.

Mr Ficky said: 'We might end up like our counterparts in the marine sand dredging business.

'All of them have had to turn to other businesses, like trading, when their commodity was banned from export.'

Marine sand, used in reclamation works, was banned as an export item in 2003.

Like the ban on exports of land sand, which is used to make concrete, the earlier ban was also not indefinite.

The directives for both bans say that the restriction could be reviewed once issues related to the reasons given for the rulings were addressed.

Both bans cited environmental concerns and the need to safeguard Indonesia's maritime borders as reasons.

The ban is on exporting - not quarrying - as the impact from catering to overseas markets was judged to be the reason for rampant sand mining that has led to all the problems.

Both bans also state that a reversal could happen if there were clear indications that environmental damage due to mining activities could be contained, and if Indonesia and its neighbours could settle on clear resolutions over their still unmarked common boundaries.

Given the similarity of the two bans, and the fact that the earlier ban is still in force, the prospects of a way out for the businesses affected look slim.

Singapore, which is the country most affected by the latest ban, has moved on - and away from its over-reliance on Indonesian sand.

The Republic has already started bringing in sand from other sources and pushing for construction methods that use less concrete.

Hipepari has already strongly registered its unhappiness with the local government, to some effect.

The local administration, which had played a part in pushing for the ban, has since reversed its initial stand.

Kepri spokesman Muhammad Nur told The Straits Times: 'While we agree with the ban, we believe it should be applied selectively.

'If a company has good environmental practices, then it should not be barred from exporting its commodity.'