Economic Impact of Coal Mining
Attributes
Medium: Land
Country: Indonesia
Analytical Framework(s): Other
Study Date: 2006
Publication Date: 2007
Major Result(s)
| Resource/Environmental Good | IDR (2006) |
IDR (2014)1 |
USD (2014)2 |
|---|---|---|---|
| Total leakage of metal, machines, transportation appliances, and other processing industries sector in South Kalimantan Province | 2,111,680.00 | 3,153,920.78 | 256.47 |
| Total leakage of electricity sector | 147,050.00 | 219,628.00 | 17.86 |
About the Inflation Adjustment: Prices in Indonesia (IDR) changed by 49.36% from 2006 to 2014 (aggregated from annual CPI data), so the study values were multiplied by 1.49 to express them in 2014 prices. The study values could be expressed in any desired year (for example, to 2025) by following the same inflation calculation and being sensitive to directional (forward/backward) aggregations using your own CPI/inflation data.
Study Note: This study investigates the impact of coal mining on the economy and environment of South Kalimantan Province, one of the most important coal producing regions in Indonesia. It uses a Social Accounting matrix to assess how the industry affects the province's economy and the livelihoods of its people. It also investigates what policy options will best reduce its negative environmental impacts at least cost to the province's economy.
Study Details
Summary: The purpose of this research is to analyze the impact of the coal mining industry on the economy as well as the environment of South Kalimantan Province, Indonesia. The South Kalimantan Province is an area with abundant deposits of coal and contributes 16.36% to the national coal stock. Coal mining is a profitable business. It creates employment, generates value, and improves the foreign investment of a country or region. However, coal mining has its disadvantages including negative externalities. It seems that in this business the public gets the dust and dirt, while the workers and managers get the benefits and advantages. This research uses a Social Accounting Matrix (SAM) to analyze the impact of the coal mining industry on the economy and to do simulations to find alternative policies on the coal industry that are suitable for economic improvement and environmental sustainability. The results show that the coal mining industry in South Kalimantan Province is growing. Large-scale coal mining is more profitable economically than small-scale operations, but in terms of environmental impact, the latter is a better choice as it exploits less resources. The policy-maker needs to consider measures to reduce the level of coal exploitation to save the environment and investment policies that support agriculture-based activities where the employment rate is the highest. The first easy step is to impose taxes on coal mining to slow down mining activites and then use this tax revenue as transfer payments such as subsidies and direct transfers "in kind" (e.g. rice, farming equipment, etc.) to support the needs of lower income households in the province.
Site Characteristics: The South Kalimantan Province is one of the areas in Indonesia with abundant deposits of coal. Contributing 16.36% to the national coal stock, South Kalimantan stands at third place. With the government's policy in 1980 inviting direct foreign investment in the coal industry in East Kalimantan and South Kalimantan and allowing coal transportation vehicles to utilize public roads, the mining activity started to grow. The coal business has boomed since 2000 in South Kalimantan.
Comments: The study, by Luthfi Fatah of Lambung Mangkurat University, finds that mining is one of the most significant parts of the province's economy and that it is steadily growing in importance. However, it also shows that the industry disproportionately benefits the betteroff sectors of society and is having an unacceptable impact on the environment. Fatah recommends that policy makers slow the growth in coal mining through regulation of small-scale mining. This should help the environment. He also suggests that the government boost investment in agricultural-based activities to improve the employment prospects of the poorer sectors of society.