Better Than The Ban

1 Feb 2007 (TODAY)

Indonesia's eco-friendly move is potentially lucrative but must be managed
well

Gavin Chua Hearn Yuit and Martha Maulidia

INDONESIA'S blanket ban on the export of sand has caught Singaporeans and
regional stakeholders by surprise, and may not be best for the country
itself.

While the country's environmentalists and affected communities in the
sand-mined areas have won a long-drawn battle to widen the 2003 ban on
coastal sand to include other types of sand and soils, sand exporters in
Riau that rely on overseas markets such as Singapore and China are mulling
over the loss of their multi-million dollar business.

Now staring at price hikes as high as 50 per cent, concrete suppliers and
contractors in Singapore are also hard hit by the sudden ban announcement.

Why the ban now?

Indonesian Trade Minister Mari Elka Pangestu has invoked "resource
conservation" as the key rationale behind the government's decision. There
is truth to this. For the past two decades, environmental degradation from
sand-mining activities has been a sadly familiar story. The victims are
often fisherfolk who have little voice to speak for themselves about
coastline erosion and fishing-ground destruction from sand-mining
activities that have affected their livelihoods and homes.

An investigation by Indonesian non-governmental organisation Kaliptra in
2001 showed that coastline erosion was over 5m in some places, and that
several small islands had virtually disappeared. This was despite a
Ministry of Marine Affairs and Fisheries Decree disallowing mining
activities on any island of less than 2,000 sq km. Polluted waters from
the frequent mining traffic have also disrupted fishing activities many
kilometres from the shore.

A map released by Indonesia's Ministry of Mines and Energy shows there is
"not one square centimetre" of the waters in Riau that has not received
sand-mining concessions - which are issued without any prior environmental
impact assessment.

A January 2005 report in the Jakarta Post also revealed how the sand trade
hindered development plans for tourism and industry in Batam and Bintan.

The Indonesian government now seems to recognise that these losses
outweigh the government revenue. For while Indonesian sand exporters
benefited, local government revenue from the export tax has been minimal,
due to tax evasion. More broadly, the Indonesian Trade Ministry could be
trying to gain more economic mileage by de-emphasising raw material
exports to focus more on value-added exports. In 2002 for example, log
exports were banned in favour of value-added products such as plywood.

In many ways, these woes and the ban must be set in the wider context of
Indonesia's struggle to govern its natural resources from over
exploitation. These include the fires from many large companies that cause
transboundary haze pollution and the mudflow in Java for which a major
Indonesian company is believed to be responsible.

The question is, will the ban work?

After all, despite the ban on logs, reports indicate that many illegal
logs still go from Indonesia to China and other destinations. Growing
demand and higher prices may well spur illegal trade in sand too,
complicit with corruption and weak governance. The Indonesian government
should consider other measures rather than the total ban, which may be
difficult or, indeed, impossible to enforce.

One alternative is to modify the system of export charges to ensure that
the government and local communities receive fair revenue from the total
export value of the sand trade. Proper environmental impact assessments
and zoning for industries that take into account the concerns of local
communities and ecological fragilities should also be enforced.

Connected to this, an ethical buying approach should be explored between
Indonesia and buyers in Singapore. This would incorporate proper
mechanisms for exporters to, for instance, contribute a portion of their
export tax to fund environmental protection and monitor the ground for
illegal mining.

Such measures, unlike a ban, would allow Indonesia to gain more from the
current demand boom while minimising the damage. Even if Indonesia wishes
to move away from exporting raw sand, dialogue with buyers and receiving
states such as Singapore is important. This could lead to investments for
secondary processing to be made in Indonesia.

Indonesia should be applauded if the government is serious about managing
its environment better and ensuring the local communities benefit from the
development of the Riau islands, including Batam and Bintan.

The way the ban has surprised many, however, may affect business and
investor confidence unnecessarily - especially when it remains to be seen
if the ban will be effective or if illegal trade will soon begin, with yet
more negative effects.

For Singapore and other buyers, alternatives in construction must be
explored, including the options for recycled materials and other, more
environmentally friendly, methods of construction.

Gavin Chua is a researcher at the Singapore Institute of International
Affairs (SIIA). Martha Maulida is an Indonesian environmental researcher
attached to the SIIA.