<Chapter 10> Impact of the China-induced Coal Boom in Indonesia: From a Resource Governance Perspective (Part III International impacts of China-induced resource boom and climate-energy policy)

Abstract

Though Indonesia is well-known as major oil and gas exporter, it becomes net oil importer. It then turns out as a major coal exporter amid the China-induced coal boom. Meanwhile, coalmines are criticized as harmful to ecology and local livelihood, as many of them are located in the forest. Against this backdrop, this chapter analyzes how the China-induced coal boom has affected resource governance. It employs the typology on natural resource governance presented by Luong and Weinthal (2010) to assess how Indonesia’s democratic decentralization and the revision of its Forest Law affected coalmining and deforestation. This chapter reveals that democratic decentralization changed the ownership structure to from state ownership without control to private ownership with control, and generated duplicate licensing authority and inconsistent and contradictory rules between the central and local governments, all of which have resulted in weak central control and widespread corruption. Chinese companies have capitalized on this weak control, backing local companies or their joint companies to obtain licenses---thus accelerating open cast mining. They have also invested in major Indonesian miners, gaining political power to protect their vested interests, which makes it difficult for the Indonesian government to enforce more stringent environmental and social safeguard policies and to shifting the energy system toward a low CO2 pathway.