ERWIZA ERMAN Deregulation of the tin trade and creation of a local Shadow State A Bangka case study Introduction Can tin swim to Singapore by itself? This was the angry question of a local journalist from Bangka Pos about smuggling tin-bearing sands. Smuggling of Bangka’s tin sand, known as ‘Bangka coffee’ (kopi Bangka)1 has increased since the deregulation of the tin sand trade was withdrawn and a ban was imposed on its export by the Minister of Trade and Industry, Rini Soewandi, in early June 2002. Tin may only be exported in smelted form or tin bars, which are far more profitable both for Regionally-Generated Revenue (Pendapatan Asli Daerah, PAD) and for the business operators. Even so, the smuggling of tin sand has never stopped; the government finds it difficult to control this mafia. The deregulation of the tin trade that accompanied the introduction of regional autonomy in January 2001 signalled a new era in the history of Indonesia’s tin mining management. The region’s response to the transfer of authority for tin management from the centre to the regions, and its search for sources of regional revenue, were both rapid and radical. Regional autonomy actually brought about new conflicts, which were business and power con- flicts rather than cultural or political ones. This chapter will attempt to examine how power was transferred from the old tin regime to the new, and to what extent the practices of the tin business are under the control of the local government. What benefit does this business bring the people of Bangka? Why did the tin smuggling mafia 1 ‘Bangka coffee’ is the term used by the Bangka tin sand mafia in Singapore. When ships carrying kopi bangka arrive in Singapore, the receivers of the smuggled goods (mostly ethnic Chinese), who are often also lenders to the small tin miners in Bangka, handle it right away (Interview with smuggler BY, 7-6-2004). Erwiza Erman - 9789004260436 Downloaded from Brill.com09/25/2021 08:44:00PM via free access 178 SINGAPORE Riau Archipelago Belinyu Singkep Sungai Liat Mentok B A N G K A Pangkal Pinang JAVA SEA Pangkal Balam Jakarta JAVA Airgegas Tanjung Pandan Toboali BELITUNG S O U T H S U M A T R A Map 7. Bangka Belitung Erwiza Erman - 9789004260436 Downloaded from Brill.com09/25/2021 08:44:00PM via free access Deregulation of the tin trade and creation of a local Shadow State 179 emerge, and why is it so difficult to prevent? To what extent are local state actors involved? Mining tin is not terribly difficult. From its simplest form to its most tech- nologically advanced, it can use a simple pan, other non-mechanical methods, pumps powered by 20 HP engines, or dredging ships that operate offshore. Once the tin has been dug up, it is washed, either with the panning system in the river or using spraying machinery, to separate the tin sand from the soil. The tailings, a yellowish mud, flow into the rivers, which are so important for the residents’ day-to-day needs. If the mines are located along the coast, the sea water is likely to become turbid. The old tin mining regime Monopoly and centralization were the earmarks of Bangka’s tin industry throughout its long history, from its eighteenth century beginnings in the time of the VOC (Vos 1993), throughout the Dutch colonial period, and con- tinued by the government of Indonesia, both the Old Order and the New Order (Erwiza Erman 1995). The profits flowed to the centre, whether in the Netherlands, Batavia, or Jakarta. This placed the local government elite and the community in a disadvantageous position, except in terms of certain facilities that were built. Development of the administrative and governmental region of Bangka was closely tied to, and highly dependent upon, the expansion of the tin min- ing area and the presence of a labour force. The Dutch state companies were nationalized between 1953 and 1960. From that time, Indonesia’s tin mining region – the islands of Bangka, Belitung, and Singkep – was combined under a state company called PN Tambang Timah. The Indonesian government, both in the Old Order and the New Order, followed the mineral policy of the colonial government, which considered tin, like coal and oil, a strategic com- modity that had to be supervised by the state, both in its exploitation and in its trade (Erwiza Erman 1994). During the New Order era, the government reorganized and restruc- tured state companies to become more efficient and free of corruption. This was done during the oil boom (1973-1981) and the early collapse of oil prices (1982-1985) (Mari Pangestu 1996:67-96; Robison and Hadiz 2004:9). In 1976, PN Tambang Timah Indonesia became a Limited Company called PT Tambang Timah (Persero). This was intended to eliminate corruption; it was also hoped that the new company would be financially more independent. The New Order government also invited foreign investment. In 1973, the Australian Kajuara Mining Company joined with PN Timah to establish PT Koba Tin. PT Tambang Timah produced 10% of the world’s tin output in 1983, Erwiza Erman - 9789004260436 Downloaded from Brill.com09/25/2021 08:44:00PM via free access 180 Erwiza Erman the largest in the world. During the period of collapsing oil prices (1982-1985), when the govern- ment no longer had funds to subsidize the state-owned companies, there was a new policy: privatization. In the coal mining industry, privatization was signalled by the opening of Kalimantan to private foreign and domestic companies under several generations of Contracts of Work. PT Tambang Timah Indonesia did the same, by entering into contracts with private par- ties to carry out mining in the less productive regions and in smaller mines, with their production surrendered to the parent company. These mines were called Contract of Work Mines (Tambang Kontrak Karya, TKK) or simply Work Mines (Tambang Karya). In 1985, there were 152 TKK operating under contracts with PT Tambang Timah, 87 of which were on the island of Bangka (Tambang Timah 1986:8). Most of the contractors were ethnic Chinese, and half of the state’s mining production came from TKK. Some of this produc- tion was smuggled to Singapore. A rough estimate states that around 3,000 to 5,000 tons of tin concentrate arrived in Singapore each year from these mines in the late 1970s and early 1980s (Baldwin 1983:176). One source from Tambang Timah claimed that small-scale panning tin miners tended to engage in this smuggling. The calculation is that these TKK produced 26% to 32% of the total tin production from 1983 to 1986, using spray mining. Despite liberalization, the government continued to treat tin, like coal and oil, as a strategic commodity whose mining and trade were supervised by the state. Jakarta’s control was tight. PT Tambang Timah used the military to protect mining areas, and prohibited local residents from mining tin, from keeping it in their homes, even if only one kilogram, and especially from trading it to outside Bangka. Anyone who violated these regulations would face an immediate prison sentence.2 The incident when many village resi- dents were arrested and shot by the military because of tin smuggling near the town of Jebus remains covered up. The harsh regulations of the New Order regime made the populace mere spectators of the PT Tambang Timah tin business. Excessive bureaucracy and centralization were the main characteristics of the tin industry during the New Order era. The procedure for private invest- ment was complex; it required approval from the Minister of Mining and Energy, the Investment Coordination Agency (Badan Koordinasi Penanaman Modal, BKPM), the People’s Representative Assembly (Dewan Perwakilan Rakyat, DPR), and the President. The local government had no authority, and tin royalties went to the centre and to Palembang, rather than to Bangka. The local government was in a weak position, while PT Tambang Timah, as an extension of the central government, was all-powerful. 2 Interview with Sugono, 6-6-2004. Erwiza Erman - 9789004260436 Downloaded from Brill.com09/25/2021 08:44:00PM via free access Deregulation of the tin trade and creation of a local Shadow State 181 Decentralization and the new tin mining regime The 1997 economic crisis and the post-Suharto period brought important changes in the political system, in the management of tin mining, and in the status of Bangka. The most basic change was the local (district or city) governments’ claim to authority over management of mining with the intro- duction of regional autonomy in early January 2001. Local governments now felt that they had the authority to issue mining permits to private parties, or to manage tin through local government companies. In fiscal terms, this reform provided a better allocation for the regions, even though the author- ity remained with the central government. Mining companies pay royalties to the government that grants their permits, that is to say the central govern- ment. Of the 80% of the royalty that is passed to the province where the mine is located, 32% is split between the districts/cities within the province, 32% goes to the district that actually produces the commodity, and the remaining 16% goes to the provincial government. This does not yet include the vari- ous taxes, such as land lease, property tax, and other taxes. But it seemed that the central government, in this case the Department of Mining and Energy, wanted to retain its authority. This is evident from a statement by the Minister that the mining industry would remain under Jakarta’s control for the coming five years.