• Abdurrahman Arum

Investment for a Cement Factory or for Destroying Livelihoods?

Updated: Jul 1

Abdurrahman Arum

This is a story of unjust development. Semen Singa Merah, a cement factory in Jember Regency brings in some raw materials from outside the concession. Hundreds of their hauling trucks crossed public roads and damaged them heavily, suffering thousands of people living along the roads or on them every day.

In 2018, a large cement factory was built in the southern part of Jember, an ordinary regency in the eastern East Java Province, Indonesia. This counts as a foreign direct investment (FDI) from China, enacted by Hongshi Group Co Ltd. The investment which totaled 5 trillion rupiahs (336 million dollars), is the largest in the history of Jember Regency and it was directly escorted by the Indonesian Coordinating Minister for Maritime Affairs and Investment, Luhut Binsar Panjaitan. Based on the publication of ESDM Jember, Hongshi secured a 41 hectare of high-quality limestone concession with a deposit of more than 100 million tonnes, enough to supply the factory for 82 years. This foreign company then made a local legal entity, PT Semen Imasco Asiatic, and created the Semen Singa Merah brand. PT Imasco plans to expand the capacity of 3 million tons per year and create jobs for 3,000 people. Huge investment and job creation are good for the economy of Jember Regency, or so they said.

Yet, other things have escaped the public's attention; things that are very disturbing to thousands of people who live around the site. Semen Singa Merah uses clay material excavated outside the concession or procured from third parties. There are at least three mining queries that are actively supplying the factory, from Curah Takir Village, Curah Nongko, and Gumuk Rase. Hundreds of dump trucks are passing by almost every day carrying clay from these queries.

The problem is that those trucks drive through public district roads, which are mostly small roads or “3C-class” with an average paving width of 4 meters. Under normal conditions, only small vehicles and a few empty or normally loaded mini trucks pass through such 3C-class lanes. And nowadays, those small roads are traversed by tens to a hundred dump trucks almost every day with overloaded loads. In just one year, the roads were severely destroyed. The difference between the roads traversed by mining trucks and those that are not is obvious. If you are a sleeping passenger in a car at night, you will know immediately when you enter the affected areas; because the shock from the damaged roads will suddenly wake you up.

Poor environmental planning

Hauling projects of raw materials for cement factories that pass through small public roads certainly do not pass adequate feasibility studies. With adequate study, it will be obvious that the losses of the project are greater than the benefits, so it is not feasible. First, for a smaller scope, namely the Jember Regency government side, the benefits are negative. The cost of maintaining heavily damaged roads is more expensive than the levy tax obtained from this project. So that in general, this project provides negative cash flow for the district treasury. Second, for a larger scope, namely public welfare or economic value added for the whole community, the conditions are worse. The benefit of this project goes to query owners, fleet owners, and drivers, which number just around several hundred people. Meanwhile, thousands of people who live along the road and who pass through the road every day suffer from heavy damage.

There are economic activities for thousands of people along the road. They were all suffered. While this project benefits hundreds of people, it costs thousands. The factory may be able to procure clay at a low cost because it does not have to maintain roads, but the community actually bears the costs. Besides, during the COVID-19 pandemic, the revenue of the Jember government dropped drastically. The budget for public road maintenance is also reduced. As a result, the surrounding community will "enjoy" the heavily damaged public roads for a longer time.

Inadequate standards

For FDI companies that made large-scale investments, this is an anomaly. Usually, large FDI companies are very concerned about the surrounding environment and community. They maintain “brand image” carefully and use high environmental and community protection standards. Even all cement factories of comparable size operated by Indonesia’s state-owned enterprises (BUMN) use their own roads to transport raw materials such as limestone and clay. Nobody lets their trucks go through the small public roads. The FDI companies should have a higher standard than these BUMNs, or at least equal. With high operational standards, hauling material through small public roads would never go in their list of options.

A Win-Win Panacea

The way to address this problem can actually come from Jember’s geography. Also known as the “city of a thousand hills”, there are many hills scattered throughout Jember Regency, including those close to the PT Imasco’s cement factory. The company can open their own query on one or several of these hills and build their own roads without destroying public roads and disrupt the economic activities of thousands of people. The cost to build those queries and hauling roads is not huge. A few dozen billion rupiahs (a few million dollars) might be enough. That is very small when compared to the total investment they have made. Taking this necessary step will save the company’s brand and at the same time save the interests of thousands of local communities.

If the company does not immediately take steps, the initiative should come from the Jember district government. The government must ban hauling trucks from passing on public roads for justified reasons, considering that in this case, the Jember government is actually suffering a loss. Clay mining and hauling operations provided negative cash flow to the district treasury. The reasons are even stronger when we consider the interests of thousands of people affected. Thousands of people who live around the roads and the people who cross them every day all suffer. The prohibition is justified both economically and legally. Someone has to come up with a solution immediately so that losses do not continue.

Abdurrahman Arum is the founder of the Global Currency Initiative and author of “Currency Democracy: The Theory of Organic Global Monetary”.