Saturday, June 16, 2012

Paper: Management of Natural Wealth and Energy, Contribution of Islam to Indonesia



Management of Natural and Energy Wealth, Contribution of Islam to Indonesia

I. Natural Wealth and Indonesian Energy and Management Model Errors.


Indonesia is a big country. The area of ​​Indonesia's territory is around 5 million km2. About 1.9 million km2 is land while 3.1 million km2 is in the form of the sea. If coupled with an exclusive economic zone, the total area of ​​Indonesia will be more than 7.5 million km2, with a sea area of ​​5.8 million km2.


If we compare the map of Indonesia on the mainland of Europe, the territory of Indonesia includes England to some parts of Russia. Indonesia has a population of 240 million, more or less the same as the population of all European countries that are members of the European Union. Based on population, Indonesia ranks fourth in the world after China, India and the United States.

Indonesian Natural Property

Speaking of natural wealth, Indonesia is a country that has abundant natural wealth. Indonesia's biological wealth such as forests, the remaining area according to the World Bank is around 94,432,000 ha in 2010. Around 31,065,846 ha of them are forests that have high economic value. Indonesia has 10% of the remaining tropical forest area.

Indonesia also has a large marine wealth, Indonesia has a sea area of ​​5.8 million km2 with a coastline of 81,000 km. About 7% (6.4 million tons / year) of the total sustainable potential of the world's marine fish come from Indonesia. Approximately 24 million ha of shallow marine waters in Indonesia are suitable for marine aquaculture with a production potential of around 47 million tons / year. Coastal areas that are suitable for aquaculture business are estimated at more than 1 million ha with a production potential of around 4 million tons / year.

Catch fish production reached Rp. 18.46 trillion. Sea fish seeds reach Rp 8.07 billion. Aquaculture reached Rp. 1.36 trillion. Meanwhile, illegal fishing by foreign vessels reaches a value of 4 billion US dollars (around 34 trillion rupiah) per year.

The Agriculture, Livestock, Forestry and Fisheries business fields together contribute 14.7% of Indonesia's GDP in 2011 which reached Rp. 7,427.1 trillion.

Indonesian Mineral Wealth
Indonesia is the second largest producer of tin, the largest for copper, fifth for nickel, seventh for gold and coal.

Indonesia produced over 790,000 tons of copper concentrate in 1999. The production was produced from the Grasberg mine whose majority shares were controlled by PT Freeport Indonesia owned by US-based Freeport-Mcmoran.

The Grasberg mine, located in Tembagapura, has a reserve of 2,500 metric tons, which contains 1.13 percent copper, 1.05 grams per tonne of gold, and 3.8 grams per tonne of silver.

The Batu Hijau copper mine on Sumbawa Island was developed with an investment of around 1.9 billion US $ by PT Newmont Nusa Tenggara (PT NNT). Reserves estimated at 1,000 metric tons consist of copper 0.52 percent and gold 0.4 grams per ton. The estimated duration of the Batu Hijau mine is up to 25 years. Annual production reaches 245,000 tons of copper and 18 tons of gold.

Newmont also has an 80 percent stake in Minahasa gold mining, which produced over eight tons of gold and 340 kg of silver in 1998. Other major silver and gold producers are Equatorial Kelian mines in East Kalimantan and Indomuro Mine in Central Kalimantan.

Wealth of Indonesia's energy resources

Indonesia has energy resources in the form of oil, coal, natural gas, geothermal, renewable and nuclear energy. The potential of Indonesian energy sources, benefits and estimated age of production can be seen in Table 1.

Indonesia is the third largest coal exporting country in the world after Australia and China. Indonesia exported 64 metric tons of coal in 2001, from a total production of 92 metric tons. Indonesia's coal reserves are estimated at 35 billion tons and have been proven as many as 23 billion tons.

Table 1. The potential of Indonesia's national energy sources without the discovery of new reserves


The irony of the State of Indonesia

Even though Indonesia has a wealth of natural resources, in reality Indonesia is a country with a large poor population. Based on data from the statistical center bureau, the number of poor people in Indonesia in 2005 reached 51.2 million (23% of Indonesia's population that year reached 221 million). This number increased to 60 million in 2006. Based on world bank poverty standards, namely revenues of less than US $ 2 (IDR 19,000) per day, the number of poor people in Indonesia to 110 million (48%).

Nearly 6 million Indonesians do not have a home. A total of 16 to 17 thousand residents live in uninhabitable homes. More than 50 percent of the population does not have access to clean water; more than 25 percent of children under five are malnourished; illiteracy reached 9.55 percent or 14.7 million. The number of unemployed has reached 40 million people (25 percent of the workforce). From year to year, this number continues to increase, which is around 8.1 percent in 2001, 9.86 percent in 2004 and 10.9 percent in 2005. Prevalence of malnourished children and severe malnutrition up to 2003 was 27.5 percent.

In addition, Indonesia is heavily in debt, in the 2012 Revised State Budget ceiling for debt repayments (principal and interest) reaching Rp 322.709 trillion, consisting of principal repayments of Rp 200.491 trillion and interest payments of Rp 122.218 trillion.

Indonesia has really been in debt, even though the accumulated payment of both interest and principal debt installments for 12 years between 2000-2011 reached Rp 1,843.10 trillion, but strangely, the amount of the country's debt did not decrease but instead increased. Indonesia's debt recorded in 2010 or the era of President SBY is still Rp. 1,677 trillion. In the 2011 fiscal year, Indonesia's foreign debt of Rp. 1,803 trillion and as of March 2012 reached Rp. 1,859.43 trillion and even continued to increase until the year 2012 Indonesia's debt has reached Rp. 1,937 trillion.

This debt becomes a trap for Indonesia to be controlled by the interests of the capitalists.

Mismanagement

The question arises why does a contradiction occur? Why is this amount of wealth not enough to prosper the Indonesian people? The answer is that most of the wealth has been controlled by the private sector, especially foreign private companies through transnational companies.

From the list issued by BP-Migas itself, it can be seen that the majority of the 56 oil and gas cooperation contracts in Indonesia are foreign (BPMIGAS.com).

Companies such as ExxonMobil can get total profits from looting in various countries up to $ 36.1 billion in 2005. BP-Amoco, which produces 10 percent of Indonesia's national gas, can make a profit of US $ 1.3 billion per year. PT. Freeport McMoran Indonesia (PTFI) made a profit of US $ 934 million in 2004 and increased from year to year recorded in 2009, Freeport McMoran (FCX) financial report stated that PTFI's profit was US $ 4,074 billion, while state revenues through taxes and royalties were around US $ 1.7 billion is smaller than PTFI's profits. In the case of PT Freeport Indonesia, from the mine in Papua, Indonesia should get a profit of Rp 50 - 100 trillion per year, if the management of the mine is managed by the state rather than the private sector.

Gross income earned by Newmont mining companies reaches trillions in value per day. In 2003 the company produced 3,390 tons of copper per day or 3,390,000 kg per day. If the price per kg is Rp. 766,666.67, then the value of Newmont's gross income reaches Rp. 2,599,000,011,300 per day equivalent to Rp. 948,635 trillion per year or 2/3 of the Indonesian State Budget a year. They have abundant assets from mining Indonesia's natural wealth, the directors of the imperialist companies generally receive salaries of between US $ 200,000-US $ 300,000 per month. While the residents around the mine live with income below US $ 1 / day. This is the impact of a mistake in natural resource management policies in Indonesia.

This mismanagement of natural and energy wealth occurs because Indonesia chooses a capitalist system and a democratic government system. Democratic governments in the New Order and reformation era have sold Indonesian natural wealth to foreign parties, through various products such as Laws on Oil and Gas, Minerba Law, Foreign Investment Law and so on.

All of these laws give a large part to private and foreign capitalism, endorsed by the House of Representatives without any precautionary measures. All of these are based on the trust of Indonesian authorities and officials to the liberal system of economic systems and market mechanisms. Additionally with corrupt mentality where those who only think for his own sake.



II. Model of Wealth Management and Energy in Islam.

As an ideology, Islam has a unique economic system. In it there is the concept of how to manage this natural resource.

According to Islamic views, forests, water, and energy are public property. This is based on the hadith of the Prophet:

"The Muslims are in three things: water, pasture and fire" (HR Abu Dawud, Ahmad, Ibn Majah) (Imam Asy Sayukani, Nayl al Authar, page 1140)

So, the management should not be left to the private sector (corporate based management) but must be managed entirely by the state (state based management) and the results must be returned to the people in various forms.

For the management of mining goods explained by the hadith of the history of Imam At-Tirmidhi from Abyadh bin Hamal who told, at that time Abyad asked the Prophet SAW to be able to manage a salt mine. The Apostle passed the request, but was immediately reminded by a friend.

"O Messenger of Allah, do you know what you have given him? You have given something like a flow of water (ma'u al-'iddu)" The Messenger of Allah then said, "Take away the mine from him".

Ma'u al-'iddu is the water because of its very much depicted amount of continuous flow. The hadith is a salt mine that contains very much of its contents with running water.

The first attitude of Rasulullah SAW to give salt to Abyadh shows the ability to give a salt mine or other mine to someone. However, when the Prophet SAW knew that the mine was a large mine-it was described as the water that flowed continually-then the Apostle revoked the gift. This is because with its huge content the mine is categorized as a public property. All public property can not be mastered by individuals.

The focus of the hadith is certainly not "salt", but the mine. Evidently, when Rasul SAW learned that the salt mine was very large in number, he withdrew the gift. Sheikh Taqyuddin An-Nabhani quoted Abu Ubaid as saying:

"As for the giving of the Prophet SAW to Abyadh bin Hambal to the salt mines found in the Ma'rab area, then he took it back from Abyadh's hands. Indeed he revoked it solely because according to him the mine was a dead land turned on by Abyadh, then he managed it. The Prophet (pbuh) knew that the mine (like) flowed water, which meant that the mine was an inexhaustible object, such as springs and drill water, so he pulled it back because the sunnah of the Prophet Muhammad in matters of fields, fire and water stated that all humans are united in the matter. For this reason, he forbids someone to have it, while others cannot have it. "

Therefore, the withdrawal of the gift of the Prophet SAW from Abyadh is illat from the prohibition of something that belongs to the public including in this case mining goods which contain a very large amount for individuals. In the hadith of Amru bin Qais it is more clearly stated that the meaning of salt here is a salt mine or "ma'danul milhi" (salt mine).

According to the concept of ownership in the Islamic economic system, a very large number of mines, both visible so that they can be obtained without having to struggle, such as salt, coal, etc .; and mines that are in the bowels of the earth that cannot be obtained, except by hard work, such as gold, silver, iron, copper, tin, and the like, including public property. Both in the form of solids, such as crystals or in the form of liquid, such as oil, all are mining goods which are included in the meaning of the hadith above.

Al-'Assal & Karim (1999: 72-73) quotes Ibn Qudamah in his book al-Mughni saying:

"Mining goods which are coveted and utilized without cost, such as salt, water, sulfur, gas, mummies (petroleum), petroleum, diamonds, etc., must not be maintained (individual ownership rights) other than by all Muslims, because it will harm them ".

The purpose of Ibn Qudamah's opinion is that mining goods belong to many people even though they are obtained from special land rights. Anyone who finds mining or oil and gas goods on his land is not lawful for him to own it and must be given to the state to manage it.


Income and Production of the State From Natural Wealth


This state management of natural resources produces two benefits at once. First, the results of its management are a source of income for the state budget that is large enough to meet the various needs of the country. Second, the state can escape from dependence on foreign debt.

State expenditure from natural resources can be allocated to various needs. Among others:

· Costs of exploration and exploitation of natural resources, starting from labor costs, infrastructure development, provision of equipment, and all matters relating to the two natural resource management activities above.

· Returned the results to the people as owners of natural resources. The Caliph may and can share it directly in the form of objects that are indeed needed or in the form of basic needs services such as cheap education and health as well as other infrastructure.

· Allocated for the costs of da'wah and jihad.

The concept of Islam in managing natural resources ensures that Indonesia's natural wealth returns to the people. As a result, people will feel prosperity in the true sense.

III. Indonesia becomes a prosperous country with Islam

The Islamic economic system has been empirically able to improve the welfare of its people in the past. Extraordinary progress and resurrection arose because of that the Khilafah became a beacon for other countries in the world. So, it also makes sense if Indonesia wants to prosper, there is no other choice but to return to Islam.


With the political economy of Islam, Indonesia's natural wealth will become a very large state revenue post. This is very different from the current condition where the state revenue in the state budget is actually dominated by taxes. The results of natural wealth are enjoyed by the private sector, both local and foreign, while the people continue to suffer. This condition will not occur if the Islamic economic system regulates it. Mathematical calculations can show that extraordinary potential.


Sector Energy

Oil production in Indonesia is currently around 900,000 barrels per day (bpd) while oil consumption needs around 1,300,000 barrels per day, so Indonesia must import at least 400,000 barrels per day to meet Indonesia's fuel needs.

If the assumption of imported oil prices is US $ 100 / barrel and the cost of Lifting, Refining and Transportation (LRT) of domestic oil is around $ 15 / barrel, it will reach SPBU with a rupiah exchange rate of Rp. 9,000 / US $, the costs incurred by the government to meet BBM needs per day:

1. Imported oil: 400,000 barrels x [$ 100 + $ 2.55 (RT) *] = $ 41,020,000

* Refining and transportation costs (RT) are around 17% of the total LRT costs

2. Domestic Oil: 900,000 barrels x $ 15 (LRT) = $ 13.5 million

Total = $ 54,520,000

Equivalent = Rp. 490,680,000,000, -

The revenue from selling BBM to the public at the current price (IDR 4,500 per liter) is

- 1,300,000 barrels x 159 liters / barrel x Rp. 4,500, - = Rp. 930,150,000,000 per day

The profit from selling BBM per day is around Rp. 439,700,000,000, - or equivalent to Rp. 160.4 trillion, - per year

This advantage is input into the post of receipt of general ownership in Baitul Maal and will be returned to the community.

This revenue may still increase because Indonesian oil lifting can be increased if it is managed by the State, with the current management model we cannot control how much real lifting is produced by the mines of private and foreign companies. BP Migas as the supervisor only receives data made by each of these companies, even Director General of Tax Fuad Rahmany (Vivanews.com, Monday 2 April 2012) explained, along with the establishment of a tax service office (KPP) specifically for oil and gas sector taxpayers earth and mining, oil and gas production has never been examined so that the contractor can outsmart the slowing down of oil and gas production gauges.

"So do not say that it is impossible for big companies to dare to cheat. They have implemented good corporate governance, so they do not dare to cheat. It is stupid for them not to cheat us," he said

For your information, Indonesia's oil lifting in 2011 was only 898 thousand barrels per day, far below the 2011 Revised State Budget target of 945 thousand barrels per day. While in the 2012 APBN-P it is targeted to reach 930 thousand barrels per day

Gas production (LNG) is equivalent to around 5.6 million barrels of oil per day, but the price on the world market is only 25 percent of the price of oil. So the value is around Rp. 297 trillion or the net profit is around Rp. 268 trillion.

Coal production is equivalent to 2 million barrels of oil per day, with prices on the world market around 50 percent of oil prices. So the value is around Rp. 212 trillion, or the net profit is around Rp. 191 trillion.

Electricity production is not significant unless electricity is generated from renewable (water, wind and geothermal) or nuclear energy. Electrical energy like this usually breaks even on its own consumption.

The accumulation of state revenues from the energy sector alone is around Rp. 619.4 trillion, -

Mining

Mining production, especially gold, such as Freeport or Newmont, we calculate with estimates from their tax payments. If we believe the truth of the value of Freeport tax which is IDR 6 trillion per year, and this is only 20 percent of the profit margin - that means the profit net is Rp. 30 trillion per year. Another source said that the gold production in Freeport was around 200 tons of pure gold per day - so roughly, together with other metal mineral mining companies, namely gold / Newmont also tin, bauxite, iron and lime, sand, etc., etc. is a minimum of Rp. 50 trillion per year.


Seafood

Well, outside mining, there is a potential for the sea that is not less big. According to Rokhmin Dahuri, the sustainable potential value of the Indonesian sea, both biological, non-biological and tourism, is around US $ 82 billion or Rp. 738 trillion. If there is a marine SOE that plays here with only 10 percent niche, then the value is around Rp. 73 trillion.

Forest products

The most interesting thing is forest production. Indonesia's forest area is 94,432,000 hectares. To maintain a sustainable cycle of 20 years, every year only 5 percent of the plants are taken. If in 1 hectare of forest, the minimal count is 400 trees, which means that every year only 20 trees per hectare are cut down. If the 20-year-old tree wood has a market value of Rp. 2 million and the net profit is Rp. 1 million, the economic value of Indonesia's forests is 94 million hectares x 20 trees per hectare x Rp 1 million per tree = Rp 1,880 trillion.

But of course this is not easy to obtain, because currently more than half of Indonesia's forests have been damaged by illegal logging. The price of legal timber has also been played by transfer pricing to save taxes. But Rp. 900 trillion is still very large. And if managed properly, there are still many other forest products that have high economic value, for example for medicines.

From the calculation above, the state revenue from its natural wealth is very large, which is around Rp. 1,642 trillion, -. Not to mention when calculating state revenues from fai, ghanimah, shadaqah, state-owned land and others.

The amount of revenue is more than enough to meet the needs of the state and the people and move the economy. Compare this with the current 2012 APBN P revenue, which is only around Rp. 1,358.2 trillion, of which 74.5% came from taxes, namely Rp. 1,012 trillion, besides that, the Indonesian State Budget had a deficit because the state expenditure was around Rp. 1,548.3 trillion, - which must be covered through debt.

By looking at the acceptance post if managed in an Islamic way compared to the revenue and expenditure in the current APBN, it is evident that there is a surplus in revenues. This surplus can be used to bolster the economy towards prosperity with Islam. This is not a dream, but a reality that will be proven if the Islamic system is applied.


People's Leadership Conference. The Best Khilafah Model of a Welfare Country. Management of Natural and Energy Wealth, Contribution of Islam to Indonesia. 1433 h.

IWD/The Truth Seeker Media

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