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The Extractive Industries and Society 10 (2022) 101069

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The Extractive Industries and Society


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Original article

“The economic impact of tin mining in Indonesia during an era of


decentralisation, 2001–2015: A case study of Kepulauan Bangka
Belitung Province”
Sulista Sulista a, b, *, Fadhila Achmadi Rosyid c
a
Faculty of Mining and Petroleum Engineering, Bandung Institute of Technology, Indonesia
b
Bappeda of Kepulauan Bangka Belitung Province, Research and Development Division, Indonesia
c
Department of Mining Engineering, Faculty of Mining and Petroleum Engineering, Bandung Institute of Technology, Indonesia

A R T I C L E I N F O A B S T R A C T

Keywords: This paper examines the economic impacts of tin mining activities in Indonesia during the country’s decen­
Resource curse tralisation period, 2001–2015, focusing on the case of Kepulauan Bangka Belitung Province. Here, the evidence
Decentralisation points to tin mining contributing significantly to Gross Regional Domestic Product (GRDP) and, through cata­
Input-output model
lysing backward linkages, having fuelled growth in local construction and manufacturing trades. In addition, the
Mining multiplier impacts
Tin mining
multiplier effects of tin mining have significantly affected household income across the province. From an
economic standpoint, therefore, tin mining has not caused a resource curse in Kepulauan Bangka Belitung
Province, although production has been associated with a series of adverse social and environmental impacts.

1. Introduction nationalised and merged to form the Tin Mining State Company in 1968.
Since then, the central government has been responsible for managing
Indonesia is a country richly endowed with mineral resources such as Indonesia’s tin resources for approximately 30 years. The government’s
nickel, copper, and tin that are essential for modern technologies. After initiative in tin mining deregulation in 1998 stated that tin was no
China, Indonesia is the world’s second-largest producer of tin account­ longer one of the goods exported that was regulated and supervised by
ing for 26% of global production in 2019 (USGS, 2021). Resource the central government. The Law on Local Government in 1999 then
governance and management are critical factors in determining whether shifted the responsibility to the regional governments to regulate the
the country’s wealth in tin and other mineral resources translates into exploitation of tin in their respective regions (Erman, 2004). In January
sustainable economic development or entails risks for the so-called 2001, the government began implementing a decentralisation policy in
‘resource curse’ observed in some resource-rich countries. The managing mineral and coal mining to facilitate the economic prosperity
resource curse may comprise different factors such as reduced compet­ of the mineral-producing regions. This regional approach was only
itiveness of domestic sectors not related to raw materials, commodity recently adjusted: in 2016, the central government adopted a policy to
price volatility translating into national budget risks, economic delegate the mining authority from the district to the provincial level.
mismanagement, weak institutions, rent-seeking, and corruption (e.g., This policy ended in 2020. Since then, the work of these institutions has
Badeeb et al., 2017; Hilmawan and Clark, 2019). Some authors have been re-assigned to fall under the authority of the central government.
expanded the term resource curse to include the larger sustainability The major production area of tin in Indonesia, Kepulauan Bangka
impacts related to previous issues, such as insufficient protection of local Belitung Province (Fig. 1), holds 99% of national tin resources (Ministry
communities and the environment for the benefit of the elite (e.g., of ESDM, 2016). During the first five years of implementing the de­
Rosyida et al., 2018). centralisation policy of 2001, there were 75 mining concessions, 37 tin
Indonesia’s tin mining sector has been subject to different gover­ smelters, and 6507 artisanal tin mining units that together drove a sig­
nance approaches through the years. Three tin mining companies nificant increase in tin production (Yunianto, 2009a). This led to a sig­
operating in Indonesia under Dutch ownership from 1953 to 1958 were nificant contribution to local revenues as well as increasing income for

* Corresponding author at: Bappeda of Kepulauan Bangka Belitung Province, The Integrated Office Complex for the Provincial Government of Kepulauan Bangka
Belitung, Air Itam, Pangkalpinang, 33149, Indonesia.
E-mail addresses: sulista.litbang@babelprov.go.id (S. Sulista), fadhila@mining.itb.ac.id (F.A. Rosyid).

https://doi.org/10.1016/j.exis.2022.101069
Received 30 April 2021; Received in revised form 8 March 2022; Accepted 9 March 2022
Available online 1 April 2022
2214-790X/© 2022 Elsevier Ltd. All rights reserved.
S. Sulista and F.A. Rosyid The Extractive Industries and Society 10 (2022) 101069

Fig. 1. Distribution of raw materials in Southeast Asia and location of the study area (Kepulauan Bangka Belitung). Source: (Ministry of ESDM, 2021).

the people of artisanal mining communities (Erman, 2004). (Bappeda of Kepulauan Bangka Belitung Province, 2017). Field surveys
In an investigation of district-level income in Indonesia from 2005 to performed in association with the present research show that after the
2015, Hilmawan & Clark (2019) found a positive association between termination of the formal mining contract of work, the local community
per capita income and extractive activities focusing on energy resources started conducting illegal tin mining that caused the region to lose
(oil, gas, and coal). Nevertheless, there are concerns that poor man­ revenue.
agement and governance of mining businesses in the long term will lead Public concerns have sparked great interest amongst researchers to
to regional economic dependence on natural resources such as tin. This study the Kepulauan Bangka Belitung case and many of these have
might bring about negative economic effects and, potentially, the confirmed that the decentralisation policy of 2001 did entail a range of
manifestation of a resource curse phenomenon at the subnational sustainability problems. Apart from environmental issues, there are
(province) or meso‑level, such as slower economic growth, reduced horizontal and vertical conflicts (Erman, 2004; Ibrahim et al., 2019b;
social welfare, and environmental damage (Benghida, 2017; Frankel, Sulista et al., 2019; Zulkarnain et al., 2005), the existence of illegal
2010; Gilberthorpe and Papyrakis, 2015; Manzano and Gutiérrez, 2019; artisanal ‘people mining’ (Erman, 2008; Indra, 2013; Rosyida et al.,
Poncian, 2019; Syahrir et al., 2020; Ushie, 2012). 2018; Yunianto, 2009a), weak institutions (Erman, 2004, 2008, 2010),
Various parties have voiced public concerns that tin extraction and and disproportionate fiscal impact (Arkam et al., 2017). These studies
the management of post-mining activities if conducted poorly, will found that tin mining impacts in Kepulauan Bangka Belitung are rela­
transform Bangka and Belitung into ‘dead islands’. Tin mining activities, tively close to the definition of the ‘resource curse’ (Erman, 2014; Sur­
especially informal activities, are often associated with environmental yadi, 2016).
damage such as landform deformation, soil and other environmental The present study expands and builds on these earlier studies by
degradation, and inconsistent spatial planning (Bidayani, 2009; Erman, analysing the record of economic data associated with the imple­
2010; Ibrahim et al., 2018; Yunianto, 2009a). Similar adverse environ­ mentation of the decentralisation policy in Indonesia’s tin mining sector
mental and socio-economic impacts were associated with tin mining from 2001 to 2015. Because most empirical studies were dominated by
activities and an unexpected mine closure on Singkep island, an descriptive-qualitative approaches, our study fills a gap from the
important historical tin mining location in Indonesia until 1992 (Syahrir perspective of economic analysis that will explore its relevance to the
et al., 2020). The fact that 79.9% of the Kepulauan Bangka Belitung area resource curse literature. The basis of our view is that the contribution of
is in coastal waters and 50.6% of Mining Business Licenses were issued the mining sector provides not only a fiscal impact but also further
for offshore mining (Bappeda of Kepulauan Bangka Belitung Province, economic impacts that will produce inputs and outputs amongst sectors
2017), have motivated various parties to urge the regional government (Hirschman, 1982).
to compile and ratify a so-called Zoning Plan for Coastal Areas and Small
Islands, the substance of which is still creating arguments, especially in 2. The beginning and end of the mineral and coal mining
the matter of reducing offshore tin mining license areas (interview of a decentralisation policy in Indonesia
government official, Fr, related to this fact).
Another illustration of adverse economic impacts in the province is Decentralisation resulted in a fundamental change in the control of
the case of Lampur Village, a tin mining community that experienced mineral and coal resources by regional governments. This was marked
economic paralysis after the formal tin mining license holder (PT. Timah by the enactment of Law No.22 of 1999 on Local Government, stating
Tbk) had left the village because tin reserves were no longer sufficient to that the regions were authorised to manage the resources within their
enable profitable mining activities (Indra, 2013). In 2012–2013, territory and were responsible for preserving the environment. This
termination of PT. Koba Tin’s contract of work resulted in a decline in included the authority to manage tin mining, following the issuance of
royalty and land rent in the Bangka Tengah district by 35.2%, which the Regulation of Minister of Trade (MoT) No.558/MPP/Kep/12/1998
resulted in a 9.7% decrease in the revenue-sharing funds (Dana Bagi on General Provisions in Export as amended by the Regulation of MoT
Hasil, or “DBH”) received by the Kepulauan Bangka Belitung Province No.146/MPP/Kep/4/1999. This excluded several mineral commodities

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including tin from the list of strategic commodities that had to be Bahar and Santos, 2018; Yang et al., 2021).
regulated and supervised by the central government. This became an Meanwhile, the combination of quantitative and qualitative evi­
important basis for many mineral resource-producing regions to form dence may be used to evaluate whether the development of extractive
new provinces. One of these was Kepulauan Bangka Belitung, formerly a resources in the long term negatively affects regional economic devel­
part of South Sumatera Province, which separated from the latter based opment reflected by relatively slower economic development, which
on Law No. 27 of 2000 establishing Kepulauan Bangka Belitung may be indicative of the resource curse (Elbra, 2013). In the short term,
Province. on the other hand, extractive industry projects often generate a positive
Five years later, the central government enacted a new law for local impact on the local economy and create jobs that bring economic
government, Law No. 32 of 2004, regulating the division of authorities well-being (Cust and Poelhekke, 2015).
between the provincial and district/city governments fully implemented In Indonesia, studies of economic impacts have shown the significant
in 2005. Erb (2016) stated that the new law gave local governments economic contribution of the mining sector. The development of mineral
more power to make financial decisions about investment in their re­ resources has given sectoral economic value to the national income and
gions, especially in the mining sector, which in turn would provide DBH regional economic value in the form of corporate social responsibility
for producing regions. In the case of Kepulauan Bangka Belitung, Erman (Soelistijo, 2013). Suciyanti et al. (2018) carried out an input-output
(2004) mentioned the emergence of a local shadow state that caused multiplier analysis, the result of which suggested that the copper min­
business and power conflicts. Tin mining businesses were protected by ing business in the producing area had significant impacts on the in­
the police and there were indications of collusion in issuing mining crease of output, income, and employment opportunities in the region.
business licences. Under Law No. 4 of 2009 on Mineral and Coal Mining Regarding the resource curse, Hilmawan and Clark (2019) conducted
(Mining Law) that specifically regulated the issuance of mining business a regression analysis linking the Gross Regional Domestic Product
licences by district government (regent) and by provincial government (GRDP) indicator, land rents and royalties for coal, oil, and gas, and
(governor), the division of authority caused overlaps in mining business mining and quarrying activities to observe the economic dependence of
areas that inflicted trouble in identifying mining business holders, 390 districts in Indonesia during the period from 2006 to 2015, finding
increasing the risk of unpaid taxes (Hamidi, 2015). Consequently, the no evidence of a resource curse. By contrast, Martawardaya et al. (2016)
governor took over the regent’s authority to issue mining business li­ suggested that the six regions receiving DBH were the poorest in
cences, as regulated in Law No. 2 of 2014 on Local Government, with the Indonesia. These funds were not found to generate a significant impact
implementation set for a maximum of two years (Erb et al., 2021). on economic growth because they were not used in sectors providing a
On June 10, 2020, the central government passed the new mining multiplier effect such as education and health. A field survey conducted
law, Law No. 3 of 2020, which came into force six months after its by Suharto et al. (2015) in the coal mining districts of East Kalimantan
enactment. It states that all mining policies are determined by the cen­ found further evidence for negative socio-economic effects of natural
tral government, except for people’s mining licences. This means that resource abundance in Indonesia. Adverse impacts detected by these
regional governments, including provincial and district governments, no authors included a decline in the quality of welfare of local commu­
longer have the authority to grant mining business licences. This law has nities, resulting in a decrease of local agricultural land to make room for
been an important milestone marking the end of Indonesia’s minerals coal mining. Few local workers were recruited by mining companies
and coal mining decentralisation era. because of low education and skill levels, while local communities were
not empowered but their living costs increased. Mining-related emis­
3. Literature review sions also impacted local air quality, resulting in respiratory tract in­
fections amongst people. Based on a historical socio-economic impact
The economic literature, in general, comprises a large body of in­ assessment expanded to the post-mining situation, tin mining impacts on
vestigations into the contribution of natural resource wealth to regional Singkep island have also been evaluated against sustainability and
economic development as well as into possible adverse impacts on the governance parameters, detecting a range of socio-environmental
context of the resource curse debate. Within the framework of these problems (Syahrir et al., 2020). These studies demonstrate the rele­
general and country case studies, we consider the following three ap­ vance and broad methodological scope of research approaches applied
proaches to be particularly applicable for evaluating the economic im­ to evaluate resource curse phenomena, both in Indonesia as well as
pacts of tin mining in Kepulauan Bangka Belitung Province. internationally.
First, a general input-output approach as done, for example, by Lei
et al. (2013) evaluates the mining industry’s contribution to fixed asset 4. Methodology and data
investment and Gross Domestic Product (GDP), creation of jobs, and
promotion of technology investment. Furthermore, Olvera & Foster-­ Based on the economic analysis methods applied to studies on the
McGregor (2018) explore the implications of inter-sector linkages in resource curse as illustrated in chapter 3, the following research steps
extractive industry-based countries with regards to the manifestation of were implemented. First, we used GDP and GRDP data at 2010 constant
resource curse phenomena. Similarly, Bontadini & Savona (2017) market prices from 2001 to 2015 to examine the level of specialisation of
analyse backward linkages as a potential driver of export diversification the provincial (tin) mining sector using the Location Quotient (LQ)
of the manufacturing sector. Finally, Sabiroglu & Bashirli (2012) eval­ (Statistics Indonesia, 2015; Statistics of Kepulauan Bangka Belitung,
uate the development of the trade sector and the diversification of 2012, 2022). The LQ method is the most commonly used method to
economic sectors resulting from mining activities. Such economic ap­ analyse the leading sector of a given region, despite the debate about the
proaches allowed these authors to evaluate arguments in favour of or weaknesses of this analysis (Kiser, 1992; Mack and Jacobson, 1996;
against the resource curse in certain countries. Strotebeck, 2010). The description of the model formulation is presented
The next analytical approach to consider is an econometric approach in Appendix A.
using time series data. This approach may evaluate the long-term re­ Secondly, we observed the contribution of the tin mining sector to
lationships between indicators representing extractive industries (the the structure of the regional economy using GRDP analysis, using the
economic development of the mining sector, revenue allocation, and GRDP at 2010 constant market prices from 2001 to 2015. We used the
natural resource exports) and regional economic development (Dubiń­ GRDP approach because there was a wide range of resource curse
ski, 2013; Ericsson and Löf, 2019; Jalloh, 2013). In many cases, this literature related to the economic contribution, either positive or
approach also reveals the phenomenon of the resource curse which is negative, of the mining sector to the total economy. Three economic
characterised by a negative or opposite relationship between these in­ proxies are commonly used to reflect the abundance of mineral re­
dicators and economic growth (Alpha and Ding, 2016; Awolusi, 2015; sources in a given region, namely the share of mineral exports (Alpha

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Fig. 2. LQ value of economic sectors in Kepulauan Bangka Belitung Province from 2001 to 2015.

and Ding, 2016; Bahar and Santos, 2018; Jalloh, 2013; Mahonye and The IO table is a statistical description compiled by the statistics
Mandishara, 2015), th revenue allocation from mining activities (Car­ office and the regional governments every five years using data from the
rillo Hoyos, 2019; Yang et al., 2021) and the economic development of previous year (n-1). As the region was formed in 2000, the first available
the mining sector (Elbra, 2013; Ericsson and Löf, 2019; Mahonye and input-output table is for 2005 with the base year 2000 so that the table
Mandishara, 2015). In this study, we used the economic development of will represent the conditions before the division of authorities to grant
the mining sector as an indicator of the abundance of mineral resources. mining business licences (before the enactment of Law Number 32 of
The mining sector GRDP of the Kepulauan Bangka Belitung Province 2004). The absence of an annual input-output table prevents an analysis
illustrates the overall economic benefits, both direct and indirect, from of the developments in economic sectors for 2000–2004. The input-
tin mining activities carried out by companies and artisanal and output table for 2010 with the base year 2010 captures the relation­
small-scale ‘people miners’. Besides formal activities, it also captures the ship between economic sectors after the division of authorities to grant
impacts of informal mining activities, as most of the extracted tin ore is mining business licences by the districts and provincial government
eventually sold to formal local producers. The results of the LQ analysis (after the enactment of Law Number 32 of 2004). Furthermore, the
and GRDP analysis may be used as the basis for the statement of the input-output table for 2015 with the base year 2010 is used to analyse
importance of the role of (tin) mining in stimulating the regional economic developments after the division of authorities which was
economy. confirmed by the Mining Law and at the same time represents the last
Thirdly, we analysed the further economic impact of the mining period that can be analysed, because after that half the authority of the
sector using an input-output model and its relationship to the resource regional governments was transferred back to the central government. It
curse literature. Input-output models are commonly used to describe is important to note that the difference in the base year has caused the
regional economic impacts (e.g., Lei et al., 2013; Suciyanti et al., 2018). data to be incomparable in monetary terms.
However, some scholars have begun using input-output models to
measure the economic impact associated with the resource curse. Olvera 5. Results of economic analysis
& Foster-McGregor (2018) used input-output analysis to observe the
value of inter-industry linkages, both backward and forward. In this 5.1. Analysis of location quotient (LQ)
case, the authors observed a trend of reducing or smaller inter-industry
linkages interpreted as a resource curse manifestation. Furthermore, Between 2001 and 2009, the provincial economic structure consisted
Bontadini & Savona (2017) used value-added flows of mining and of nine sectors which were formally reclassified into 17 economic sectors
quarrying to capture their relationship with downstream industries to in 2010. To generate uniform and comparable data, particularly to
examine the resource curse. Sabiroglu & Bashirli (2012) also used the adjust in terms of GDP, we reclassified the 17 economic sectors back into
input-output model framework to explain the resource curse measured the nine original economic sectors while further subdividing the mining
by the output of mining and quarrying on total outputs and inputs. This and quarrying sector into (1) other mining and quarrying and (2) metal
was relatively low due to its limited capacity to directly generate wealth ore mining, so that the final data structure refers to ten economic
and employment on a large scale. In addition, the value of the highest sectors.
multiplier on the trade sector score was not a characteristic of the The calculation of LQ values for the economic sectors is presented in
resource curse condition. Fig. 2. Three economic sectors show an LQ value >1 over 15 years, all of
Based on the perspective of the input-output analysis presented in which are natural resource sectors. The metal ore mining sector (tin
these studies, three factors are noteworthy: namely the proportion of the mining) shows an LQ value >2. This illustrates that tin mining was a
mining sector to the total outputs and inputs, the strength of inter- leading sector in the period investigated as its relative GRDP contribu­
sectoral backward and forward linkages, and the significance of the tion in the province was greater than the GDP’s national average.
multiplier impact of sectors attracted by mining activities. Therefore,
three analyses were carried out in this study within the framework of the 5.2. Gross regional domestic product (GRDP) analysis
I-O model, namely linkage analysis, the degrees of dispersion and
sensitivity, and multiplier analysis. A more detailed description of the The total GRDP of all economic units in the Kepulauan Bangka
applied method is described in Appendix B. Belitung Province for the period from 2001 to 2015 was IDR 32.6 trillion

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Fig. 3. The GRDP at 2010 constant market prices by industrial origin from 2001 to 2015 (in billion rupiahs).

Table 1
Matrix of priority economic sector of Kepulauan Bangka Belitung Province,
2005–2015.
Power of High (IBL > 1) Low (IBL < 1)
dispersion
Degree of
sensitivity

High Priority I Priority II


(IFL>1) Industries of manufacturing of other Agriculture, forestry, and
than base, precious, and other non- fishing (3)
ferrous metals (5) Other mining and
Transportation and storage (8) quarrying (2)
Construction, wholesale and retail Metal ore mining (1)
trade (7)
Low (IFL<1) Priority III Priority IV
Food and beverage service activities Information and
(9) communication(10)
Fig. 4. Total input-output of economic sectors in the Kepulauan Bangka Beli­
Electricity, gas and water supply (6) Financial and insurance
tung in 2005, 2010, 2015 (in billion rupiahs).
The manufacturing of base metals (11)
sector (tin smelting) (4) Real estate activities (12)
(US$ 3217.5 million) annually (Fig. 3). Meanwhile, the total GRDP from Business activities, rentals,
and other agents (13)
the mining and quarrying sector grew by an average of IDR 5.9 trillion
Public administration and
(US$ 578.5 million) annually, of which tin mining contributed about compulsory social security
IDR 4.2 trillion (US$ 418 million) or 73%. During that period, there was (14)
an increase in the GRDP of the tin mining sector from IDR 2.9 trillion (US Education (15)
$ 285.6 million) in 2001 to IDR 4.5 trillion (US$ 328.5 million) in 2015 Human health and social
work activities (16)
or 3.2% annually.
Culture, entertainment, and
The average contribution of tin mining activities to the total GRDP of recreation (17)
the Kepulauan Bangka Belitung Province was 13.4% annually. This Individual services serving
contribution has declined over the past 15 years, from 14.3% in 2001 to households (18)
10% in 2015, corresponding to an average annual decrease of 2.4%. The Note: Priority 1 shows strong forward and backward linkages (IFL > 1 & IBL >
data also showed that if the GRDP of (tin) mining was removed from the 1); Priority II shows strong forward linkage (IFL > 1) but weak backward linkage
economic structure, the total GRDP would still have experienced (IBL < 1); Priority III shows weak forward linkage (IFL < 1) but strong backward
growth, although at a reduced number. The average growth of the GRDP linkage (IBL > 1), Priority IV shows weak forward and backward linkages (IFL <
of (tin) mining was 5.8% annually while GRDP non (tin) mining grew at 1 and IBL < 1).
6.1%. These data indicate that other economic sectors in the province
experienced stronger growth than the mining sector. 5.3. Input and output analysis

The input-output of each economic sector is shown in Fig. 4. The


metal ore mining sector (tin mining) was the 5th largest of the 18

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Fig. 5. The average multiplier impacts of 18 economic sectors in the input-output Table 2005, 2010, 2015.

(2.8%), and inventories (0.1%). Inter-sectoral transactions indicate that


Table B.1
the manufacturing of base metals (i.e., tin smelting) benefited the most
Input-output matrix has the order of 3 × 3.
from the tin mining sector by 94.4%. Manufacturing of base metals itself
Output allocation Intermediate demand Final Total produced the largest output in the economic structure in 2005 and 2010
Input allocation Sector Sector sector demand outputs
and created the second largest output in 2015.
1 2 3

Intermediate sector Quadrant I Quadrant


input 1 II 5.4. Linkage analysis and priority sectors in I-O model
X11 X12 X13 Y1 X1
sector X21 X22 X23 Y2 X2
Details of the performed linkage analysis are presented in
2
sector X31 X32 X33 Y3 X3 Appendix C. The average direct and indirect forward linkages (FLDN)
3 value for the tin mining sector was higher than the direct and indirect
Primary input Quadrant III Quadrant IV backward linkages (BLDN) value. This indicates that the tin mining
V1 V2 V3 sector had a closer linkage to the final demand than to its raw materials.
Total inputs X1 X2 X3
Compared to many others, tin mining is amongst the top five sectors
Source: Firmansyah, 2006. having strong driving forces. In 2015, the FLDN value was 2.1, meaning
that every IDR 1 million increase in the final demand of the mining
economic sectors of the Kepulauan Bangka Belitung, in which the value sector would foster an increase in total output by IDR 2.1 million. This
is above the average of the entire economic sector. From this figure, it figure was larger than those of 2005 and 2010 when the FLDN stood at
can be seen that the input-output value of the sector was ranked 2nd in 1.7 and 1.4, respectively.
2005, contributing 16.5%. However, its contribution decreased to 9.0% On the other hand, the average BLDN value of the tin mining sector
(5th rank) in 2010 and continued to decline to 6.0% (5th rank) in 2015. was 1.3 in 2015, which was ranked 12th out of 18 economic sectors. This
On average, from the total input structure, the tin mining sector was means that total output of IDR 1.26 million is needed for every IDR 1
ranked 5th, consisting of primary inputs of 7.2% and gross value added million increase in the tin mining sector. The BLDN value of the tin
(Nilai Tambah Bruto, or “NTB”) of 12.9%. Meanwhile, from the total mining sector in 2015 was lower than in 2005 (1.9) and 2010 (1.3),
output structure, the tin mining sector was ranked 2nd with the inter­ indicating that its dependence on the upstream sector was lower as well.
mediate demand contribution of 22.2% and final demand of 7.0%. The combined value of the degrees of dispersion and sensitivity put
Despite having an above-average rating, Table 2 describes the decline in the tin mining sector at 7th out of the province’s 18 economic sectors.
both input and output, which then led to a downgrade in rank from 2nd Economic diversification towards downstream was relatively strong
(in 2005) to 5th (in 2010 and 2015). (IFL > 1), ranked as 5th (Appendix D). Meanwhile, the upstream side
The input structure of the tin mining sector was 73% of NTB domi­ was relatively low (IBL<1), ranked 8th. IFL experienced a significant
nated by business surplus (64%), wages and salaries (21%), depreciation increase (20.5%) compared to the average value (17.9%) but the per­
(10.9%), and indirect taxes (4.2%). While the rest was intermediate centage of IBL decline was very high (− 38.3%), far above the average
input by 27%, consisting of manufacturing industries other than base, value (1.5%).
precious, and other non-ferrous metals (48.4%), the tin mining sector On the scale of the province’s economic sector priority (Table I), the
itself (17.9%), construction, wholesale, and retail trade (16.6%) as well tin mining sector was in priority group II because it had IBL < 1 and IFL
as transportation and storage (8.8%). > 1. The high IFL was caused by output dominated by the inter-sectoral
On the other hand, the output structure came from inter-sectoral transactions of 97.2%. Meanwhile, the low IBL value was related to the
transactions (97.2%), followed by gross fixed capital formation low input from other sectors by 27%.
The matrix also shows three sectors in priority group I, namely (1)

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Tabel C.1 Tabel D.1


Direct and indirect forward linkages (FLDN) and direct and indirect backward The degrees of dispersion (IBL) and sensitivity (IFL) in the 18 economic sectors
linkages (BLDN) amongst economic sectors in Kepulauan Bangka Belitung of Kepulauan Bangka Belitung Province.
Province in 2005, 2010 and 2015. No Economic sectors μIBL μIFL ΔIBL ΔIFL
No Sector BL FL 2015–2005 2015–2005
2005 2010 2015 2005 2010 2015
1 Metal ore mining (tin 0.9 1.1 − 38.3% 20.5%
1 Metal ore mining (tin 1.9 1.3 1.3 1.7 1.4 2.1 mining)
mining) 2 Other mining and quarrying 0.8 1.1 − 9.6% − 18.6%
2 Other mining and 1.3 1.2 1.2 2.3 1.3 1.9 3 Agriculture, forestry, and 0.9 1.7 25.7% − 36.7%
quarrying fishing
3 Agriculture, forestry, 1.4 1.3 1.8 3 3.1 1.9 4 The manufacturing of base 1.6 0.7 31.79% − 13.82%
and fishing metals sector (tin smelting)
4 The manufacturing of 2.5 1.9 3.3 1.2 1.1 1.1 5 Industries of manufacturing 1.3 2.4 20.9% − 56.6%
base metals sector (tin of other than base, precious,
smelting) and other non-ferrous
5 Industries of 2.1 1.9 2.6 5.1 4 2.2 metals
manufacturing of other 6 Electricity, gas and water 1.2 0.9 − 26.6% 20.2%
than base, precious, supply
and other non-ferrous 7 Construction, wholesale and 1.5 1.3 82.5% − 35.8%
metals retail trade
6 Electricity, gas and 1.9 2.3 1.5 1.3 1.3 1.6 8 Transportation and storage 1.2 1.1 − 1.5% 39.5%
water supply 9 Food and beverage service 1.1 0.8 − 27.1% 18.1%
7 Construction, 1.9 1.6 3.5 2.2 2.6 1.4 activities
wholesale and retail 10 Information and 0.8 0.8 − 10% 44.7%
trade communication
8 Transportation and 1.9 2 1.9 1.4 1.6 2 11 Financial and insurance 0.8 0.9 − 12.2% 109.8%
storage activities
9 Food and beverage 1.9 1.8 1.4 1.1 1.3 1.4 12 Real estate activities 0.8 0.8 − 17.2% − 6.2%
service activities 13 Business activities, rentals, 0.7 0.9 6.7% 156.5%
10 Information and 1.4 1.4 1.3 1.1 1.3 1.6 and other agents
Communication 14 Public administration and 0.9 0.7 90.1% 3.9%
11 Financial and 1.4 1.3 1.3 1.1 1.3 2.3 compulsory social security
insurance activities 15 Education 0.9 0.7 − 22.5% 33%
12 Real estate activities 1.4 1.3 1.2 1.4 1.3 1.3 16 Human health and social 0.8 0.7 16.4% 19.9%
13 Business activities, 1 1.4 1.1 1 1.2 2.6 work activities
rentals, and other 17 Culture, entertainment and 0.9 0.7 − 41.5% 24.3%
agents recreation
14 Public administration 1 1.8 1.9 1 1.1 1.1 18 Individual services serving 0.8 0.7 − 40% − 0.2%
and compulsory social households
security Mean 1 1 1.5% 17.9%
15 Education 1.6 1.3 1.3 1 1.1 1.4
Note: IBL > 1 is a sector that has strong backward linkage with other sectors; IBL
16 Human health and 1 1.8 1.2 1 1.1 1.3
social work activities < 1 is a sector that has a low backward linkage with other sectors; IFL > 1 is a
17 Culture, 1.7 1.5 1 1 1 1.3 sector that has a high forward linkage with other sectors, IFL < 1: a sector has a
entertainment, and low forward linkage with other sectors.
recreation
18 Individual services 1.7 1.3 1 1.1 1 1.1
ranked 9th out of 18 economic sectors. These values indicate that for
serving households
every IDR 1 million increase in the output of the tin mining sector, there
would be an increase in the output of all sectors by IDR 1.5 million.
industries of manufacturing other than basic precious and other non- Likewise, the value-added multiplier was ranked 9th with a mean value
ferrous metals, (2) transportation and storage, and (3) construction, of 1.5, meaning that for every IDR 1 million increase in the NTB of the
wholesale and retail trade. These are intermediate inputs needed by the tin mining sector, there would be an increase in the regional NTB by
tin mining sector. IDR1.5 million.
Meanwhile, the other three impacts of the tin mining sector multi­
pliers were far below the average value, namely the surplus multiplier
5.5. Analysis of multipliers in I-O model (ranked 11th), the employment multiplier (ranked 12th), and the in­
vestment multiplier (ranked 13th). The lower values indicate that the tin
As illustrated in Fig. 5, the multiplier impacts generated by tin mining multiplier is lower than the multipliers of other economic
mining were below the average value, except the income multiplier (1.8) sectors.
that was above average (1.7). However, two of the five economic sectors In short, although dominated by multiplier impacts that were below
with a multiplier impact above the average (>2) were the base metal the average value, the tin mining sector was the 8th largest of the 18
processing industry (4.4), the largest output from tin mining activities, economic sectors with the highest multiplier impacts. This reflects that
and the industries of manufacturing of other than base, precious, and economic development in the tin mining sector was better than in most
other non-ferrous metals (3.8), the largest input required by the tin other economic sectors with lower multiplier impacts.
mining activities. Meanwhile, the construction, wholesale and retail
trade sector which represented a significant input required for tin 6. Discussion
mining, also produced an output multiplier (1.7) above the average
(1.6). Our analysis shows three main points regarding the economic
The income multiplier for the tin mining sector was ranked 6th out of development of the tin mining business in the Kepulauan Bangka Beli­
18 economic sectors. The values indicate that for every IDR 1 million tung Province during the decentralisation period, 2001–2015. First, tin
increase in the final demand of the tin mining sector, there would be an mining was a leading sector with a value of LQ>1, explaining its
increase in the household income for all sectors by IDR 1.8 million. The specialisation not only at the level of the producing region but also at the
average output multiplier for the tin mining sector was 1.5, which

7
S. Sulista and F.A. Rosyid The Extractive Industries and Society 10 (2022) 101069

national level. For the region, the tin mining business contributed manufacturing other than base, precious, and other non-ferrous metals
significantly to the regional economy, at IDR 4.2 trillion (US$ 418 (3.8), the transportation and storage sector (2.3 except for the invest­
million) or a relative share of 13.4% annually. The literature on the ment multiplier), and the manufacturing of base metals sector (4.4), also
resource curse states that in the long term there is frequently a negative had multiplier impact values above the average of all sectors (2). The
relationship between the growth of the mining sector and the develop­ construction, wholesale and retail trade also had an average output
ment of the regional economy as a whole (Elbra, 2013; Mahonye and multiplier (1.7) higher than the average output multiplier of all sectors
Mandishara, 2015). The GRDP growth trends indicate that this is not the (1.6), which indicates that its development would significantly affect the
case in Kepulauan Bangka Belitung Province. Average annual growth output of all sectors. These figures illustrate that these sectors require
rates in other economic sectors (6.1%) exceed GRDP growth rates stimulation if a significant increase in impact across all sectors is desired,
observed in the tin mining sector (3.2%), resulting in an average GRDP with tin mining activities playing a central driving role.
growth of 5.8% p.a. from 2001 to 2015. In short, our analytical results are in line with the findings of Hil­
Secondly, economic diversification is needed to avoid the resource mawan & Clark (2019) for mineral-rich regions in Indonesia that no
curse (Bontadini and Savona, 2017; Sabiroglu and Bashirli, 2012). It is evidence of a resource curse was found, as indicated by a positive
therefore important to assess the linkages between tin mining and other relationship between mining sector income and per capita income. This
economic sectors in the province. Out of the 18 economic sectors, the tin result is also supported by Rahma et al. (2021), showing the Index of
mining sector was included amongst the five sectors that produced the Natural Resource Independence (NRDI) and the Index of Regional
largest inputs and outputs. The five sectors with input-output values Resource Curse (RRCI) of the Kepulauan Bangka Belitung of 6.1 and 8.3,
above the average consist of (1) manufacturing in the base metals sector respectively, are much lower than other regions, including the East
(tin smelting), (2) construction, wholesale and retail trade, (3) agricul­ Kalimantan (NRDI = 75.7; RRCI = 16.6) and the West Papua (NRDI =
ture, forestry, and fisheries, (4) industries manufacturing other than 50.9; RRCI = 15.2).
basic precious and other non-ferrous metals, and (5) metal ore (tin) A significant difference can be observed between tin mining in
mining. Except for the third sector, all other sectors show economic pull Kepulauan Bangka Belitung and the coal mining region of East Kali­
and push effects related to the tin mining sector as follows. mantan, which local sector is classified as underdeveloped with low
On the upstream side, the linkage of the mining sector was indeed inter-sector linkages, both forward and backward (Hilmawan et al.,
low (IBL < 1) due to a significant decline of 38.3%. The decline occurred 2016; Rahma et al., 2021; Suharto et al., 2015). Its low linkages indicate
in the industries manufacturing other than base, precious, and other that the mining sector is unable to drive other sectors in East Kali­
non-ferrous metals, whose percentage decreased from 74.3% in 2005 to mantan, in both the upstream and the downstream sides. In addition, the
29.5% in 2015. However, it should be noted that most of the inputs high economic dependence on the coal mining and oil/gas sectors will
required by the tin mining sector came from the output of this sector cause East Kalimantan’s economic output to fall by 65.1% if these re­
(48.4%). By contrast, the construction, wholesale and retail trade sector sources were depleted or otherwise no longer extracted, likely triggering
increased from 10.3% in 2005 to 18% in 2015. The inputs of the tin a significant reduction in purchasing power in the region. This figure is
mining sector also came from the output of the transportation and six times greater than the tin mining sector’s average output of 10.5% in
storage sector, with an output increase from 4.3% in 2005 to 13.2% in Kepulauan Bangka Belitung Province. From this output, the tin mining
2015. When examined, these three sectors, driven by the tin mining sector managed to create new output through the base metal processing
sector, showed IFL and IBL values greater than 1 (Priority 1) with IBL industry sector by an average of 22.7%. While these two sectors are thus
growth above the average of 82.5% for the construction, wholesale and coupled, the provincial economy as a whole is nonetheless less
retail trade sector, and 20.9% for industries manufacturing other than resource-dependant and more diversified than East Kalimantan.
base, precious and other non-ferrous metals, whereas the transportation
and storage sector had an IFL growth rate above the average at 39.5%. 7. Conclusion
On the downstream side, the tin mining sector displays a strong
degree of sensitivity (IFL > 1) encouraging economic diversification The decentralisation policy in Indonesia’s mineral and coal mining
towards the manufacturing of base metals, thus inserting the tin mining sector was associated with significant economic contributions to the
sector in Priority II for development. In the period 2001–2015, tin GRDP structure of the mineral-producing regions and further correlated
smelting in the province produced, on average, 75,337 tons of tin positively with per capita income (Hilmawan and Clark, 2019; Suciyanti
annually with an average export value of US$ 1010 million. This ac­ et al., 2018). However, empirical studies also illustrate the resource
counts for 74.8% of the province’s total exports (Statistics of Kepulauan dependence of some of Indonesia’s regional economies, making them
Bangka Belitung, 2020), illustrating the role of this region in generating vulnerable to adverse impacts from the exploitation of natural resources
foreign exchange. Tin-based export activities create low linkages with (Rahma et al., 2021; Suharto et al., 2015). This illustrates the need for
the downstream sector (IFL < 1), resulting in the vulnerability of this regional-level evaluations of economic development and resource curse
region to experience the resource curse phenomenon (Alpha and Ding, phenomena.
2016; Bahar and Santos, 2018; Mahonye and Mandishara, 2015). This case study on the Kepulauan Bangka Belitung Province provides
However, this manufacturing sector has an IBL > 1 with an an economic analysis of Indonesia’s most important tin production re­
above-average growth rate of 31.8%, reflecting its strong ability to gion. A close relationship between the tin mining business and the
attract upstream economic sectors. overall regional economy is evident from the LQ, its contribution to
Thirdly, the impact of the tin mining sector’s income multiplier of GRDP, and inter-sectoral linkages enabling the sector to generate sig­
1.8 exceeds the average income multiplier of all economic sectors at 1.7. nificant income multiplier impacts. These conditions allow the tin
This figure illustrates that if the regional governments wanted to in­ mining sector to drive other economic sectors that, in turn, generate
crease local purchasing power, the main sector that needed to be stim­ significant additional multiplier impacts at all levels. From this stand­
ulated is tin mining, as the income from this will significantly affect the point, we consider the tin mining sector is a main driver of the economy
buying and selling activities in local markets (Ibrahim et al., 2019a). in the province. We did not find economic trends to classify the region as
However, an increase in income has the potential to reduce the amount suffering from a resource curse, given that (1) there is a positive cor­
of labour absorption (Pelzl and Poelhekke, 2021; Rustam et al., 2019). relation of growth in the tin mining sector and relatively high growth in
This explains why the employment multiplier effect in the tin mining other economic sectors, and (2) significant values of multiplier impacts
sector is of low value. outside the tin mining business exist, specifically in the transportation
Meanwhile, the upstream and downstream sectors attracted and and storage sector, the industries manufacturing other than base,
encouraged by tin mining activities, such as the industries precious and other non-ferrous metals sector, and the construction,

8
S. Sulista and F.A. Rosyid The Extractive Industries and Society 10 (2022) 101069

wholesale and retail trade sector. These three sectors are not charac­ Declaration of Competing Interest
teristic of regions experiencing the resource curse phenomenon (Bon­
tadini and Savona, 2017; Elbra, 2013; Mahonye and Mandishara, 2015; The authors do not have a conflict of interest with any party related
Sabiroglu and Bashirli, 2012). to the publication of this scientific article.
While our study illustrates provincial economic development trends,
it seems necessary to conduct further research into the relationships Acknowledgements
amongst economic benefits, social welfare indicators, and institutional
aspects to explore the wider socio-economic framework of tin mining in The authors would like to thank Gavin Hilson and the reviewers of
the province against the backdrop of the decentralisation policy. this article for important comments improving this article. The authors
Furthermore, for a holistic evaluation of resource curse effects, other are especially grateful to Philip Schütte for his substantial advice,
aspects of natural resource governance are important to consider given insightful reviews, and editing. In addition, thanks to Rusni Budiati for
the widespread environmental impact generated by onshore and her assistance to copy-edit this article during the review process. This
offshore tin mining activities. research is also supported financially by the Indonesia Endowment Fund
For Education (LPDP).

Appendix A Calculation of the location quotient (LQ)

LQ = (Xi / GDRP)/(Xj / GDP) (1)


LQ is the location quotient index, GRDP is the total GRDP of all sectors, GDP is the total GDP of all sectors, Xi is the GRDP of the mining sector at the
regional level, and Xj is the GDP of the mining sector at the national level. An LQ > 1 indicates base and specialised sectors, LQ < 1 shows the non-base
and unspecialised sectors, and LQ= 1 shows the same specialisation sector between regional and national levels.

Appendix B Input-output analysis

The equation for calculating the total inputs and outputs is as follows:
∑3
j=1
Xij + Yi = Xi for i = 1, 2, 3 (2)

∑3
i=1
Xij + Vj = Xj , for j = 1, 2, 3 (3)

X = (I − A)− 1
F (4)

X is total outputs, I is the identity matrix, F is the final demand, A is the matrix A obtained from the input-output transaction matrix, referred to as aij,
and (I-A)− 1 is the Leontief inverse matrix, referred to as αij. The equation used to analyse the direct and indirect linkages is:
∑n
FLi = j=1
aij (5)
∑n
FLDN = j=1
αij (6)
∑n
BLi = i=1
aij (7)
∑n
BLDN = i=1
αij (8)

FLi is the direct forward linkage of sector I, FLDN is direct and indirect forward linkages of sector I, Bli is the direct backward linkage of sector I, BLDN
is direct and indirect backward linkages of sector I, αij is elements of Leontief inverse matrix.
The degrees of dispersion and sensitivity are calculated as follows:

n nj=1 αij
IFLj = ∑n ∑n (9)
i=1 j=1 αij


n ni=1 αij
IBLi = ∑n ∑ n (10)
i=1 j=1 αij

IFLj is the degree of sensitivity of sector j and IBLi is the degree of dispersion of sector j.
The equation used to measure the value of the economic multiplier is (Soelistijo, 2013):

1 Output multiplier

OMji = αij (11)
i

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S. Sulista and F.A. Rosyid The Extractive Industries and Society 10 (2022) 101069

2 Income multiplier
/
IMji = Σαij IjT IjT (12)

3 Employment multiplier
∑ Ij αij
LMji = (13)
Ij

4 Value-added multiplier
∑ Vj αij
VMji = (14)
Vj

5 Investment multiplier
∑ kj αij
KMji = (15)
kj

6 Surplus multiplier
/
∑ Vj αij Vj
ΠMjII = (16)
kj αij

kj is a capital coefficient, αij is a Leontief inverse matrix element, vj is a


value-added coefficient, and T is transposed .

Appendix C Details on forward and backward linkages

Tabel C.1

Appendix D Economic dispersion and sensitivity analysis

Tabel D.1

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