New Internationalist

Thanks to British banks, coal is king in Indonesian Borneo

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Local villages are being evicted while the City of London and mining companies binge on fossil fuels. Alex Scrivener reports.

Nothing can prepare you for the shock of seeing first-hand how Borneo is being destroyed by the world’s hunger for coal. I emerged from the rainforest to see a pile of felled trees the height of an apartment block and a crater the size of several football pitches. During the previous two hours, I had heard the drone of the diggers get louder and louder until they started to drown out the natural sounds of the forest.

I was accompanied by Swanto, the local village leader, who explained how his village’s water supply had become polluted by the waste from the mine. His village, Maruwei, is just one of the many indigenous settlements paying the price for the coal boom underway in Kalimantan, Indonesian Borneo.

Indonesia is the world’s largest exporter of coal, and production has increased threefold in the last eight years. Little of the coal ends up powering Indonesian households, as 77 per cent is exported to countries like Japan, South Korea, China and beyond to Europe. The part of Central Kalimantan province around Maruwei is increasingly being seen as a new frontier in this coal boom that has already enveloped the eastern and southern parts of the island.

World Development Movement
Mining in East Kutai has all but destroyed this part of the forest. World Development Movement

Despite the destruction, Central Kalimantan province is still home to thousands of square miles of pristine rainforest and hundreds of indigenous tribes. But their survival depends increasingly on what happens in the single square mile of the City of London.

The World Development Movement’s new report, ‘Banking while Borneo burns’, reveals that many of the coal companies profiting from the export of Indonesian Borneo’s resources receive huge amounts of money from the British financial sector. Indeed, British banks are estimated to have lent more money for Indonesian coal than banks from any other country. Without the backing of the industry, companies like BHP Billiton, which is planning on expanding its mining activities in Central Kalimantan, would struggle to fund their damaging Borneo adventures.

Standard Chartered, Britain’s second biggest bank is the world’s biggest lender for the Indonesian coal industry. Last year, it approved a loan worth $1 billion (£640 million) to Borneo Lumbung, the company behind the coal mine that the people of Maruwei say is polluting their water supply.

Company security vans patrol the roads in between the mines which have turned what was once lush forest into a desolate wasteland

Standard Chartered is not alone. HSBC, RBS and Barclays all have offices in Jakarta from which they support the Indonesian coal industry with loans and help them raise money from the issue of bonds and shares.

The reach of the British financial sector’s fossil fuel investments stretches across the whole of Indonesia. From the Tanjung Enim coal project in South Sumatra to the disastrous Lapindo Brantas gas project in Java that rendered 13,000 homeless in 2006 after it caused a mud volcano, it is possible to trace much of the finance back to Britain.

It is in the province of East Kalimantan however that coal mining been allowed to dominate the most.

After leaving the rainforest, I visited East Kutai, an area of East Kalimantan where coal mining and logging has all but destroyed the forest completely. Bumi Resources, a company financed to the tune of £127 million by Barclays in 2011, has control over much of the region’s coal.

World Development Movement
Local villages and the environment are paying the price for the coal boom. World Development Movement

Here it is impossible to ignore the power of the coal industry. Company security vans patrol the roads in between the mines which have turned what was once lush forest into a desolate wasteland full of toxic tailing ponds and muddy holes in the ground.

But it was in the village of Segading, situated in the middle of Bumi’s mining concession, that I saw the full effect of coal mining in the province.

The community here has been forced to leave their homes three times to make way for coal mining. Having been promised that mining would mean a better life for his indigenous Dayak Basap tribe, the village’s customary leader, Gagay, feels cheated by the mining company.

83 per cent of the coal production of East Kalimantan is extracted by companies with a link to Britain’s financial sector

‘The company doesn’t tell the truth,’ Gagay told me, ‘they have not helped with schools and we feel very disappointed. If we knew at the time what would happen, we would have objected and resisted more. We want to sue the company for what they have done to us. I haven’t felt any benefits from the mining company being here’.

Throughout East Kalimantan, there are many communities like Segading that have been devastated by coal mining.

The shocking truth is that 83 per cent of the coal production of East Kalimantan is extracted by companies with a link to Britain’s financial sector. For example, Bumi plc, which owns big stakes in both Bumi Resources and Berau Coal, raised £707 million on the London Stock Exchange when it floated in 2010. Much of this money will have come from big institutional investors such as pension funds, which supposedly invest on behalf of ordinary pension scheme holders across Britain.

It’s time to call time on the British banks’ fossil fuel binge. We need urgent regulation to control the flow of money to fossil fuel companies so that banks and pension funds are held to account for the impact of their investments.

Alex Scrivener is a policy officer at the World Development Movement and recently visited Indonesia.

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