Business

KPC transforms Sangatta
from jungle into town


Moch. N. Kurniawan, The Jakarta Post, Sangatta, East Kalimantan

For most people in Jakarta and elsewhere, PT Kaltim Prima Coal is better known as a giant coal mining company in the remote area of East Kalimantan, currently mired in a protracted dispute with the local government, which is seeking to acquire a majority stake in it.

However, here in Sangatta, where the company is based, people look up to the company as the prime initiator of development in the town.

Before KPC started coal production in 1992, Sangatta, the capital of East Kutai regency, was a small village in the middle of the jungle, with a population of only 600 people.

Today, Sangatta has about 60,000 people, with good roads, electricity supply, telecommunications services and others.

""Sangatta was very quiet and rather neglected when I started my business here since 1992. But then it grew and attracted many people.

""That's good news for me because my shop has many customers now. I think Sangatta would be nothing without KPC,"" Kenny Samosir, 40, a merchant selling a variety of goods told The Jakarta Post last week.

Kenny, who had traveled far, from North Sumatra, is one example of how KPC has brought hope to outsiders of a better life in Sangatta.

She stated that she had moved to Sangatta after hearing about KPC's coal mining operations. She married a local who worked at a cooperative at KPC.

Another merchant, M. Arifin Kabil, who hails from East Kalimantan's oil town of Balikpapan, said he enjoyed business success, ranging from housing rental to selling basic commodities in Sangatta.

""I arrived at the early stages of Sangatta's development, so I did not have many competitors. That contributed to my success,"" he said.

He also said that here he could educate people, as his proposal to build an Islamic school had been financially supported by KPC.

""I'm very grateful for the aid. I hope this cooperation will continue in the future,"" he said, while carrying a cellphone.

KPC, jointly owned by Anglo-Australian mining firm Rio Tinto Group and British-American oil and gas company BP Plc., signed a contract of work with the government in 1982 and started production ten years later.

It is the only large company in Sangatta, operating 10 open-cast coal mines, which require a total workforce of 7,000 people.

The company produced 15.6 million tons of coal last year, while this year it expects production to reach 17 million tons.

The coal, categorized as some of the best in the world, is exported mainly to Japan, Taiwan, and European countries, thus generating hundreds of millions of dollars in revenue per year for KPC.

From its revenue, KPC pays million of dollars in taxes and royalties to the central government each year, but in the past the local government received only a small portion, while the lion's share went to the central government.

Despite the relatively small sums collected by the local authority from the company, Sangatta nevertheless developed. This is due to KPC's commercial attractiveness to outsiders.

KPC said it had spent about Rp 130 billion (US$14.4 million) on community development since the beginning of its operation.

It has contributed to the cost of road surfacing in North Sangatta, Singa Geweh and Singa Gembara, plus the route from Swarga Bara to Kabo Jaya and other areas of the city, thereby significantly improving the town's transportation system.

KPC has also renovated public and private schools, for example, Junior High School 1 Sangatta, and supported the establishment of several technical schools.

The company has also made other contributions, such as helping local farmers modernize their techniques and providing mobile medical clinics to serve local people.

The latest KPC move was to establish last week a foundation, Yayasan Kutai Timur Bangun Bangsa, which will manage KPC's development fund of about Rp 20 billion per annum.

KPC hopes to continue in operation at least for the next two decades, given the huge coal reserves it has found at its concession.

KPC president Noke Kiroyan said KPC would continue to allocate funds to develop not only Sangatta but also East Kutai, by focusing on the development of local businesses.

He also hopes to put into action another plan, to build Sangatta into a ""unique technology-based town"" in cooperation with the prestigious Bandung Institute of Technology. He did not elaborate on this, however.

KPC would also take the necessary measures, along with the local government, to protect nearby Kutai National Park from destruction, Noke said.

East Kutai regent Awang Faroek Ishak said he would guarantee security for the continuation of KPC's operations as he appreciated that KPC was the regency's greatest asset.

He said he would build more infrastructure in Sangatta, such as a new airport, new apartments at the worked-out KPC mining site and a toll road, as part of the regency's development program.

""This is important infrastructure, to develop our town and connect it with other areas,"" he said.

Awang said he would also develop agribusiness in an attempt to assist it to become the main business of the regency.

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