In the six years from 2013 to 2018, the Papua regional gross domestic product (RGDP) grew at a higher rate than national growth in GDP, driven largely by mineral exports. But things began changing in the fourth quarter of 2018, when copper production and exports plummeted. PT Freeport Indonesia (PTFI), which has the largest recoverable copper and gold reserves in the world at Grasberg, started phasing out copper production at the Grasberg open-pit mine and transferring its production focus to the huge Grasberg Block Cave underground mine.

This has had a huge impact on the Papuan economy. Its growth rate has contracted over three quarters, contracting 18 percent in the fourth quarter of 2018, 19 percent in the first quarter of 2019, and a huge 24 percent in the second quarter 2019. Papua’s economy has thus been in a deep recession over these three quarters. Economic contraction at this magnitude must have been painful for the Papuan people.

But that is the price Papua has had to pay for the structural imbalance in its economy. The Papuan economy depends on a single commodity and a single company. Last year PTFI’s sales revenue was US$6.5 billion, equivalent to 45 percent of the Papua RGDP. It is rare that the sales revenue of a single company makes up such a huge chunk of a provincial economy.

Exports from Papua fell 75 percent from January to June 2019 to $580 million, causing an 80 percent drop in export tax.

Open unemployment increased from 3.2 percent in August 2018 to 3.4 percent in February 2019. It is getting increasingly more difficult for university graduates and vocational school (SMK) graduates to find jobs in Papua. Unemployment among university graduates increased from 6 to 8 percent, while unemployment among SMK graduates soared from 2 to 8 percent. When these young people cannot find jobs, they will vent their anger and frustration as the opportunity arises, creating social tension and conflict.

The prospects of increasing employment in the short term do not look good. PTFI, the largest employer in the province, has not started recruiting new permanent employees, because it is using only outsourced workers while constructing the Grasberg underground mine.