Abstract
This article aims to analyse the effects of coal and minerals on human development index in South and East Kalimantan Provinces of Indonesia. Historically, Kalimantan was famously known as the largest contributor of coal and mineral production in Indonesia. Under Indonesia's fiscal decentralization policy which effectively ran since 2004, we test: do revenues from coal and minerals negatively affect Human Development Index (HDI)? By focusing on nine coal giant areas within these two provinces that have longer mining histories, and linking it with the coal boom event since the 2000’s, and using panel data analysis with fixed effects controlled, we find that coal and mineral revenues have a positive effect on HDI, contrary with resource curse hypothesis. The results remain consistent regardless of inclusion of other important covariates such as the past level of institutional quality and net student enrolment ratio, or whether revenues in all non-renewable resources are used. However, the positive impact found is small in magnitude. For example, for every 10 percentage points increase in the share in coal and mineral revenues in local government budgets, HDI increases by 0.0085 points, ceteris paribus
Highlights
Indonesia is known as the largest archipelago country with more than 17,000 islands and at the same time blessed by abundant of natural resources, ranging from forest to energy sector
We argue that as Indonesia has implemented decentralization policy, revenues from natural resources can serve as better proxy for coal and mineral dependence measure as it is directly transferred to local government budget periodically per annum and will be used to execute development as programmed
We use revenues from oil, natural gas, and coal and mineral obtained by local governments that we focus as our sample, and we test it on human development index (HDI) as previously modelled
Summary
Indonesia is known as the largest archipelago country with more than 17,000 islands and at the same time blessed by abundant of natural resources, ranging from forest to energy sector. Regarding with the latter sector, there are three main commodities covering this sector: oil, natural gas, and coal and other minerals. The surplus of national coal production still indicates that coal is the essential commodity for Indonesia’s energy security in the future.
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