Bauxite mining in Malaysia went on a tear after neighboring Indonesia banned exports, transforming an industry that hardly existed until 2013 into China’s biggest supplier.

In September alone, China bought a record 3.7 million tonnes of Malaysian aluminum-rich bauxite. It was a US$170.8 million (RM728 million) windfall for the oil-palm covered hills in Pahang, where dozens of companies have rushed in, paying smallholder-farmers for their land to be dug up.

Now, chunks of farmland resemble moonscapes of bauxite quarries and dusty rock piles, which some residents - including Pahang royalty - say have polluted the environment. In response, the government halted mining on Jan 15, starting a three-month moratorium to gain control over an industry that’s exposed gaps in Malaysia’s mining laws.

“If everything followed standard procedure, this would not be happening,” said Teh Teck Tee, managing director of Aras Kuasa Sdn, who began mining bauxite near the city of Kuantan in mid-2014 and exports solely to China. He’s hoping the moratorium will enable authorities to root out operators without proper permits and allow exports to resume with better control and compliance, he said. “This will wipe out the illegal (operators). It’s good.”

Pahang, the largest state on the peninsula, accounts for more than 70 percent of the country’s estimated 109.1 million tonnes of bauxite reserves. Mining of the ore, used to make aluminum, surged last year after neighbouring Indonesia prohibited the raw material from being sold overseas. China, instead, bought more than 24 million tonnes from Malaysia, valued at US$1.1 billion (RM4.69 billion), in 2015.

Within months, quiet roads winding through the hills behind the city of Kuantan, about 250km east of Kuala Lumpur, became congested with trucks. When red ore dust seeped into rivers and the sea, and dead fish washed up on nearby banks, residents reacted to the pollution, torching transport vehicles, according to Andansura Rabu, who represents the seat of Beserah in the state legislative assembly.

After contamination was reported in the waters around Pantai Balok where the Pahang royal family has a home, Crown Princess Azizah Aminah Maimunah Iskandariah posted on her Instagram account earlier this month that she could no longer gather ‘kerang’ (cockles). “Fight people, fight,” she said.

The Department of Environment has conducted “several tests” on water samples from rivers said to have been affected by bauxite to determine their safety, Natural Resources and Environment Minister Wan Junaidi Tuanku Jaafar said Friday in an e-mailed statement. He didn’t elaborate on any findings or say when the results would be ready.

Bauxite mining, meanwhile, has grounded to a halt in Prime Minister Najib Abdul Razak’s home state of Pahang. About 400 police and other government agency officials have been deployed to enforce the temporary ban, and eight checkpoints have been established to check for any illegal operations, Wan Junaidi said.

Disappointed voters

Complications over bauxite are adding to the premier’s problems, which include a slowing economy and a political-funding scandal. Najib spent the latter half of 2015 fending off calls to step down over revelations that RM2.6 billion appeared in his private accounts before the 2013 general election.

Even though Najib has denied wrongdoing and retains widespread support within his party, some voters in Pahang said they were disappointed at the way bauxite mining has been handled. While some residents have welcomed a break from the steady stream of ore-hauling trucks, those reliant on the industry, including about 250 farmers in the Felda Bukit Goh area whose land was mined on, are frustrated by the loss of income.

“I want to beg the government, don’t let this drag on,” said Nik Abdul Majid Nik Sin, a 72-year-old farmer, who set aside half of his four-hectare oil-palm grove for mining after bauxite was discovered there around 2013. “What can I eat? My trees have been chopped, I have to wait for bauxite.”

It’s activities on such small plots that led to out-of-control mining, said Fuziah Salleh, an opposition parliamentarian for Kuantan. Because much of the bauxite-rich ground is owned by smallholder palm oil producers, orchardists and vegetable-growers, companies could pay the farmers to mine their land without having to undertake an environmental impact assessment - a requirement when the land area exceeds 250 hectares, she said.

“Greed and corruption, coupled with poor regulations and enforcement, have led to an environmental disaster,” Fuziah said in a Jan 20 interview. “Our local economies, such as the fishing and tourism industry, which we have been dependent on for generations, are destroyed. This environmental catastrophe will take years to rehabilitate.”

Wan Junaidi’s ministry will hold a three-day workshop starting today “to review all the rules, procedures, guidelines related to the mining and export of bauxite, and propose improvements”, he said. The review will cover mine management, transportation, stockpiling ore and the procedure for applying for export permits.

Proposed improvements will be presented to the federal government for approval and implemented after the moratorium expires, Wan Junaidi added.

“All claims alleging that the ministry has ignored the bauxite problem and hadn’t done enough to solve the issue, are obviously not accurate,” the minister stressed.

Barricades erected

Government action is coming too late for some. Residents erected barricades to stop trucks entering housing areas and spilling their contents, said kindergarten proprietor Mardhiyah Mat Hussin. Some lorries even overturned negotiating sharp corners, she said, adding that outdoor play at her nursery school had to be curtailed because of air pollution caused by bauxite dust.

“We kept thinking this bauxite thing will all stop soon, but it didn’t,” Mardhiyah said. “We collected signatures at the local mosque, but nothing seemed to work.”

After investigating allegations of malfeasance, Malaysia’s anti-graft agency concluded on Jan 6 that there were “elements of corruption” involved in the extraction of bauxite. The next day, it said it detained state government officials in Pahang suspected of taking bribes from unlicensed miners to protect them from enforcement action, it said.

Under current arrangements, the state receives royalty payments from bauxite only after the ore is shipped, Pahang Menteri Besar Adnan Yaakob told the New Straits Times this month. He wants the system changed as part of the government review.

They’ll need to move quickly. Malaysia’s bauxite reserves may be depleted in less than five years, based on last year’s sales to China alone. Chinese alumina refineries may instead seek bauxite from suppliers in Australia and Guinea, according to Jackie Wang, a Beijing-based consultant at researcher CRU Group.

Malaysia’s bauxite prospects depend on cost, said David Wilson, a metals analyst with Citigroup Inc in London. “If the mining is low-cost and it’s easy to ship and the miners can improve their environmental management, then it could come back for a while,” he said.

According to Adnan, the mining hiatus may be good for prices. “When the supply is low, what will happen? Prices will go up,” he said. “This is a blessing in disguise for the players. If I were them, I would enjoy this moratorium period.”

- Bloomberg