Jun 16, 2024 Last Updated 8:34 AM, May 27, 2024

Risky business

Published: Jul 27, 2007

Mining interests in Indonesia are facing challenging times

Brendan Ross

As transnational mining companies retreat from Indonesia, due largely to prohibitive political risk, civil society groups are calling for alternative community focussed development. Such criticisms raise complex issues for the Indonesian government. Extractive industries in 2000 contributed 12 per cent to Indonesia's Gross Domestic Product (GDP). It is difficult for the Indonesian government to balance calls for greater environmental and social protection which either prohibit or increase costs for mining activities, whilst sustaining the Indonesian economy. If the Indonesian government makes decisions which undermine the investments and confidence of transnational mining corporations, it may incur substantial economic losses.

Sustainable development?

Mining industry rhetoric continues to link mining with sustainable development. It suggests that under the right conditions, mining can boost the economies of developing countries. Indonesian civil society groups, however, point to an ever-increasing inventory of human rights abuses, continuing environmental degradation and severe social impacts in and around existing Indonesian mine sites. These groups strongly believe that mining is not in the best interest of Indonesian communities and the Indonesian environment.

The Indonesian government is at an interesting crossroads where it is making hard decisions on forestry protection and provincial autonomy. Twenty-two mining companies valued at A$24 billion stopped operations in Indonesia after the implementation of Forestry Law No.41/1999. In March 2003, a government team was established to negotiate with the companies concerned. Environmental activists have objected strongly to the plan.

Meanwhile, the move towards greater autonomy for the provinces has also had serious implications for mining operations. It increases local politicians' influence over mining operations and their access to mining revenue. It has become more difficult for transnational mining companies to organise contractual agreements, royalty payments, negotiation processes, environmental obligations and community responsibilities.


The Freeport McMoran gold and copper mine in West Papua is possibly the most infamous mine in Indonesia for its environmental and human rights record. At the same time it contributes around 1.6 per cent of Indonesia's GDP. This mine highlights the difficulties Indonesian policy-makers face. On one hand the mine contributes substantially to national economic growth. On the other it has a negative impact on communities and environments in West Papua.

Freeport recently admitted paying US$5.6 million to the Indonesian military for provision of security at the mine site. This figure was less than had been paid in previous years. The dissatisfaction of the Indonesian military with this re-negotiation of payments (due in part to new disclosure laws in America) may be linked to the murders of two Americans and an Indonesian at Freeport in 2002. The murders reinforce arguments that the mine's presence inflames a violent and hostile relationship between the Indonesian military and the Papuan people.

On 19 March 2003, 12 civil society groups including JATAM (Jaringan Advokasi Tambang, Mining Advocacy Network) and WALHI (Wahana Lingkungan Hidup Indonesia, Indonesian Forum for Environment) issued a joint statement about the Freeport payments, commenting that payments to state security forces promote corrupt practices by the state apparatus which have very harmful consequences for the local people. Allegations of forced evictions, environmental degradation, human rights violations and unfair distribution of mine derived incomes have become commonplace. The mine pumps over 200,000 tonnes of toxic mine waste into the river system daily, which, according to a 1996 Environmental Audit Report, have turned low-lying areas into artificial floodplains. By comparison, the much maligned Ok Tedi mine in Papua New Guinea, pumps 80,000 tonnes into the Fly River system. The tailings from Freeport have contained toxic levels of arsenic, copper and mercury.

The government has recognised the need to address environmental problems associated with Freeport. According to a recent report by Indonesia's national news agency Antara, the Minister for the Environment, Nabiel Makarim, believes the environmental destruction caused by Freeport has reached an alarming level. Even so, he was not advocating a closure of the mine. Antara quotes him as saying, 'If we do not want the environmental effects, Freeport must be closed down. However what needs to be done is to ,inimise the effect of mining operations'.

Good news or bad?

Mining companies may view the current political climate in Indonesia as a threat to their operations. However, it can also be seen as a sign of hope. In the past, the interests of communities and their environments have been subordinated to those of large companies, politicians and businesspeople. Now there is a healthy debate over future resource use within Indonesia.

The environmental and social impacts witnessed at mines such as Freeport demonstrate the need for enforceable social and environmental regulations and mechanisms to ensure the equitable distribution of mining derived incomes. While the debate about mining and environmental degradation is not likely to be resolved in the near future, affected communities continue to feel the impact of inequality. The departure of transnational mining interests from Indonesia will be viewed differently depending upon people's political, environmental and economic attitudes. However, the type of mining which destroys environments, perpetuates inequalities and violates human rights will not be missed by the majority of Indonesian people.

Brendan Ross (brendanr@caa.org.au) is the Mining Advocacy Officer at Oxfam Community Aid Abroad. CAA's Mining Campaign can be found at: www.caa.org.au/mining

Inside Indonesia 75: Jul - Sep 2003

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