Vancouver — There is no denying the impact the Grasberg operations have on the East Indonesian province of Irian Jaya. Operated by
Grasberg sits amidst the glacier-capped mountains some 70 miles inland from the Arafura Sea. In the late 1960s when Freeport first arrived, fewer than 1,000 Amungme and Kamoro and indigenous people lived in and around the project area. The Amungme were living in three highland villages, whereas the Kamoro were scattered along the coast. With the discovery of the giant Grasberg deposit in 1988 and the rapid operational expansion that followed, the population spiraled upwards. Today some 70,000 live in the surrounding areas of Timika and Tembagapura; among them are migrants from other indigenous Irianese tribes drawn by the area’s economic prosperity, as well as more than 20,000 transmigrants relocated from other islands under a central government-sponsored program. This has created an, at times, volatile mixture of Irianese indigenous people, who have their own history of interethnic hostility, and Indonesians from other islands, who have completely different ethnic and cultural backgrounds. Throw in a large military presence, and the area is a veritable powder keg.
Social unrest near the mine resulted in a well-publicized uprising in March 1996, which was quelled by the military in a manner that drew outrage from human rights activists. At the same time, Freeport was criticized for not having done enough to forge positive relations with local communities.
There have been at least five investigations of human rights violations in Irian Jaya, though no PT-FI employee was ever found to be in violation. Freeport has publicly condemned all human rights violations in the province.
Freeport has invested in social, cultural and community development programs designed to address the impact of its mining operations on local villages and tribes, as well as provided assistance for local development.
A independent review of Freeport’s social and community development programs, carried out by LABAT-Anderson in 1996, recognized positive and negative effects which mining was having on the indigenous people. While the audit lauded PT-FI for going beyond the usual role and responsibilities of a private company, it concluded that, in the past, the subsidiary had often placed undue emphasis on creating and implementing programs, as opposed to responding to the needs of the local community. One of the report’s key recommendations was that the government of Indonesia take the lead in the ongoing development of the Timika area, with support from PT-FI.
In April 1996, PT-FI initiated The Freeport Fund for Irian Jaya Development (FFIJD) and agreed to commit 1% of its gross revenues for the next 10 years to support village-based health, education, economic and social development programs in areas of its operations. The company had spent US$100 million on similar programs in the previous seven years.
However, at the recommendation of the independent audit and at the urging of local and church leaders, the disbursement of funds from the FFIJD program was suspended in August 1997 after it was determined that inappropriate funding decisions and expenditures had been made. Funding continued for essential ongoing programs, such as malaria control, public health, job training, educational programs, scholarships and small business development for the Irianese.
In co-ordination with the government and local people, PT-FI has built outpatient clinics and sponsored community health education programs aimed at AIDS awareness, sanitation, nutrition and malaria control. An extensive malaria control program in the lowlands has reduced the disease there dramatically, falling from 80% in some communities in the early 1990s to less than 10% today.
FFIJD was restructured in the latter part of 1998 into a new umbrella organization called the Lembaga Pengembangan Masyarakat-Irian Jaya (LPM-IRJA). Its board of directors includes the head of the local government, leaders of the Amungme, Kamoro and three local churches, plus a representative of PT-FI.
The LPM-IRJA board of directors has approved a 1999/2000 operational plan and has selected foundations to implement the funded projects. The operational plan provides some type of assistance for all 71 villages in the Mimika district, with the greatest support going to the 29 villages defined by the Amungme and Kamoro as the most affected by PT-FI’s operations.
One example of such assistance is the construction of the Mimika primary care hospital, 10 km west of Timika. The hospital is being built at a cost of US$3.5 million and, for the first time, will bring medical services to the lowlands portion of PT-FI’s project area. In the past, many of these services were provided at the Freeport-AEA hospital in Tembagapura, a 90-minute drive up the rugged mountain road. The Mimika hospital is the first major community project sponsored by the LPM-IRJA and will set the precedent for future allocation of funds. The operator will be Yayasan Caritas Timika, a health care foundation directed by the Roman Catholic Church.
At the end of 1998, PT-FI had 14,000 direct and contract employees. Approximately 20% of the workers are Irianese. Freeport is committed to expanding the number of local Irianese in its workforce, as well as at supervisory and managerial levels. PT-FI has worked with local governments and citizens in building a network of schools, education and job-training opportunities for the local highland and lowland people.
Indonesia is an expansive and diverse nation consisting of more than 16,000 islands stretching across 3,400 miles of water, from the Indian Ocean to the Pacific Ocean. It is home to 210 million people. The country’s geographic size and topography have contributed to the development of hundreds of different ethnic groups and languages.
The country endured a half-century of military dictatorship, which ended only in May 1998 with the resignation of President Suharto in the wake of an economic crisis and in the face of growing social unrest. Vice-President B.J. Habibie succeeded Suharto and, in June 1999, Indonesia conducted parliamentary elections at the national, provincial and local levels as the first step towards electing a new president. In October, the country’s highest political body, composed of the newly elected national parliament, along with additional provincial and other representatives, elected Abdurraham Wahid as president and Megawati Sukarnoputri as vice-president.
Indonesia continues to face economic and political uncertainties as demonstrated by recent outbreaks of violence in the province of East Timor following a pro-independence vote. Separatists in the resource-rich province of Aceh are currently calling for a referendum on independence.
Vancouver Sun reporter Jonathan Manthorpe writes: “At the heart of Acehnese discontent are decades of repression by the central government and army dominated by Javanese from Indonesia’s central island, home of the capital, Jakarta. Thousands of Acehnese have been killed by troops, and revenues from the province’s natural resources go straight into Jakarta’s coffers. . . . Acehnese insistence on a referendum with an inevitable pro-independence outcome throws the whole future of Indonesia into question. Separatist movements are bubbling in other regions like Irian Jaya, Sulawesi, Riau, and East Kalimantan, which could be brought to the boil by a spark from Aceh.”
In the past five years, PT-FI has consistently been one of the largest taxpayers in Indonesia. Since 1992, the subsidiary has paid the central Indonesian government in Jakarta US$1.25 billion in corporate taxes, mineral royalties and dividends. The central government also owns a direct 9.36% interest in PT-FI.
Indonesia has realized another US$5.9 billion indirectly in the form of wages and benefits paid to workers, purchases of goods and services, charitable contributions and reinvestments in operations.
At the beginning of the year, PT-FI volunteered to pay additional royalties on its expanded production above 200,000 tonnes per day. These additional royalties would be double the amount specified for copper in the 1991 Contract of Work (CoW) and triple the amount specified for gold and silver. The central government is required to return most of the royalties to the provinces from which the minerals were extracted. Freeport says it volunteered the additional royalties to provide further support to the local governments and the people of Irian Jaya.
During the first nine months of 1999, the royalties totalled US$16.2 million, compared with US$11.1 million in the corresponding period a year ago.
Irian Jaya is the western half of the island of New Guinea. In the early 1960s, Indonesia, under the rule of then-president Achmed Sukarno, laid claim to West Papua (Netherlands New Guinea) on the basis of former colonial boundaries. Indonesia embarked on a military campaign against the Dutch, sending paratroopers inland and engaging in naval activities off the coast. In the latter part of 1962, the Dutch were persuaded to hand the territory over to the United Nations, which, in turn, transferred it to Indonesia in 1963. An “act of free choice” took place in 1969 to allow Papuans the choice to remain in Indonesia. The Indonesian government selected 1,022 people to represent the wishes of 809,000. The vote to remain under Indonesian rule was unanimous.
After a failed communist coup in 1965, General Suharto rose to power and began courting foreign investment. In April 1967, Freeport was granted the first CoW under the new foreign investment law. Terms of PT-FI’s CoWs were renegotiated in 1991, providing for a 30-year term and two 10-year extensions. The CoWs govern PT-FI’s rights and obligations relating to taxes, exchange controls, repatriation and other matters. Specifically, the CoW’s provide that the Indonesian government will not nationalize or expropriate PT-FI’s mining operations. Any disputes regarding the provisions of the CoWs are subject to international arbitration.
Indonesian law also provides for giving “recognition” in the form of community benefits to indigenous people for the use of their land. In 1974, PT-FI reached a land-rights agreement with the Amungme, recognizing the temporary use of their traditional land. By 1997, mine expansion and construction of the Ajkwa tailings deposition area had affected the lowlands area and some stands of sajo palm, as well as some access to traditional fishing grounds. A land-rights agreement was negotiated with several Kamoro tribal communities near the affected area. The agreement was reached with the help of the Sejati Foundation, a noted non-government organization that works to protect the rights of indigenous people.
PT-FI is negotiating with the leaders of both groups for additional voluntary recognition as a reflection of the expanded scope and continuing success of the mining operations.
Freeport’s mining operations entail environmental challenges. The most visible and significant impact on the environment is the disposal of the large amount of tailings. PT-FI channels the tailings into the Agawagon River, which flows from the mill site to the Ajkwa deposition area in the lowlands. The tailings deposition is controlled through a levee system for future revegetation and reclamation. By the end of the mine life, up to 250 sq. km will be affected by the tailings.
In April 1996, an independent environmental audit by Dames & Moore concluded that PT-FI had adopted the most suitable tailings management option. The audit team concluded the tailings were not toxic and that PT-FI was in compliance with the government’s regulations. It went on to make 33 principal recommendations, all of which have been implemented.
Freeport Indonesia continues to monitor the Ajkwa River deposition area and carries out routine water and biological sampling not only at the Ajkwa estuary but at four adjacent ones. PT-FI owns and operates an environmental laboratory in Timika, which, in April 1999, was granted the ISO Guide 25 Certificate of the National Standardization Agency. The main purpose of the lab is to provide analytical support for long-term environmental monitoring.
PT-FI also operates a tailings reclamation research station in the lowlands, where it experiments and demonstrates the growing of fruits and vegetables, food grains, forestry and animal pasture grasses.
The removal of waste rock material and controlling acid rock drainage poses another environmental challenge. The waste rock is transported primarily to the Wanagon area on the western side of the mine by a combination of truck haulage and conveyor stacker installations. About 20% of the rock is limestone, which provides a neutralizing capacity to prevent acid generation. PT-FI’s mine management plan is designed to limit exposure to oxidizing conditions and take advantage of the acid-neutralizing capacity of the limestone.
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