Corporate responsibility towards community

Hendarsyah Tarmizi The Jakarta Post

"We have done a lot of things to help the community but only the bad things appear in the press," said a public relations manager of a mining giant when asked about the company's community development (CD) program.

Such a complaint is common among mining, oil and gas company PR officials, and they are right. Most of the news about mining concerns environmental damage and conflicts with locals.

Mining, oil and gas companies, which mostly operate in rural areas, are more concerned about community development than are companies outside the sector. They have to establish good relations with village people, who are now more aware of their rights.

Since the fall of authoritarian leader Soeharto in mid-1998, protests against mining or oil companies have become common in mineral-rich provinces such as Kalimantan, Sumatra and Sulawesi.

During Soeharto's era, protesting against large companies, which mostly had strong backing from the local government and the army, could risk being put into a jail. Sometimes, the consequences could be worse.

It is understandable if distressed local people are more vocal nowadays. They are now free to say "no" to things they don't like. But the locals sometimes go too far, and are often unrealistic in their demands.

Forcing a company to employ all the unemployed living near the mining site is one such unrealistic demand. The locals also often demand additional compensation for land used for mining years ago on the grounds that they were forced to sell their land at low prices under duress.

At present, most intimidation comes from the locals. The community leaders often mobilize the residents to blockade mining areas or oil wells if their demands are not met.

The resentment can be stronger, as some mining firms have failed to implement rehabilitation projects after their contracts have ended.

The stereotype that mining operations come purely to "steal" natural resources and leave behind a wasteland surrounded by devastated communities can actually occur.

Could CD programs eliminate conflicts between mining companies and local inhabitants? The answer is yes.

But community development should be considered an integral part of a mining operation, which should be pursued by all mining companies whether at a time of conflict or peace. It should not be used at all as a means of covering up local opposition to a mining operation.

Former director general of general mining at the Ministry of Energy and Mineral Resources Surna Tjahya acknowledges that, besides uncertainty over the status of land used by mine operators, conflicts can also result from their lack of attention to the welfare of locals.

"A good CD program will help reduce the locals' resentment, as long as it is designed and implemented in line with community needs," Surna, who is now the head of the ministry's human resource training center, told The Jakarta Post.

But he said that the source of conflicts was not merely due to poor CD programs but more due to uncertainties over the status of land used by mining companies.

State land is often disputed by local inhabitants, who claim that the properties were owned by their ancestors, who had obtained the undeveloped land from the Dutch government under hak ulayat (traditional land rights).

He believes that the public resentment is part of the "reform euphoria", which will eventually end with the return of proper legal enforcement.

Oil, gas and mining companies in the country, especially the multinationals, have, in fact, possessed a strong awareness of their need to share their wealth with the locals.

A statement made by former president of Rio Tinto Indonesia Noke Kiroyan at a recent mining seminar is quite inspiring.

He said the responsibility towards community development is a working contract between mining companies with the community that has permitted them to enter and to commence operations.

"The operations of mining companies may have fulfilled all legal requirements, but without acceptance by the community the fulfillment is only partial as it lacks legitimacy. Acceptance can be achieved only if we are worthy of being trusted," said Kiroyan, who is now president of the East Kalimantan-based coal producer PT Kaltim Prima Coal.

In fact, most natural resources-based companies, such as Caltex Pacific Indonesia (CPI), Newmont and Gulf Indonesia, also share the view on the need to promote the welfare of the people surrounding their mining areas.

Caltex, which operates massive oil fields in Riau, spends between US$3.5 million to $4 million per year in pursuing its CD programs.

Priority is placed on education, health and income generation, in addition to the development of infrastructure, such as roads and bridges.

"CPI is currently building a polytechnic school to prepare the locals to take a lead in the company's oil operations," CPI's Vice President Renville Almatsier said.

The school, which will cost the company about Rp 18.5 billion ($1.7 million) to build, will open in September this year. The funds are not part of the budget allocated for the CD program.

Renville said that the company was also active in providing financial aid to improve the quality of local technical school universities so that local job seekers who were not yet qualified to work in the oil company could improve their knowledge and skills at such schools.

Vice president for corporate strategic development and government relations at Gulf Indonesia Resources S.Santosa said that community development was an integral part of a company's operations.

The formal contribution, such as taxes and royalties, was not enough on its own, he added. A company, he said, had also to be seen to be useful and beneficial for residents living in the vicinity.

"If we succeed in running businesses there, the villages should have something too."

"We need their support, and they need us," Santosa said. "If, for instance, the surrounding area where we work still has many unemployed people, we cannot do business properly and safely. Keep in mind that unemployment generates a lot of social tension and other problems, which in the end will create disorder," he explained.

For that reason, major companies should develop genuine relations with local people, intellectuals, authorities and community leaders. "We have to be seen to be a good corporate citizen in the area."

One of the problems many companies have faced in implementing CD programs is assessing what assistance the villagers really need.

"This is the most difficult part, so we often ask local university researchers to help us," Santosa added.

Many local residents and mining observers have often described mining company community development as only good in theory.

"It is just a token gesture, "NATO", or "no action, talk only," a mining observer said, describing how the local residents near a coal mining company should stage a demonstration only to get what the company had promised to give.

Jakarta-based mining advocacy network JATAM has also highlighted some reservations about CD programs carried out by the country's mining companies.

Chalid Muhammad, the coordinator of the advocacy group, said that most of the CD programs of the mining companies were formulated without the involvement of local residents.

"That's why many CD programs have failed to achieve their goal in promoting the well-being of the locals," he told the Post.

The concept of community development should, therefore, be streamlined to allow the participation of the locals in deciding what kinds of programs can suit their needs, he added.

Community development programs that only favor the companies often generate conflict among residents, instead of benefiting them, he said.

"Those who benefit from the program and those who don't often fight each other," he added.

Worse still, according to him, many CD programs were often used only to eliminate the opposition against mining companies, rather than being designed as long-term programs to promote the welfare of the locals, who mostly remained in poverty.