Empowering the economy of local communities

Empowering the economy of local communities

Sudibyo M. Wiradji, Contributor, Jakarta

Oil, gas and mining companies operating in remote areas in
Indonesia cannot separate their presence from the existence of
the communities surrounding their operating sites.

The principle of growing together with the community has been
adopted by many natural resource-based companies in their efforts
toward empowering the economy of the local communities.

But due to the lack of guidelines from the government, the
community development programs carried out by such companies
often do not touch the real needs of the local villagers.

This might be one of the underlying reasons behind the planned
enactment of a new mining law now being debated at the House of
Representatives (DPR). Unlike the current law, the new
legislation will formally outline the responsibility of mining
companies in conducting their community development programs.

At present, the community development programs that should be
carried out by mining companies are contained in their respective
work contracts. Besides being too general, the guidelines stated
in the contracts are mostly focused on environmental issues
rather than the empowerment of the local communities' economy.

Oil and gas companies which operate under a different law also
lack guidelines to properly carry out their community development
efforts. But compared to the mining companies, oil and gas firms
have clearer directives.

Starting last year, oil and gas companies operating under the
product-sharing scheme with state-owned oil company Pertamina
carried out their community development programs under the
directives issued by Pertamina.

The guidelines were issued in January, 2002 in response to the
enactment of Law No. 22 /1999 on regional autonomy and Law No.
25/1999 on equitable distribution of income between the central
and regional government and the enforcement of Law No. 22/2001 on
oil and natural gas.

The guidelines outline community development programs,
starting from the meaning, mission, objective, strategy,
principles, implementation stages, scope of activities,
priorities for program implementation to organizations and the
forms of coordination in the implementation of community
development programs.

In the scope of activities, for instance, the activities are
divided into several areas with their respective activities. In
the economic sector, the activities should include assisting
cooperatives and small-scale businesses in developing their
businesses and assist in providing infrastructure for agriculture
and fisheries. In the education sector, the activities include
the provision of scholarships and repairing or constructing new
schools. In the health sector, activities include building and
repairing health facilities, providing health services and
supplying medicine.

The guidelines also stipulate that the needs of the community
directly impacted by the operation should be prioritized. While,
the second priority goes to the community indirectly impacted by
the operation.

The government's plan to formally include the regulation on
community development programs in the new mining law is seen by
mining circles as a positive development.

"This demonstrates the growing importance of community
development as a critical and integral part of responsible
mining," said PT Newmont Nusa Tenggara's (NNT) Senior Manager for
External Relations, Robert Humberson.

Despite the absence of a government regulation on community
development programs, many oil, gas and mining companies such as
PT Caltex Pacific Indonesia, PT Newmont Nusa Tenggara, ExxonMobil
Oil Indonesia Inc., PT Kaltim Prima Coal, PT Freeport Indonesia
and BHP Indonesia have made significant efforts to empower the
economy of the communities located near their concession areas.

To Caltex Pacific Indonesia (CPI), community development
programs date back to the 1950s when CPI was operating under the
name Caltex Petroleum Oil Company (CPOC).

"The construction of Pekanbaru Senior High School (SMA) I in
1954 was the company's first and earliest community development
program," said PT CPI's spokesman Djati Susetyo.

The company's community development projects in the early
1950s included the construction of a 180-kilometer long road
connecting Pekanbaru and Dumai. In 1977, the company built the
Siak I Bridge.

Its community development program for 2001-2002 includes the
provision of Magister (S2) scholarships for lecturers in Riau,
training for teachers, librarians and laboratory assistants for
senior high school. The program also includes assistance in the
form of school equipment, laboratories and library books, foster
parent programs, community health services and water sanitation
facilities. Caltex spends between US$3 million and $5 million per
year on such projects, which comes from its operational budget.

PT NNT's community development programs focus on five
integrated areas, including public health, agriculture, local
business development and education.

"Our agriculture programs involve over 2000 local farmers to
increase production through education, improved farming
techniques and crop diversification, " Humberson said.

In education, activities include improving the quality of
education through teacher training, textbook assistance, and a
province-wide scholarship program. "We provide over 400
scholarships at secondary and university level. We also have an
ongoing functional literacy program reaching over 140 villagers,"
he said.

To ensure long-term sustainability, PT NNT provides training
and institutional strengthening of village institutions, local
businesses, local NGOs, and other program partners.

"Commitment to the community in terms of the environment and
social responsibility is part of our core business," Humberson
said.

NNT also works closely with the local community and local
government to avoid duplication and to ensure greater program
effectiveness, synergy, and long-term sustainability.

PT Kaltim Prima Coal (KCP) believes that its business success
is closely linked to harmony in the workplace, community
relations and the quality of the environment in which they
operate.

The East Kalimantan-based coal mining company's community
development programs include cooperation with local universities
in research, education and health.

Meanwhile ExxonMobil Oil Indonesia Inc., which has been
operating in Aceh province since 1968, has been working with many
different agencies and local communities to initiate a broad
range of community projects like providing jobs, building roads,
schools, public halls and mosques.

"Local villagers are provided with quality health services
through the Civic Mission Clinic located near the Arun Field
operations," said ExxonMobil Oil Indonesia Inc.'s media relations
officer Deva Rachman.

For BHP Indonesia, educational activities and the empowerment
of the local economy are an important part of the company's
community development programs.

The company said that it has also worked with Kalimantan's
Wanariset Tropical Research Center in bringing tropical species
into land rehabilitation efforts. To strengthen the economy of
communities around its sites, BHP cooperates with South
Kalimantan's UNLAM University in the project.

BHP's mine-rehabilitation program in Kalimantan involves the
local community growing seedlings for land vegetation.

PT Freeport Indonesia's senior manager for corporate
communications Siddharta Moersjid disclosed that since the mining
giant began development activities more than 30 years ago, it has
invested $5 billion for infrastructure both for the use of the
company and for the public in southern Papua.

The development projects include the construction of roads, an
airport, heliports, an electrical distribution system and a
modern communication system. "To assist the local people in
Papua, PT Freeport Indonesia has built hospitals, schools, places
of worship, housing and community facilities," he said.

Since 1996, PT Freeport has committed 1 percent of its gross
revenue for the benefit of the local community through a vehicle
called the Partnership Fund For Community Development.

"PT Freeport Indonesia has worked for years to support the
creation of an integrated and coordinated health care system
capable of delivering comprehensive and competent and sustainable
medical services to the local Papuans, both in the highlands and
lowlands," Siddharta said.

But implementing community development programs is not without
constraints or challenges. Misperceptions, limited data and
information in developing programs, limited manpower and
competency, conflict of interests within the community and
different expectations from different community segments have
been cited as among the constraints in the implementation of
programs.

"The greatest challenge is in managing community expectations.
We tackle this by fostering a 'can do' culture amongst the
community, by channeling community aspirations through existing
government budgeting/ planning processes and by providing the
tools and encouragement for the community to work together as a
means of finding creative solutions," Humberson of PT NNT said.