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.