Security for investors

Security for investors

Minister of Defense Juwono Sudarsono's call to mining
companies to cooperate with the military and police to protect
their businesses from rioters and looters is so far the strongest
stance ever taken by the government to defend the business sector
from disorder and lawlessness. But Tuesday's move, which simply
reflects the government's desperation of its inability to
maintain security and order in many parts of the country, could
dangerously be taken by businesspeople as a license to hire
security forces for their own interests.

Juwono acknowledged that the military and police are so
overstretched and inadequately funded that they simply cannot
maintain security throughout the sprawling archipelago. Even
though he referred only to mining companies as he was speaking at
a mining and energy conference, security problems have been
adversely affecting most other resource-based enterprises,
including plantations, which are located in remote areas. In
fact, gun-wielding guards patrolling plantations and mining areas
have been familiar scenes in Irian Jaya, Kalimantan, Sulawesi,
Maluku and Sumatra since mid-1998, soon after the fall of former
president Soeharto.

While Indonesia takes its first step toward devolving more
power to local administrations and most people are still mired in
economic suffering caused by the financial crisis of 1997, mining
and plantation companies are among those which mostly bear the
brunt of resentment from locals who despise big investment
ventures in their areas as outside exploitation of their wealth.

Many mining and plantation companies have been facing a rash
of arbitrary claims for special payments, additional land
compensation, back taxes or more generous community development
funds from locals and sometimes administrations. In part, these
claims were prompted by the centralized business-licensing
policies of the New Order authoritarian government which were
based largely on greed, arrogance and cronyism and which
completely disregarded the interests of locals. But many claims
were simply cooked up by those intending to benefit from the
seemingly slackening spirit of law enforcement and lack of firm
action on the part of the demoralized military and police.

Recent harassments of Kaltim Prima Coal in East Kalimantan,
Newmont gold company in North Sulawesi, Caltex in Riau, Indo Muro
Kencana gold mining company in Central Kalimantan and widespread
raiding of oil palm and rubber plantations in Sumatra are only a
few examples of the virtual breakdown of law and order. Ethnic
and sectarian violence in several provinces also severely
disrupts production operations.

This chaotic condition should obviously be brought to order,
otherwise not only will new potential investment, sorely needed
to fuel the economic recovery, continue to shun the country, but
the billions of dollars of investment already sunk in local
resource development could be damaged and eventually abandoned to
waste.

But while firm military and police action or the deployment of
private security guards could be helpful to protect enterprises
from security disturbances, the "license" for private companies
to hire security forces is highly prone to abuse either by the
military or police, which badly need an additional source of
income, or by greedy businesspeople trying to quash legitimate
claims from locals or trade unions. More clear-cut rules are
therefore needed to safeguard what Juwono stated as cooperation
between businesses and the military or police. All taxpayers,
not only corporations, should equally be entitled to protection
by the military and police.

Businesses' calls for military or police measures to cope with
violence should be considered mostly as a contingency action to
extinguish the fire. It is more important though for companies
and the government to do their part in a joint fire-prevention
program.

This means that companies should always profess good corporate
governance to keep employees comfortable and to make local
community and administration hospitable to their operations. It
is an approach to prosperity, not security, that is the most
effective protection for businesses in the long term. On the
other hand, the government should work harder to improve the
credibility of its law enforcement system to encourage people,
including trade unions, to settle their claims or disputes
through the proper legal channels.