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.