The empowerment of local communities

Sudibyo M. Wiradji, The Jakarta Post, Jakarta

Community development (CD) programs have become an integral part of the operations of oil, gas and mining companies.

The programs are developed not only to reduce the social impact of these companies' operations, but also to empower the residents living near their operation sites.

"By supporting and developing their livelihood, we expect local people to have more job opportunities," said the external relations manager of Caltex Pacific Indonesia, Edwin Abdulmuthalib.

Caltex, a subsidiary of U.S.-based Chevron Texaco, operates in Riau province. Its contact of work for the Rokan oil block runs through 2021.

As of 2004, Caltex had spent over Rp 100 billion on entrepreneurship training programs for small businesses and cooperatives under the Business Development Institution (LPB) initiative. The LPB was introduced in 2001.

At least 500 small business owners, including farmers, cattle breeders, fishermen and weavers, have taken part in the LPB initiative, Edwin said.

Local businesses have grown significantly thanks to the training programs, and many of these businesses now provide jobs for hundreds of locals.

"Slowly but surely, local people are expected to be self- reliant and Caltex will play a role as the driving force," he said

Since its operations in Riau province began in the 1950s, Caltex has designed and implemented numerous CD projects, with the construction of infrastructure such as roads and bridges being the top priority in the earlier years.

In cooperation with the local government, Caltex has also built a polytechnic college in Riau to help meet the growing demand for graduates ready to work in the heavily industrialized province.

Over the past five years, the United Kingdom-based Premier Oil, which operates the Anoa oil field in the West Natuna Sea in the Riau Islands, has designed training programs to help the local community to learn new job skills.

Together with the West Natuna consortium, Premier Oil provides training to residents of Matak island and surrounding areas like the Anambas islands and Natuna. This training includes mechanics, carpentry and sewing.

According to an agreement with the local government, the program will eventually be turned over to the local manpower agency, said Premier Oil vice president for general affairs Sonny Kosasih.

Also, kindergartens have been established by several villages close to the operation site of Premier Oil following the establishment of the Anoa preschool by Premier Oil on the island of Matak.

Meanwhile, mining companies like gold and copper producer PT Freeport Indonesia and coal producer PT Adaro Indonesia have encouraged locals to develop businesses outside of the mining industry.

In 1996, Freeport established a partnership fund for community development programs. Freeport and its joint venture partners contribute 1 percent of revenue from their operations to benefit the local community.

"Contributions to the fund in 2004 reached US$19 million. Total contributions since the inception of the fund amount to nearly $152 million," said Freeport senior manager for corporate communications Siddharta Moersjid.

Some of that money has been used to finance the construction of an ice factory and processing facility to help Kamoro fishermen near the company's mine in Timika regency develop their businesses.

Kamoro fishermen are given training to help them run their businesses and export their catches.

Freeport has also developed an integrated animal husbandry and poultry production center in the regency's lowlands to help local businesspeople increase their income.

Freeport has also set aside funds for closure programs when the company ends its operations in the area, which should be in 2041.

"We have set aside adequate financial resources to pay for the decommissioning of operating assets and reclamation costs," he said.

For PT Adaro Indonesia, it is important to ensure that products produced by small-scale businesspeople are marketable and able to sell. That's why the company involves the Astra Assistance Fund Foundation (Yayasan Dana Bantuan Astra, YDBA) in providing training in management, marketing and improving product quality for local small-scale businesspeople.

"YDBA has experience and expertise in this subject and we can take advantage of its network for the benefit of local small- scale businesspeople," said Adaro Indonesia's administration manager, Priyadi.

Adaro Indonesia operates in Tabalong and Balongan regencies in South Kalimantan and Hulu Sungai Utara in East Kalimantan. Most of the residents near its operational sites work on plantations, breed cattle or produce furniture.

Priyadi said more local people had access to jobs thanks to training programs introduced by the company three years ago.

Adaro allocated about Rp 8 billion for its CD programs for 2005.

Meanwhile, mining companies that have closed their operation sites are responsible for the fate of local people surrounding the area. Apart from CD programs that were implemented when the companies were in operation, they also introduce other programs to ensure that local people will not be adversely affected by the closures.

PT Newmont Minahasa Raya (NMR) -- which operated a gold mine in Ratatotok village in North Sulawesi and is currently completing its mine closure activities there -- is developing the businesses of residents as part of its social and economic commitments.

Newmont's senior manager for external relations, Robert Humberson, said in 2002 that NMR had introduced microfinance or microcredit programs in response to capital shortages faced by the communities of Ratatotok, Buyat, Basaang and Belang.

A lack of capital had hampered the development of local businesses, he said.

Many local fishermen, farmers, cooperatives and enterprises have taken advantage of the loan facility.

Humberson said the program had proven beneficial to local people and would continue to do so in the future.

Citing an example, he said Kelompok Wanita Nelayan Damai organization in Norgo Village, Belang, which took advantage of the microcredit facility, was able to develop the businesses of its members who work as fish traders.

"They have also contributed to community development by building a kindergarten for their children," he said.