The thorns in the sides of the oil and mining industries
The thorns in the sides of the oil and mining industries
By Johannes Simbolon
JAKARTA (JP): The country's oil and mining industries was in
deeper trouble this year as local communities, supported by non-
governmental organizations, continued their attack on the
industries amid the lingering reform euphoria.
Local communities, who had gained little from the development
of oil and mining resources in the more than three decades of
former president Soeharto's administration, blamed their poverty
on the industries. They are demanding compensation for loss of
their land and livelihood.
The conflicts between local communities and investors surfaced
after the resignation of former president Soeharto in the middle
of 1998 and continued with greater intensity last year.
But, this year, Irwan Prayitno, head of the House of
Representatives' Commission VIII for mines and energy, science
and technology, and environment said, conflicts in the mining and
energy sectors had become worse, citing various cases of arson,
blockades and violent demonstrations by workers.
"I agree that conflicts in the oil and mining industries have
been on the rise this year," Irwan told The Jakarta Post.
"This is not a happy year for the industries," Paul Louis
Courtier, executive director of the Indonesian Mining Association
(IMA) told the Post in his private capacity.
Among the major conflicts that gained media attention this
year are the legal battle between the Minahasa regency in North
Sulawesi and gold mining company PT Newmont Minahasa Raya; the
land dispute between gold mining company PT Kelian Equatorial
Mining (KEM) and the local communities in Kutai, East Kalimantan;
the environmental dispute between oil and gas company PT Unocal
Indonesia and the villagers of Marangkayu, East Kalimantan; and
several disputes between PT Caltex Pacific Indonesia and the
locals in Riau.
Labor protests occurred, among others, at Caltex; coal mining
company PT Kaltim Prima Coal (KPC) in Sangatta, East Kalimantan;
and oil and gas company PT Vico Indonesia, also in East
Kalimantan.
All the labor protests were staged by workers grouped in the
Indonesian Prosperity Trade Union (SBSI), while protests by
villagers gained support from a number of non-governmental
organizations, including the Indonesian Forum for Environment
(Walhi) and the Mining Advocac Network (Jatam), according to the
media reports.
Intervention
The tax dispute between the Minahasa regency and Newmont
looked "special" as it was the first case in the country's mining
history where a regional administration sought to settle its
dispute with a foreign investor in court.
Many regional administration leaders have publicly voiced
their criticism of foreign mining operations in their respective
areas, but they talked to the press and never tried to seek a
legal solution to the matter.
Minahasa regent Dolfie Tanor filed a lawsuit against Newmont
last year, demanding the company pay Rp 19 billion (US$2.02
million) in overdue taxes on building materials to the regency.
The regency maintained in its lawsuit that Newmont had used
the building materials in its overburden, but Newmont said it had
not made use of the overburden and had to remove the it to access
the gold deposit.
The regency hired one of the country's most prominent lawyers,
OC Kaligis, to represent it in the legal battle.
The country's mining industry was shocked early this year when
the court in Tondano ruled in favor of the Minahasa regency,
ordering Newmont to close its gold mine.
The central government intervened by asking the Supreme Court
to annul the district court's decision in response to the
investors' outcry. This was despite the promise made by President
Abdurrahman Wahid in the early days of his presidency that his
government would support judicial independence.
Many parties, including legislators, praised the government's
move.
Newmont and the Minahasa regency finally reached an out-of-
court settlement in April, where the regency agreed to drop its
lawsuit if Newmont paid $500,000 in overdue taxes and compensated
the regency. The compensation included community development
programs.
Lawyer Todung Mulya Lubis regretted the government's move in
asking the Supreme Court to annul the decision by the Tondano
district court, saying the move was reminiscent of the New Order
era of former president Soeharto, during which the government
often intervened in court decisions.
Lubis noted however the government's move was understandable,
in view of the fact that the country very much needed foreign
investment and its legal system was still far from being clean,
independent and impartial.
But, he warned the government not to repeat the move in
future.
"Hopefully, the government's intervention in Newmont's legal
battle will be its last intervention," Lubis said in an article
in Kompas daily in April this year.
After the Newmont case, the central government appeared
reluctant to intervene in other conflicts in the oil and mining
industries.
It, at most, called on the disputing parties to resolve their
disagreement through dialog mediated by the local government.
That was what the government did when striking workers
blockaded KPC's coal mine and Vico's operations in East
Kalimantan or when villagers attacked Caltex's operations in Riau
in the second half of the year.
KPC was forced to halt its operations several times and
declare force majeur on its coal sale-purchase contracts with
buyers after its workers, grouped in the SBSI labor union,
occupied its production facilities in July and August, to demand
for higher salaries.
The workers ended their strike following negotiations between
the company, SBSI and the local government.
Meanwhile, the protests by workers of Vico's contractor, who
are demanding higher salaries and permanent jobs at Vico, are
reportedly still continuing.
Caltex is also struggling to resolve a dispute with thousands
of workers of its contractors, who are demanding better wages and
permanent jobs in the joint venture projects of American oil and
gas companies Chevron and Texaco.
Aside from the labor protests, Caltex, which accounts for more
than half of the country's 1.3 million barrels per day oil
output, was also hit by several violent protests by villagers
this year.
In one of the protests, a group of farmers, who claimed to
have received very low land compensation from Caltex, set ablaze
four oil wells belonging to the company in November.
Frustration
Former minister of mines and energy Susilo Bambang Yudhoyono,
who is now coordinating minister for social, political and
security affairs, blamed the rising conflicts in the oil and
mining industries on an international conspiracy which sought to
close down all major mining operations in the country.
He said the international movement used old land disputes, and
environmental and wage issues to provoke workers into carrying
out hostile actions against mining operations across the country.
"There is a suspicion that an international antimining
movement is behind the growing conflicts in mining operations,"
he said.
He refused to name the antimining group.
But, Irwan and Coutrier said the conflicts mainly stemmed from
the decades of frustration of the local people over the unfair
distribution of revenues from the development of their natural
resources.
"The protesters are actually demanding justice. But,
unfortunately, some of them have taken improper steps, like
blockades and arson, to push for their demands," Irwan said.
Both Irwan and Coutrier shared the optimism that the conflicts
pitting mining investors against local communities could be on
the wane after the decentralization program begins next year with
the implementation of Autonomy Law No. 22/1999 and the
Intergovernmental Fiscal Balance Law No. 25/1999.
Under both laws, which are to be implemented on Jan.1, 2001,
regional administrations will manage their natural resources and
receive a greater share of the government's revenue from the
development of the natural resources.
Under the laws, regional administrations will get 15 percent
of the government's oil revenue, 30 percent of its gas revenue,
and 80 percent of the mining royalties payable by contractors to
the government.
"People in the regions will for sure turn friendly to the oil
and mining investors in their areas once they are able to benefit
from the rise in their regions' revenue, thanks to the
decentralization program.
"What all stakeholders in the industries have to do now is to
make sure the decentralization program succeeds," Coutrier said.
He said he believed unruly labor protests, which were rampant
this year, could also decrease next year as workers would realize
that such actions would only hurt their companies and they could
lose their jobs because of it.
Irwan said in order to make the decentralization program
succeed, regional administrations should introduce bylaws which
ensured fair distribution of revenue to the people.
"If that happens, I am sure the situation in the country's oil
and mining industries will be better next year," Irwan said.