PT Freeport Indonesia’s newly appointed president director, Rozik B. Soetjipto, announced this week that the company is willing to renegotiate its contract with the Indonesian government for the continuation of its giant Grasberg mine complex and for the expansion of underground mining at the site.
In interviews with the Jakarta Post this week, Rozik stressed Freeport Indonesia is racing to secure and build massive underground mining facilities ahead of the depletion of the Grasberg open pit sometime between 2016 and 2017.
PT Freeport is planning to invest between $16 billion and $18 billion to make the shift from open pit to underground at Grasberg, the world’s largest recoverable reserves of copper. “We need certainty over the future of our contract because between 2013 and 2013, we’ll start pouring in investments for the expansion of underground mining at our site,” Rozik told the Jakarta Post.
The existing second generation contract, signed in 1991 will expire in 2021. The Indonesian government has included provisions for two decade-long extensions. The first contract for Grasberg was signed in 1967.
The Indonesian Government is now renegotiating all mineral and coal mining contracts in the country. The key issues being negotiated include the size of mining operations, government revenues and royalties, contract extensions, processing raw materials domestically, obligations to divest a stake to local owners, and the use of local goods and services.
That’s all well and good for the Javanese, the colonial ‘masters’ of West Papua, but this leaves unaddressed the rights and wants of the rightful owners of West Papua’s resources, the indigenous people of what once was West New Guinea. Specifically, while the international community may recognise the Javanese as the rightful rulers of West Papua, is this recognition anything more than a veneer to justify what otherwise would be unjustifiable?
The aforementioned quote, the heading of this post was made by Pastor Neles Tebay to describe the economic carnage created by the reckless/greedy/incompetent Western mining cabal that operates with impunity in West Papua. What has allowed this state of affairs to exist for so long is that our (the West’s) mainstream media, a corporate propaganda machine which is entirely owned by a handful of Oligarchs, Oligarchs whose interests coincide with those of the Hyenas of Corporate Greed, see no benefit in exposing the truth behind the façade of Freeport’s mantra of Corporate and Social Responsibility (“CSR”).
Undoubtedly PT Freeport is one very big Hyena of Corporate Greed, a Hyena that derives about 40 precent of its profits from the slow-motion genocide of the Amungme and Kamoro peoples, the rightful owners of its 250,000 acre mining concession and all the minerals the company removes from that concession.
Let’s consider for a minute the justifications, if any, for allowing PT Freeport to continue its operations in West papua.
Corporate Social Responsibility
The term Corporate Social Responsibility has been in use since the 1950s, but has really come to the fore in the past decade, along with terms such as the ‘Triple Bottom Line’ and ‘People, Planet, Profits’ (i.e. social, environmental, economic). Although CSR is frequently discussed, it is not always clearly defined.
The publication in October 2010 of the International Organization for Standardization (ISO) Guidance on Social Responsibility (ISO 26000), furnished an internationally acknowledged definition. The working group that developed ISO 26000 comprised a broad base of stakeholders across industry, government, labour, consumers and NGOs, with 450 participating experts and 210 observers from 99 ISO member countries and 42 liaison organisations. This inclusive and extensive approach lends credibility to the ISO interpretation of social responsibility:
Social responsibility is the responsibility of an organisation for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that:
• contributes to sustainable development, including health and the welfare of society;
• takes into account the expectations of stakeholders;
• is in compliance with applicable law and consistent with international norms of behaviour; and
• is integrated throughout the organisation and practised in its relationships (ISO, 2010).
The ISO 26000 Social Responsibility Standard is not a management standard, which means that it cannot be used for certification purposes. Nonetheless, it is an important set of guidelines that can help companies, not least minerals companies, achieve their CSR goals.
There is a difference between ‘sustainable development’ and ‘social responsibility’ (ISO, 2010), although the terms are related.
Sustainable development is a widely accepted concept and guiding objective that gained international recognition following the publication in 1987 of the Report of the United Nations World Commission on Environment and Development: Our Common Future. Sustainable development is about meeting the needs of society while living within the planet’s ecological limits and without affecting the ability of future generations to meet their needs. Sustainable development has three dimensions – economic, social and environmental, which are interdependent. For instance, the elimination of poverty requires the promotion of social justice and economic development and the protection of the environment. The importance of these objectives has been reiterated over the years since 1987 in numerous international forums, such as the United Nations Conference on Environment and Development in 1992 and the World Summit on Sustainable Development in 2002.
Social responsibility has the organisation as its focus and concerns an organisation’s responsibilities to society and the environment. Social responsibility is closely linked to sustainable development. Because sustainable development is about the economic, social and environmental goals common to all people, it can be used as a way of summing up the broader expectations of society that need to be taken into account by organisations seeking to act responsibly. Therefore, an overarching objective of an organisation’s social responsibility should be to contribute to sustainable development.
Drawing on these definitions, a socially responsible minerals company will therefore seek to contribute to sustainable development by enhancing social and economic opportunities while taking care to protect the environment. The minerals sector has some particular challenges in achieving these goals, as it cannot function without the initial environmental impact caused by ore extraction and it uses a non-renewable resource, as no ore body lasts for ever.
For these reasons, socially responsible minerals companies will strive to convert exhaustible mineral resources into sustainable social and economic endowments for the communities and countries whose minerals they develop. This could take the form of supporting the growth of businesses independent of the mine and able to survive mine closure, and helping to build healthy communities, able to grow in the long-term.
Socially responsible companies will also seek to establish environmental benefits that go beyond rehabilitation and enhance the environmental values of the places in which they operate. This might entail working with local partners to improve soil and water quality in surrounding areas, eventually leading to increased productivity of natural resources, or it might involve biodiversity or vegetation offsets elsewhere in the country. There is no one exact formula for contributing to sustainable development but there are many opportunities for doing so.
Stakeholder theory holds that effective management requires the balanced consideration of and attention to the legitimate interests of all stakeholders. A stakeholder is defined as anyone who has a stake in or claim on the firm. This has been interpreted to include any group or individual who can effect or who is affected by the corporation. It is perhaps more familiar in its narrow sense in which the stakeholder groups are limited to shareholders, customers, employees, suppliers, management, and the local community. The stakeholder theory asserts that a business’s financial success can be best achieved by giving the interests of the shareholders, customers, employees, management and local community proper consideration and adopting policies which produce the optimal balance among them. This viewpoint seeks to explain current corporate behaviour rather than to argue for a more moral position.
From this inclusive perspective, the corporation exists at the intersection of a range of interests; it is a node in a complex web of social relationships of dependency and expectation. From the managerial point of view, corporate success depends on an ongoing process of stakeholder management in which the interests and demands of stakeholders are identified and dealt with appropriately. In this context, it is not social issues to which corporations respond but rather stakeholder issues. The important task for managers is to identify stakeholder groups (groups that share an interest) and determine the amount of power they, as a group, have.
Theory of legitimacy
Corporations, as one kind of social arrangement, require legitimacy to maintain functional, long-term relationships with various communities on which they depend. This theory originated with Davis’s iron law of responsibility. It states that “… society grants legitimacy and power to business. In the long run, those who do not use power in a manner which society considers responsible will tend to lose it”. Legitimacy is defined as a generalized perception or assumption that all actions of an entity are desirable, proper or appropriate within some socially constructed system of norms, values, beliefs and definitions. Further, a corporation is said to be legitimate when it is judged to be worthy of support. Corporations that lose legitimacy face a variety of difficulties, ranging from punitive legislation to hiring qualified personnel.
Brief History of Freeport’s involvement in Papua
Jean Jacques Dozy, a Dutch geologist, stumbled on a huge slab of black rock while exploring the jungles of Papua in 1936.
I knew in a blink of an eye what this was about. It was hard to miss, with all the green and blue spots,” he wrote at the time. The copper was obvious. I realised that no-one could do anything with it. There were no roads, no harbours, no factories. It was just like a mountain of gold on the moon.
Dozy named his discovery Ertsberg (Ore Mountain) – and his report wound up in the lap of Forbes Wilson, a geologist with the American resources firm, Freeport Sulphur, the predecessor of Freeport McMoRan.
It wasn’t until Suharto took control over Indonesia that Freeport managed to sign what was a controversial but hugely profitable agreement.
The political turmoil in West New Guinea following the withdrawal of the Dutch from their former colonial territory and the subsequent takeover of the region by the left-leaning Indonesian leader, Sukarno meant that in the early sixties Freeport considered any involvement in West New Guinea to be politically and therefore commercially unviable. As a consequence Freeport put the Ertsberg project in the ‘pending basket’. However, following Suharto’s military coup in 1965, during which Indonesia ran red with his opponents blood, Freeport opened negotiations with the victors in Jakarta. Notwithstanding the fact that the political situation in Indonesia was extraordinarily unstable following Suharto’s coup, Freeport decided that the time was ripe to secure favourable terms from Suharto’s illegitimate regime, desperate to establish some semblance of credibility on the international stage.
Even though there was a very big question mark over both the legitimacy of the new regime in Indonesia and the legality of Jakarta signing over Papuan assets, to which it had, at best, only a tenuous entitlement to at international law, in April 1967 Freeport became the first foreign company to enter into an agreement with the Suharto regime. The signing of Freeport’s agreement with the Suharto regime witnessed the beginning of a complex though mutually supportive and beneficial relationship between Freeport, the Suharto regime/Indonesian Government and the Indonesian military (TNI) that has survived even the ousting of Suharto himself.
Pursuant to the terms of the contract between Freeport and the Suharto regime, Freeport was granted exclusive exploration and mining rights for thirty years within a 250,000 acre concession. More significantly, Freeport was under no obligation to the rightful indigenous owners of the land, owners who were excluded from the negotiations. Freeport was under no obligation to pay compensation, nor was it obliged to participate in local or provincial development as would now be required under ISO 26000. There were no environmental restrictions on the mining operation.
By 1988 with the Ertsberg mine nearing the end of its productive life, Freeport announced its plans to start mining Grasberg, only a few miles from Ertsberg. Backed by the political and military might of the Suharto regime, Freeport gained two new contracts granting it exclusive exploration and mining rights to approximately nine million acres of indigenous Papuan land for another 50 years. What Suharto and Freeport shared was a prevailing desire to turn the copper and gold of the Carstensz Range into hard currency and profit as expeditiously as possible. In pursuit of this end, Freeport became Indonesia’s largest taxpayer, the largest employer in the province, and the source of over 50% of West Papua’s GDP.
If not formally part of the arrangements Freeport entered into with the Suharto regime, the company has always welcomed the presence of the TNI in its exploration concession, rationalising that the logistic and financial support for the TNI’s presence and protection is a small price to pay for its operational security. Freeport’s ‘sweetheart’ arrangement with the TNI experienced a moral and ethical hiccup following the publication of the Acfoa report in 1995. The Acfoa report highlighted a number of serious incidents and a history of bad relations between Freeport Indonesia and the local Amungme people whose traditional lands were appropriated when the mine commenced in 1967, two years before the so-called Act of Free Choice which ceded West Papua to Indonesia as its 26th Province. This UN-endorsed process, which many West Papuans consider an injustice, continues to fuel political discontent and an armed movement for independence.
Annexed to the Acfoa report is a list of civilians allegedly killed by The Indonesian National Armed Forces (Indonesian: Tentara Nasional Indonesia, TNI; formerly Angkatan Bersenjata Republik Indonesia, ABRI) between June and December 1994. The list is as follows:
- Bantek Magal (45), Tsinga
- Netsigikal Beanal (42), Tsinga
- Henky Beanal (19), Tsinga
- Yusak Kum (19), Tsinga
- Agawal, primary school teacher, Tsinga
- Gordon Rumaropen (32), Biak tribe, Freeport employee.
Five relatives of Mr Kelly Kwalik (OPM rebels’ leader) who were captured at the Transmigration site in Timika for interrogation and killed by ABRI in Timika.
- Ambrosius Kwalik (age unknown)
- Davianus Kwalik (age unknown)
- Romulus Kwalik (age unknown)
- Marius Kwalik (age unknown)
- Hosea Kwalik (age unknown)
5 December 1994
- Rev Derek Beanal (21), of Kingmi church, Tsinga
- Uljimutme Uamang (19), Hoea
- Uruwal Uamang (about 30), Hoea
25 December 1994
- Nogoigamakme Mom (31), Tembagapura
- Natanewelan Hanggaibak (43), Tembagapura
- Six people of the Dani tribe killed or disappeared on the bus from Tembagapura to Timika on 25 December 1994. Names, age and occupation not available.
- Dani man
- Dani man
- Dani man
- Dani man
- Dani man
- Dani man
Thirteen people captured and arrested after the peaceful demonstration in Tembagapura on 25 December 1994
- Petrus Mabak
- Dominggus Narkime
- Eltinus Omaleng
- Oktovianus Tiwak
- Pius Waker
- Nalmun Narkime
- Junus Omabak
- Silas Magal
- Johnny Beanal (Amungme Freeport employee)
- Deny Ongomang (21)
- Jakobus Magal (22)
- Missing in original (Ed.)
- Komugal (19)
The publication of the Acfoa report left Freeport directly implicated in human rights abuses in West Papua. The end result was that Freeport was left in the ignoble position of relying on the Indonesian military to protect its operation while simultaneously attempting to distance itself from the Indonesian Military’s increasingly well documented human rights abuses. Freeport’s subsequent actions in continuing to buddy-up with the TNI only succeeded in further discrediting the company in the eyes of the traditional landowners.
Freeport insists that it has always been committed to operating in an environmentally responsible way, by adopting home-state standards. However, the history of Freeport’s operation in West Papua shows something different. Freeport’s operating practices demonstrates a disregard for the environment to a degree far exceeding that of its now totally discredited neighbouring mines of Ok Tedi and Bougainville, and would be unacceptable in the US or Australia. Moreover, it is impossible for Freeport to predict what the long term damage of its operation will be.
The concept of stakeholder theory has a lot to answer for in relation to what is going on in West Papua. Stakeholder theory, a term used to justify untold crimes against humanity. Why? Because as stakeholders, indigenous people are deemed to have limited if any power, so their interests don’t count in the final analysis of corporate social responsibility versus stakeholder power.
What has PT Freeport done in terms of meeting the requirements of ISO 26000? By all accounts, nothing! Should it be allowed to continue as puppet master of the illegitimate Javanese regime? That’s a matter of the individual conscience. For my money, the answer has to be no.
 Davis, K.; The Case For and Against Business Assumption of Social Responsibility; Academy of Management Journal, 1973, n.16, p.314