14.06.2014 Author: Natalia Rogozhina

The American Company Freeport And Their Activity In Indonesia: The Social And Ecological Cost

The world’s largest company mining gold and copper, U.S. based Freeport-McMoRan Copper and Gold Inc., has been is firmly established in the Indonesian province of Papua since the 1960s. As per the terms of its most recent contract, Freeport’s presence in Indonesia has been extended to 2021 with the possibility of it being extended for another 20 year period. However, for several decades its activity in Indonesia has been linked to human rights violations, environmental pollution, and corruption of the Indonesian military and of political authorities in the country.

As per the terms of contracts between Freeport and the Indonesian Government, during the reign of President Suharto, the company had to provide housing and transportation for government officials and security forces engaged in providing security and protection of their projects. The latter was a necessary measure due to mass protests of the local population, whose discontent was caused by forced relocation from traditional homelands and the violation of their rights. The use of military force in suppressing the resistance of local residents led to the deaths of innocent unarmed people, but did not produce the expected result. Papua province has become one of the most militarized regions of the country with forces positioned to suppress local uprising on Freeport bases of operation. The Indonesian military, providing security to the company, received from it a wide range of illegal payments, which for the period from 1998 to 2004 amounted to 20-30 million dollars. In addition to this sum, it is worth adding another 35 million that was used in the recruitment of former CIA personnel and ex U.S. military types to provide security.

Freeport’s internal security forces are accused of being responsible for carrying out killings, abductions, rape, torture and persecution. And the Indonesian army, using vulnerable local residents, imposed a tax for the so-called protection of Freeport, whose interests she actively served and enriched by access to its resources and allowed it to conduct illegal business, which, in 2005, was estimated at 8 billion dollars.

The dissatisfaction of the local population on the company’s activity was not limited to its social oppression. An even greater threat to its existence was represented in the form of Freeport’s anti-ecological activity. Most of all, it was related to the development of the field at Grasberg and the discharge of waste material in violation of international standards of environmental safety dumped in open ponds causing widespread contamination. As a result, it created a high risk environmental zone that included 84 thousand hectares of marine land and 35 thousand hectares of coastline, including the park reserve of Lorentz. By the time the project is completed in 2021, the river system will have taken in 6 billion tons of toxic substances, which represents a particular threat to the existence of the local population who engage in hunting and fishing in the area.

In support of the rights of the local residents suffering from anti-social and anti-ecological policies of the company, local NGOs and associations united in the Indonesian Environmental Forum – WALHI, who used its connections with international organizations to urge the company to fulfill its environmental and social obligations to the Indonesian society. Freeport became the object of international criticism, including from international financial institutions providing it with financial resources. The company had to review their policies and take some steps to improve its image, to observe environmental requirements and the implement social programs in relation to the local population. This was further facilitated by the changes in the political situation in Indonesia after the fall of Suharto. As a result, Freeport lost its traditional political support in the form of another governmental structure.

As of today, there are significant changes in the activities of multinational companies, which under pressure from international public opinion are forced to adapt to the new requirements of sustainable development. Freeport, being a member of the International Council of the mining industry, must decide for themselves new social and environmental objectives within the framework of voluntary commitments.

Despite the fact that Freeport declares its compliance on principles of transparency in its financial activity, however, there are many who doubt it has ceased its habitual practice of bribing Indonesian officials and the military. And although Freeport remains under scrutiny from social and human rights organizations in Indonesia and abroad, it must constantly provide to the court of public opinion assessment reports on their social and environmental performance, nevertheless it is still a “state within a state.” And it is the particular position of the company in Indonesia, promoted by the U.S. government, which is unlikely to change before 2041, when, according to current projections, the company will be forced to close its biggest mine due to the depletion of its reserves. But who knows, maybe by that time it will have opened a new large field, the chance of access to which the company is unlikely to miss. But what are the social and environmental costs the Indonesian people will pay for this?

Natalya Rogozhina, Ph.D of Political Science, Senior Research Fellow at Institute of World Economy and International Relations, RAS especially for the online magazine “New Eastern Outlook”.

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