Communities and companies

Down to Earth No 50 August 2001

Violations of community rights are still continuing as companies and regional governments try to maximise income from the country's mineral resources. At the same time, mining companies are complaining about the "legal vacuum" hampering their operations in Indonesia.

Large-scale mining in Indonesia is in 'legal limbo', as the protesting companies see it, because their contracts, signed during the Suharto era, are being nibbled away by the demands of local governments newly empowered by regional autonomy. These local authorities are claiming taxes and making other demands on companies operating in their areas in defiance of central government instructions that contracts signed before decentralisation are not subject to alteration. Recent cases include a dispute between PT Kelian Equatorial Mining (PT KEM), operators of the Kelian gold mine in East Kalimantan owned by Anglo-Australian mining giant Rio Tinto, and the West Kutai district government, which is demanding the payment of more than Rp 4 billion (US $350,000) in local taxes. Company concessions in many areas have also been occupied by small and medium-scale unlicensed mining operations - some of them well-organised, very environmentally damaging and protected by armed guards.

Investment in exploration is reported to be down 90% on pre-crisis figures and unlikely to recover quickly. Australian-owned Aurora Gold, whose Indonesian projects have been marked by conflict, has called Indonesia a "disaster area" for mining companies. It is pulling out of its Toka Tindung gold project in North Sulawesi - but retaining its Mt. Muro gold mine in Central Kalimantan (see below). A number of companies - including Rio Tinto and US-based company, Newmont, are putting pressure on the Jakarta government by saying they will not consider further investment in mining until a clear legal framework has been drawn up.

A new mining law which will replace the 1967 Mining Act is due to be presented to parliament in Jakarta some time this year. But parliament is more concerned with the effort to impeach President Wahid and, after that, the new oil and gas law will take priority.

In April, the World Bank was reported to have insisted on a major revision to the draft law to enable Indonesia to attract more foreign investment. The Bank is also said to be concerned about the delegation of authority over mining from central to regional governments. A promised government decree to limit the transfer of control only to those local governments that were adequately prepared, has not materialised. (See DTE 48)

The major Indonesian NGOs working on mining issues - JATAM and WALHI - are not optimistic that the new law will bring any improvements for communities affected by mining. There are changes to the way companies work in Indonesia with the Contract of Work (CoW) system being replaced by "Mining Venture Licences" (IUP) and "Mining Venture Contracts" (PUP). Concession sizes will also be limited to a maximum of 100,000 hectares for survey and exploration and a maximum of 20,000 hectares for production (until now the exploration area was unlimited and the production area a maximum of 62,500 ha.) Applications for larger concessions may have to be approved by the national parliament. This is likely to anger district governments who will see this as another bid by central government to retain control over the big revenue-earners.

Clearer rules on companies' obligations on human rights, the environment and community development have also been included in the draft law, but there is also provision for continued harsh treatment of people opposed to mining projects. Anyone who attempts to obstruct the surveys, feasibility studies and exploration activities of licensed companies can be jailed for a year. If the company is already in production, they can get prison sentences of up to five years and a Rp 500 million (US $44,000) fine.

Instead of the new mining law, the NGOs want a new comprehensive law on natural resources. JATAM is calling for a moratorium on all large-scale projects and on all new laws affecting natural resources until this has been approved. The natural resources law is needed, they say, to reflect the fact that forests, mineral deposits, farmland, rivers and the marine environment are all interlinked and should be managed holistically. This law would also give the protection of livelihoods and the environment the prominence needed to pave the way for sustainable development in Indonesia.

(Petromindo 8, 24/Jun/01, 23/May/01 28/Apr/01; Jakarta Post 7/Jun/01, Straits Times 24/May/01; Voice of America 7/May/01; via WALHI 30/Mar/01; Dow Jones Newswires 19/Feb/01)

(The draft mining law in Indonesian can be downloaded from JATAM's website at:

Legal uncertainty for communities

The mining industry's plight - the uncertainty about security and the threat to profitability - is only a pale shadow of what communities affected by mining have suffered for decades. Except that in the case of communities, the uncertainty is not about contracts and profits but over their rights to the land and the resources that sustain their lives.

In the chaotic and crisis-hit Indonesia of today, abuses are continuing. Recent cases include:

  • Central Kalimantan, where the long-running dispute between local communities and PT Indo Muro Kencana, operated by Australia's Aurora Gold continues. Aurora is 35% owned by Rio Tinto. In June, two small scale miners were found dead in a former mining site at Kerikil after an armed mobile brigade police raid. A member of one of the dead men's family said the police did not fire in the air, but straight into the pit.
  • East Kalimantan, where Dayaks have filed a complaint with the national human rights commission (Komnas HAM) against coal mining company PT Gunung Bayan Prima over pollution and intimidation of local people.
  • South Kalimantan, where indigenous Dayak villagers and local NGOs are struggling to stop mining and logging in the Meratus mountains, an area of protected forests also threatened by logging (see forests article). One of the mining companies involved in this project is Canada's Placer Dome, notorious for the Marcopper tailings dam disaster in the Philippines (see our website:

    Unlicensed mining

    Unlicensed medium-scale operations have become a major player in the mining sector since the fall of Suharto in 1998. These outfits, whose operations are often controlled by the military and backed by corrupt local government officials, are taking advantage of the legal vacuum to take over parts of licensed company concessions. In North Sulawesi, the Talawaan area - officially part of Aurora's concession - has been occupied by thousands of people working for gold mining outfits run by local entrepreneurs. These operations, which use large quantities of mercury to extract gold from the ore, are polluting the water courses and poisoning their workers. The local authorities are either powerless or unwilling to shut such operations down.

    (See Time Asia, 28/May for lengthy report on unlicensed mining in Talawaan.) (Petromindo 21/Jun/01; Kalimantan Post, Banjarmasin Post, Radar Banjar6/Jun/01; Kapos 9/Jun/01)


    Protected forests

    The legal status of concessions overlapping with protected forests remains unclear. This is despite December's announcement by the junior forestry minister, (then Nurmahmudi Ismail) that companies who received contracts before the 1999 forestry law could continue with mine development in protected forests. The law bans open-pit mines in protected forests. NGOs were alarmed by the news last year that the government was reviewing this restriction (see DTE 48 and 47).

    According to the Indonesian mining advocacy network, JATAM, the department of energy and mineral resources has already issued permits for 150 mining companies to operate within protected forests and conservation areas. In April this year, however, Indonesian Mining Association, director Paul Coutrier, complained that 120 mining companies and US $200 million to $300 million in mining investments were stuck in legal limbo because of the forestry law ban. Government assurances that they could go ahead had had no effect in the field, he said, where many mining companies "face harassment by government officials who take the law word by word."

    Cases of overlap include:

    • BHP's Gag Island nickel project, near West Papua, where the Australian company has not yet secured the required permit from the forestry department;
    • Indonesian mining magnate Yusuf Merukh's East Java gold-mining project, which overlaps with the Meru Betiri National Park (see DTE 48:6);
    • PT Citra Palu Minerals' concession which overlaps with the Poboya-Paneki Forest Park in Central Sulawesi. Rio Tinto recently sold its stake in PT CPM to the Australian company, Newcrest. (See Kerebok for more details on the NGO struggle to stop mining in the park

      (Petromindo Dec/5/00, 1/May/01 Jakarta Post 25/Apr/01, Kerebok 10)


    International solidarity

    Two recent meetings have enabled communities directly affected by mining companies in different countries to discuss ways to counter the harmful impact of large-scale mining and to draw up strategies to prevent future damage.


    Manado STD conference
    In April, a major conference on the problem of submarine tailings disposal (STD) was held in Manado, North Sulawesi. It was attended by participants from the Asia-Pacific region, North America and the UK. The resulting 'Manado Declaration' calls for a world-wide ban on STD and demands that mining companies and their consultants:

    • acknowledge the environmental, social, cultural and health consequences of their past and current use of STD;
    • accept liability for the damage already caused by STD;
    • apply the same standard of environmental management in the Pacific region as they are required to practise in their home countries.
    STD is the method used by both of Newmont's mines in Indonesia: Newmont Minahasa Raya's gold mine in North Sulawesi and Newmont Nusa Tenggara's Batu Hijau gold, copper and silver mine on Sumbawa island. Planned mines which are expected to use STD in future include Weda Bay Mineral's nickel and cobalt mine on Halmahera Island, North Maluku; BHP/Billiton's Gag Island nickel project, the Toka Tindung gold project in North Sulawesi and PT Banyuwangi Minerals and PT Jember Metals' proposed gold mine in East Java (see DTE 48).

    The Manado conference was successful in raising the level of debate about the use of STD in Indonesia and, along with a sustained campaign on the impact of the North Sulawesi operation by NGOs, has forced Newmont further onto the defensive. In May, environment minister Sonny Keraf announced he would not issue more STD permits, saying that "two are enough". The same month Keraf rejected Newmont's Environmental Risk Assessment (ERA) because the company did not use the assessment procedures agreed with the Indonesian government. The ERA - a study required to secure a permit for its tailings disposal - should have been done before operations started but, in Newmont's case, is being done years after commercial production began. In the meantime, both the company's mines have temporary permits for dumping waste under the sea. Keraf has acknowledged that the issuing of these permits was not based on a thorough study.

    Not surprisingly, the industry is opposing moves to curb STD. In June the Indonesian Mining Association called on the government not to ban the practice, claiming it would be bad for mining development in the country, particularly in the resource-rich provinces of eastern Indonesia and Sumatra.

    (Petromindo 22/Jun/01, 8, 23/May/01; Jakarta Post 25/Jun/01)

    More information on STD

    The full declaration and more information about the conference is on the JATAM and MPI websites at and or visit our web-page for link to conference site. 
    A short version of Nostromo Research's background paper on STD is on DTE's website in English at and in Bahasa Indonesia at The full paper has been published in book form and is available from DTE. Contact


    London mines and communities meeting
    A five-day seminar for communities affected by mining was held in London in May. The workshop heard accounts of communities' experiences of mining from Colombia, India, Indonesia, Ghana and Peru. Other participants made contributions on the usefulness of mounting legal challenges against companies in their home countries, the question of engagement with mining companies and the particular impact of mining on women. The workshop was organised by Christian Aid, Partizans, PIP Links and Society of St Columban.

    A mines and communities website has been set up to serve as a communication point for communities affected by mining. The 'London Declaration' which resulted from the meeting will be availble soon at this site:

    PT KEM agreement

    Pressure from communities, Indonesian and international NGOs has forced improvements in the way Rio Tinto deals with people affected by its Kelian gold mine in East Kalimantan. Here, Dayak communities have persisted in asserting their rights to proper compensation for land resources lost to the mine and for the ill-treatment at the hands of the company. This was despite years of intimidation from security forces and the company's failure to stick to negotiation agreements. (See DTE 47 for an account of the negotiation process until Nov. 2000).

    With a change of management at PT KEM this year, negotiations with the local community represented by LKMTL were reopened in March, and environmental NGO WALHI agreed to re-enter the process. Some agreement has been reached on the payment of compensation, although this has yet to be confirmed by the Dayak community. The issues covered in the discussions range from outstanding land compensation claims to losses caused by dust pollution from company vehicles. Recommendations for action on human rights abuses, including sexual abuse by company staff, are expected to be put forward by a National Human Rights Commission team in the near future.

    The company is making full use of the publicity opportunities provided by the successful outcome of the negotiations - motivated by the fact that the mine is due for closure in three years and by the need to make the first major mine closure in Indonesia a public relations success. The real test will be in how the agreement is implemented.

    Another series of negotiations concerned with mine closure opened this year, but WALHI, who was invited to participate, walked out of a May negotiation in protest over the process, which failed to allow time for WALHI's concerns over environmental issues to be properly discussed (see WALHI letter to PT KEM Mining Closure Steering Committee at Kelian 25/May/01)

    Rio Tinto's other East Kalimantan operation, Kaltim Prima Coal, has been hit by a succession of labour and land disputes which forced the company to cut output. (See also DTE 47)

    Rio Tinto's investments in the two mines total US $2 billion. The company also has a 13% shareholding in the notorious Freeport mine in West Papua (see DTE 49) and other exploration ventures. Through its acquisition last year of Ashton Mining, it holds a 35% share in Aurora Gold and therefore shares responsibility for violent confrontations between community and police at the PT Indo Muro Kencana mine in Central Kalimantan. (Petromindo, 20/Jun/01,Tempo Magazine 4/Jun/01, via WALHI 30/Mar/01)

    Inco protest

    Protests against the Canadian-owned mining company, PT Inco Indonesia have highlighted the continuing injustices suffered by villagers whose lives have been affected by the company's nickel mining operations. In May, villagers from Soroako, the site of Inco's existing mine and smelting operations in South Sulawesi, demanded a renegotiation of the company's contract. They want local people to play a decisive part in drawing up a new one. Communities from Bahumotefe in Central Sulawesi whose lands have been slated for future development are rejecting mining in their areas. Villagers from One Putih Jaya - a former transmigration site - are refusing to relocate to fit in with Inco's mining plans. The village falls within the company's Central Sulawesi concession. Their demands for land certificates to confirm their ownership of the site have been stalled by the local authorities.

    (Source: Pernyataan Bersama, 10/May/01; Pernyataan Sikap Bersama, Kronologi Kasus, forwarded by Yayasan Tanah Merdeka, May 2001)

    For more background on Inco see also PT Inco: siapa unting, siapa buntung? Anto Sangaji, and Inco updates on our website For an analysis of Inco's contract, lack of tax payments and reasons to renegotiate see Agenda Tersembunyi di Balik Kontrak Karya dan Operasi Tambang INCO di Sulawesi, Chalid Muhammad, JATAM 2001 and Kerebok Vol 2, 10 May 2001 at