The Politics of Power: Freeport in Suharto's Indonesia 9780824844417

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The Politics of Power

The Politics of Power Freeport in Suharto^s Indonesia

DENISE LEITH

University of Hawai'i Press Honolulu

© 2005 University of Hawai'i Press All rights reserved Printed in the United States of America 08 07 06 05 04 03 6 5 4 3 2 1 Library of Congress Cataloging-in-Publication Data Leith, Denise. The politics of power : Freeport in Suharto's Indonesia / Denise Leith. p. cm. Includes bibliographical references and index. ISBN 0-8248-2566-7 (pbk. : alk. paper) 1. Freeport Indonesia, Inc. 2. Freeport-McMoRan Copper & Gold Inc. 3. Irian Jaya (Indonesia)—Economic conditions. 4. Indonesia—Economic policy. 5. Indonesia—Politics and government—1966-1998. 6. Soeharto, 1921- I. Title. HD9506.I5 F745 2002 995.1'037—dc21 2002005964 Photographs by Denise Leith University of Hawai'i Press books are printed on acid-free paper and meet the guidelines for permanence and durability of the Council on Library Resources. Designed by Bookcomp, Inc. Printed by Versa Press

For the West Papuan people, who because of the West's indifference continue to live under unacceptable oppression. Add West Papua to our heavy coat of shame.

For Alan Leith, who is in every respect an admirable human being. M y deepest appreciation, as always, goes to Alan, whose unwavering support and encouragement lightened the burden and made it possible.

Contents

Acknowledgments

ix

Abbreviations

xi

Preface

xv

Chapter 1 Introduction

1

Chapter 2 Business in Indonesia

16

Chapter 3 The Business of Mining in Indonesia

38

Chapter 4 Freeport and Jakarta

58

Chapter 5 The Difficulties of Development

85

Chapter 6 Company Development Policy and Its NGO Critics

115

Chapter 7 The Environment Human Chapter 8Rights

VLL

155 187

viii

Contents

Chapter 9 Freeport and t n i

220

Chapter 10 Conclusion

248

Notes

261

Bibliography

315

Index

337

Acknowledgments

I T IS I M P O R T A N T to thank a number of individuals and organizations who made this book possible. The original dissertation was generously funded for three and a half years by an Australian Postgraduate Award scholarship, while a trip to Jakarta and West Papua was funded by a Macquarie University Postgraduate Research Fund Award. My gratitude goes to the institutions and people who made these grants possible. I am grateful to the staff of Macquarie University Library, who provided an efficient and invaluable service. My grateful thanks also goes to the many people who agreed to interviews, answered queries, and gave generously of their time and knowledge. Mention also needs to be made, and thanks given, to those dedicated people who work behind the scenes to keep the e-mail lists and Web sites that I drew so extensively upon operating.

The scope and detail of this thesis would have been limited without the assistance of a number of people working for PT Freeport Indonesia who arranged a trip to the mine site in 1998 and access to company personnel and operations. Special thanks must go to Edward Pressman and Greg Probst for their patient support and to Dr. Carolyn Cook for her kindness, generosity, and insight. I would also like to acknowledge all those within Freeport who are working with the West Papuan people toward responsible development within the region. I wish to thank the NGOS and activists who continue to remind us of what is unacceptable. To the West Papuan people who gave so generously and who remain steadfast in their desire to live in freedom and without fear, I remain humbled and grateful. I would like to make mention of two courageous individuals among many in West Papua, John Rumbiak and Brother Theo van den Broek. A special thank-you to Morris Morley for his continued support and encouragement through my years at Macquarie University and to my dear friend Jane Morgan, who read every word of the dissertation too many times. While family and friends have honored me with their support I would like to make special mention of my dear parents, Jack and Joy Helson. Mention also needs to be made of Stephen, Mark and Sue IX

X

Acknowledgments

Helson, Jack and Judy Leith, Christine Asmar, Debra Birch, Gavin Birch, Vivien Carless, Glen Carless, Cath Channon, Bruce Channon, Pam Cogar, Jan Cristaudo, J o e Cristaudo, Julie Davies, Peter Davies, Tony Gorman, Tonniajohanson, June Lahm, Roberta Mears,John Morgan, Kirsty Naylor, Helen Olsen, Carl Olsen, Lisa Parnell, Pru Sheaves, and Lesley van Beest. Your encouragement, your good humor, and your support enriched the experience. My apologies to all those who I have not mentioned and for the times my friendship may have appeared to come a poor second to my work. To the hardworking staff at the University of Hawai'i Press, most especially Pamela Kelley, who recognized the value in this study, and Cheri Dunn, who pushed it to fruition, and to Joanne Sandstrom, my copy editor, who did an incredible j o b of turning something ordinary into something readable—I warmly thank you all. I owe an enormous debt of gratitude to Stewart Firth, who gave above and beyond the call of duty and who enthusiastically encouraged my "obsession." He is a man of integrity and honesty—two truly admirable traits. Above all I wish to thank those who lived this journey with me: Alan Leith, Alex Leith, and Matt Leith. My deepest respect and gratitude go to you who have taught me so much—you are my university.

Abbreviations

ABRI

Angkatan Bersenjata Republik Indonesia (Armed Forces of the Republic of Indonesia) ; changed name to TNI after the fall of Suharto.

chief executive officer.

CEO

Consultative Group on Indonesia; replaced the IGGI after the Dutch used criticism of Indonesia's human rights record, with specific reference to the Dili massacre, to have aid suspended to the country; led by the World Bank.

CGI

Australian Council for Overseas Aid; a partly government-sponsored umbrella group for more than ninety Australian NGOS that monitors Australian foreign policy matters.

ACFOA

CoW Indonesian mining contract of work.

ADA Ajkwa Deposition Area.

Lembaga Studi dan Advokasi Hak Asasi Manusia (Institute for Human Rights Study and Advocacy) ; aims to internationalize the West Papuan cause and document human rights violations; works in close cooperation with grassroots organizations and institutions in West Papua.

ELSHAM

AMD Acid mine drainage results from the oxidation of sulfide minerals and their subsequent leaching by water percolating through the ore. Analisis Mengenai Dampak Lingkungan; a procedure for environmental impact assessment under Government Regulation 29 (1986).

AMDAL

AMUNGKAL

foreign direct investment.

FDI

Freeport Fund for Irian Jaya Development.

Breakaway Amungme

FFIJD

yayasan. Badan Pengendalian Dampak Lingkungan (Environmental Impact Management Agency) ; set up by Presidential Decree 23 (1990).

BAPEDAL

ICEL

XI

Indonesian Center for Environmental Law (Lembaga Pengembangan Hukum Lingkungan Indonesia) ; formed in 1993; has close associations to the LBH.

XII

Abbreviations

International Council on Metals and the Environment; established March 1991; comprises twenty-seven national and multinational metal companies representing sixteen countries.

ICME

ICRC

International Committee of the Red Cross.

IGGI

Inter-Governmental Group on Indonesia; f o r m e d in 1966 after the fall of Sukarno; a Dutch-led multinational group that annually channeled aid into Indonesia; made u p of representatives from countries and groups such as Australia, Japan, the United States, the World Bank, and the International Monetary Fund; replaced by the World Bank, led CGI in 1992.

Lembaga Adat Masyarakat Suku Kamoro (Kamoro Traditional Council).

LEMASKO

LBH

LPM-Iija Lembaga Pengembangan Masyarakat (People's Development Foundation Irian Jaya) ; a transitional decision-making body formed to channel Freeport development funds into the local community. MIGA

Multilateral Investment Guarantee Agency; insurance arm of the United Nations that provides private investors with noncommercial political risk insurance that covers transfer restrictions on currency, expropriation, and breach of contract.

NGO

nongovernment organization.

IMF International Monetary Fund. INFID

International Nongovernment Forum on Indonesian Development; an umbrella NGO.

Kamar Dagang dan Industri (Indonesian Chamber of Commerce and Industry).

Lembaga Bantuan H u k u m (Indonesian Legal Aid Institute or Foundation); f o u n d e d in 1971; provides legal aid, education, and awareness building within the Indonesian community.

Organization for Economic Cooperation and Development, made u p of the twenty-nine richest nations in the world.

KADIN

OECD

KKN korupsi, kolusi, dan nepotisme (corruption, collusion, and nepotism).

OPIC

Overseas Private Investm e n t Corporation; a U.S. federal government agency that insures American companies operating overseas against political risk.

OPM

Organisasi Papua Merdeka (Free Papua Movement);

Komnas HAM Komisi Nasional Hak Asasi Manusia (National Commission for H u m a n Rights). Lembaga Masyarakat A d a t A m u n g m e (Amungme Traditional Council).

LEMASA

xm

Abbreviations

indigenous resistance movement fighting the Indonesian government in West Papua; calls for West Papuan independence. PDI

Partai Demokrasi Indonesia (Indonesian Democratic Party).

PKI Partai Komunis Indonesia (Indonesian Communist Party).

tpd

tonnes per day; a tonne is a metric unit of weight equal to 1000 kilograms; an imperial ton is equal to 2,240 pounds or 1,016 kilograms (long ton), in the United States only it is equal to 907 kilograms (short ton). United States Agency for International Development.

USAID

PMI Palang Merah Indonesia (Indonesian Red Cross Society).

WALHI

PT Indocopper Investama Corporation PT II; formed to hold Aburizal Bakrie's Freeport shares.

WWF World Wildlife Fund selfdescribed as the world's largest independent and experienced conservation organization.

PRD Partai Rakyat Demokratik (People's Democratic Party). Indonesian Human Rights Campaign (London); from tahanan politik (political prisoner).

TAPOL

TNI Tentera Nasional Indonesia (Indonesian Defense Forces) ; changed name from ABRI.

Wahana Lingkungan Hidup Indonesia (Indonesian Forum on the Environment).

Yayasan Lembaga Bantuan Hukum Indonesia (Foundation of Legal Aid Institutions); grew out of

YLBHI

I.BH.

Preface

IN 1995 I WAS i n t r i g u e d to learn that an American transnational mining company called Freeport-McMoRan was operating the largest gold mine on Earth, not in Africa but in the heart of West Papua. My interest increased when I discovered that little was known of this company with the astonishing asset. Within a month of my "discovery" a report accusing the Indonesian military and Freeport security of perpetrating human rights violations within and around the company's concession was made public and turned the world's attention to the mine. Allegations of human rights violations were quickly followed by accusations of escalating social problems and gross environmental degradation associated with the company's operation. Under intense pressure Freeport launched an extraordinary program of damage control. Attempting to address all criticisms, it threatened legal action against its most vocal critics (including academics and journalists), made an "infomercial," threatened to withdraw university funding, and took out a $175,000 full page ad in the New York Times that earned it the New York Times' Academic Freedom Award for 1995 under the title "No financial folly goes unappreciated." Despite the media attention, information about the company's operation in West Papua was difficult to come by as free and open access to the area was forbidden by Freeport's security department in league with the Indonesian military. While I was attempting to research the company, it quickly became obvious that journalist J o h n McBeth had close links with Freeport. Contacting McBeth in Jakarta, I explained to him that I was researching the company with a view to writing an academic paper but had been unsuccessful in opening up communications with a company representative. Informing him that the project would be completed with or without Freeport's input, I stressed that I believed that it was in the company's interest to become involved. Within the week I received a phone call from Paul Murphy, who was then executive vice president and director of PT Freeport Indonesia, stating that he had two hours before he was due to board a plane for Singapore and the time XV

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was now mine to ask anything I wanted. At the end of our conversation Murphy expressed some surprise that I had not "asked any of the hard questions"—meaning that we had not touched on the sensitive issue of alleged human rights violations. There were two reasons for this: I had read enough of Freeport's repudiations of the allegations to believe that I knew what his official response would be, but, more important, I simply was not prepared for the phone call. I needed time to consider just what and how I was going to question Murphy. The contact, however, was significant, for it provided me with a direct line of communication with the company at the highest level. It also indicated the extraordinary degree of company sensitivity to the recent interest in its operation in West Papua. While it gave me an appreciation of the thoroughness of Freeport, something I would come to appreciate more fully later, it also made me wonder if Freeport did indeed have something to hide. A few months later I met Paul Murphy in Canberra and had another opportunity to speak with him. When I questioned him about the parent company's decision in 1991 to sell 10 percent of the West Papuan operation to a Suharto favorite, Aburizal Bakrie of Bakrie Brothers, Murphy informed me that the company had nothing to hide and that all details of the share transaction were in the company's annual reports. He added that even for a person such as himself the reports were hard to read. It was my experience that while annual reports could be boring and at times complicated, usually they were difficult to follow only when the company intended them to be so. In the case of the Bakrie share deal, the Freeport-McMoRan annual reports never mentioned the Indonesian partner by name, and the relevant share transactions were spread over a couple of reports so that the information was difficult to piece together. During the interview Murphy casually recounted the decision to sell to Bakrie, describing how Ginandjar Kartasamita, then the mining minister and a close Suharto associate, informed the company that the government required Freeport-McMoRan to sell 10 percent of its holding in its operating subsidiary in West Papua to an Indonesian entity immediately. Ginandjar also told Freeport that he would send three potential partners from which Freeport could choose. Murphy's understanding was that the company never had a choice, for Bakrie alone arrived in Louisiana, informing Freeport that he was the partner it was looking for. During the Indonesian investigation in 1999 into the deal between Freeport and Bakrie and the relationship between the company and the minister, all parties defended themselves against allegations of corruption and collusion by claiming that the sale of shares to Bakrie was purely

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an economic decision made by the company without interference from the government. In 1996, with Suharto firmly ensconced in the Merdeka Palace, Murphy would have thought little of our conversation; however, in light of the overthrow of the dictator and the subsequent political attacks on the company within Indonesia, what Murphy related back in 1996 was a potentially damaging piece of information, for it contradicted statements by the minister, the company, and the businessman to the Indonesian authorities. In early 1996 the kidnapping by the nationalist group the OPM (Organisasi Papua Merdeka; Free Papua Movement) of World Wildlife Fund researchers near the Freeport concession, together with riots that broke out in the company town of Tembagapura and in Timika, increased the pressure for the company to open its operation to outside scrutiny. At the same time channels of communication with the now curious world were opening up in West Papua for the first time. Internet access in the capital ofJayapura, together with the ability of nongovernment organization (NGOS) to gain access to the traditional landowners within the Freeport concession, meant that information was beginning to leak out. By late 1996 it had become an unstoppable flood, although by this time I had finished my original paper. What I had discovered was a company that appeared to have much to hide: questionable direct links to President Suharto and his closest associates; a relationship with the Indonesian military that saw the company supporting the institution that committed gross human rights violations in the company's concession; a troubled and damaging relationship with the traditional landowners; and environmental damage on a scale that eclipsed the nearby Ok Tedi and Bougainville mines. In early 19971 decided that I would return to the subject of Freeport for my doctorate. I was able to reestablish links with those who had helped me during my initial research period. Edward Pressman from the company's Community Affairs Department in Jakarta now became my contact. I was also assisted by a number of nongovernment organizations closely watching Freeport that were happy to provide information, as were individuals living in West Papua. I also had contact with West Papuan exiles residing in Australia, individuals and groups who supported calls for West Papuan independence, journalists who had been to the area, and academics conducting research in similar fields. It seemed that by this time Freeport was a burgeoning field of research. Stationed in Sydney, I relied on e-mail and the Internet news groups that had recently been established to cover Indonesian and West Papuan affairs. While it had taken a year for the original 1994-1995 accusations

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o f human rights violations to surface, by 1997 information technology meant that one could read daily o f events in the hitherto isolated province. I knew that to achieve my goal it was essential to visit the mining concession. While it was obvious that such a trip was needed to interview people who worked and lived in the area, an equally significant motivation was curiosity. I wanted to see this extraordinary mine, which often elicited surprising displays of passion from otherwise seemingly reasonable and rational individuals. I also wanted to see the equatorial glacier, the extent o f destruction associated with the tailings, the model American towns surrounded by jungle, and the villages I had so often read about. I also wished to speak with J o s e p h a Alomang, one o f two traditional landowners (the other being Tom Beanal, whom I had already met), who had, with the assistance of nongovernment organizations, launched billion-dollar lawsuits against the company in the United States. Basically, I wanted to see what life was like in the Freeport concession, for while information was flowing out o f the area, few photos ever surfaced, and those that did served only to increase my curiosity rather than satisfy it. T h e problem I faced was that I could visit the mine only with the company's permission. I needed a sponsoring letter from the company to get a visa for Timika from the Indonesian embassy in Sydney. Early in the research program I had begun to request permission from Freeport to visit the site. My argument remained the same: whether or not the company assisted me, I would complete the project, and it was in its best interests to be involved. Although I was continually assured that such a trip was possible, I often despaired, as the opportunity never seemed to arise. By early 19981 knew that to move forward with research I would have to go to Jakarta and the mine. Taking the initiative, I informed Pressman that I would be in Jakarta in September and October 1998 and suggested that this would be an ideal opportunity for a visit to the concession. I was only later to learn that while I was investigating Freeport, it was investigating me. Although I had booked my flight to Jakarta in early 1998 while Suharto was still in power, the escalating violence in the capital during the next few months often made me wonder if I should postpone my trip. However, once the company agreed to allow me access to the concession, cancellation was no longer an option. Suharto's forced resignation in May 1998 meant my visit to Jakarta in September was timed perfectly—not, I hasten to add, through any great foresight of my own.

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In Jakarta I interviewed a number of former ministers of the Suharto regime who were happy to speak about the past Their interviews afforded me greater insight into the relationship between Suharto and Freeport and the context in which the company operated in Indonesia. They also reaffirmed the company's importance to the New Order regime. 1 Freeport flew me from Jakarta to Timika and allowed me to make a number of visits to the mine, the mill, the environmental center, and the company towns of Tembagapura and Kuala Kencana. It also arranged for me to interview key staff. After spending time in the concession, I was free to travel to other areas of the province. O n my return to Timika the company flew me back to Jakarta. With a couple of notable exceptions, I found that the people I interviewed or spoke with from the Community Affairs Department were committed to improving the relationship between Freeport and the local community. They acknowledged that they had mishandled things in the past, accepted that they had a lot of ground to cover and a good many years of mistrust to overcome, and spoke hesitantly of the future. Much of what the department was doing appeared to be trial and error with a focus on fewer errors in the future. Frustration was commonly expressed—frustration with other departments within the company, the traditional landowners, the Indonesian government, the difficulty of their work, and the expectations placed upon them from the head office. However, the main criticism was held for the NGOS that attacked the company over its community relations while remaining unwilling to become active participants in implementing development policies. T h e Community Affairs Department seemed to expect that no matter how good a j o b it did, no matter how well it presented its case, those who came to visit and report on the company would not be sympathetic to the difficulties it was facing and would inevitably be critical. This historical reality added to their frustration. In contrast, the people I spoke with from the Environmental Department appeared professionally confident. T h e poverty of the traditional landowners around Timika was not surprising, for much had been made of it by the NGOs. It seemed reasonably typical of a head-on collision between a modern Western culture and a traditional one; the collision left a trail of pain, destruction, and anger in its wake. T h e elegance of the company's Sheraton Hotel and the Western dormitory-style town of Kuala Kencana with its gym, air-conditioned shopping center, swimming pool, schools, office blocks, and wellset-out garden suburbs and park lands contrasted starkly with Kwamki

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Lama. Separated by just a few kilometers ofjungle, the village of Kwamki Lama was built by the company and the government to house Papuans moved from their traditional lands in the concession. It was a desolate place devoid of any redeeming feature and characterized by disintegrating concrete-block houses, children with distended stomachs, and open drains. No Indonesians seemed to live in Kwamki Lama, and my Indonesian taxi driver, who was reluctant to take me there in the first place but had been persuaded by the number of Papuans who happily jumped into the taxi after me to make sure I found Beanal's house, abandoned me there after we had all alighted in the village. Perhaps an indication of his discomfort was that he didn't even wait for his fare—something rarely witnessed in Indonesia. In the highlands, although the company town of Tembagapura was less salubrious than Kuala Kencana, it still seemed like the height of luxury compared to the traditional highland villages around its perimeter. The original inhabitants expressed both frustration and anger at what they viewed as Freeport's disrespect and exploitation of themselves and their land. While some people wanted the company to leave, many others, most notably from the younger generation, lived in hope of a Freeportjob and all the benefits that that promised. It was clear that the traditions and support networks of the community were disintegrating, especially in the ramshackle growth town in the lowlands of Timika. While the poverty was not surprising, nothing prepared me for the astonishing natural beauty of this land. Standing in the lowland jungles near Timika on a clear day, one could look up to the interior highlands to see the equatorial glacier sparkling in the late afternoon sun. Lowering one's gaze, however, left one focusing on a forest of dead trees and barren land buried beneath meters of ugly gray tailings. The juxtaposition of incredible natural beauty and rampant environmental destruction, of Western development and appalling poverty, assaulted the senses. It is not hard to see why Bechtel, the engineering giant, considered the Freeport project the most difficult it had undertaken. Much has been made of the terrifying access road up the mountains. Traveling along the spine of the mountains, one never quite knew whether to curse or bless the descending cloud cover. When it cleared you could not only view majestic mountain peaks as far as the eye could see, or look down toward the coast more than a hundred miles away, but you might be lucky enough to catch a glimpse of the nearby glacier. At the same time, a clear day meant that you were acutely aware of the deadly drops of thousands of feet on either side of the treacherously narrow road. When

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one alights from the cable car that traverses the last leg of the journey to the Grasberg mine, the sudden change in altitude necessitates slow movements to allow the body time to acclimatize. The dramatic drop in temperature and humidity at the mill and mine (compared to that of the humid coastal plains one has left only a few hours earlier) is also a little disorientating. The lush deep green of the jungle is quickly replaced by towering black rock walls awash with moisture in the alpine region of the mine site. From late morning onward, at the edge of the gaping hole that is the Grasberg open cut mine, cloud cover usually obscures the view to the bottom or even to the opposite side. Giant trucks operating twenty-four hours a day and monitored by satellite tracking carry 240 tonnes in their scoops; these, together with the rotation of the giant crushers standing stories high, shatter the still beauty of the dramatic and stark alpine region. Clouds drift through these isolated highland valleys as innumerable waterfalls cascade down the barren rock faces tojoin the mine's gray tailings' sludge on its way to the lowlands and the Arafura Sea. The Indonesian military's presence is palpable in the concession, creating and maintaining a continuous and pervasive culture of fear. Apparent boredom, coupled with a general disregard for the initial inhabitants of the land and an institutional culture notable for its absence of accountability, means that the relationship between the so-called keepers of the peace and those they are charged with protecting is characterized by a lack of mutual respect, by mistrust and antagonism. One can never ignore the military, whose formidable presence is obvious everywhere. Not only is each unit's identifying symbols boldly and possessively displayed throughout the landscape, but the military monitors everyone's movement within the concession through a series of posts and passes. While I was traveling around, it became obvious that Freeport's name was like a magic wand capable of opening many doors. Conversely, on occasion it closed a few, and I often had to work hard to establish my credentials separate from the company. Just as the military's presence was pervasive in the concession, Freeport's presence is central in the province. Everyone has an opinion on the company and is eager to express it once they are convinced one is not in its employ. On one occasion Freeport unwittingly came to my assistance. Because of a large collection of documentation, my baggage exceeded the prescribed weight allowance when I was about to depart the province. Finding myself up

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against a seemingly unmovable public servant and having heard about the Indonesian predilection for financial sweeteners, I asked how I might overcome this vexing problem. Apart from being informed that I could go into Timika the following day and pay excess baggage rates, I was offered no joy. It appeared that I was going to miss my flight back to Jakarta and the connecting flight home. Reluctant to admit defeat, I remembered a Freeport handout in my possession. When I placed my carry-on bag with the company's name and logo clearly printed on the side on the counter, the officious check-in clerk changed his attitude immediately. Confirming I was with the company, he ushered my baggage and me through to my flight without further delay. In mid-20001 unofficially returned to the Freeport concession and was able to work for a short time on a company-sponsored agricultural project in Banti village. This time the Indonesian consulate in Sydney refused to give me a visa to the province. The Indonesian embassy in Darwin was more accommodating: it cooperated with a local travel agent attempting to promote Timika as a travel destination—the drawing card was the Sheraton Hotel, the golf course in Kuala Kencana, and bird watching. The time on the agricultural project was personally rewarding. The employees work hard to make their project a success, for they see this as an entrée into the cash economy. Not only are they attempting to grow produce to sell back to the company, but they are cultivating a coffee plantation that they hope will be able to sell its produce on the international market. While the main area for the project is Banti village near Tembagapura, the project is meant to benefit all the highland Papuans in the concession area and has a number of outposts in surrounding villages. To visit the villages in the other valleys, the workers hitch rides on the Freeport helicopter, which has a policy of never taking off without a full payload. Outside the hanger in Tembagapura, villagers wait patiently, sometimes for days, for a ride back to their village after they have either visited the hospital in Tembagapura or a relative in a nearby valley. When the helicopter touches down in a village, there are often a number of people wishing to return to Tembagapura. There is no timetable for the helicopter, which can work only in the early morning until cloud cover descends about 11:00 A.M.; its daily itinerary is determined by the weather and the urgency of company business. No questions are asked of the villagers hitching a ride, nor of the military, which may also take advantage of this free transport service. One of the most complicated issues I continually confronted in my research was the contending versions of reality. Paul Murphy was correct

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when he said in 1995 that much of what was written about Freeport was filled "with half truths and exaggerations and, in some cases, outright lies."2 Freeport, however, is not immune to this criticism. Because many of the issues regarding the Freeport mine are emotive, there have been a great many emotive responses. In the course of this research, I found it difficult to discover the "truth" of any given situation, especially when "truth" differs with a change of perspective. This book represents my analysis and interpretation of events and conditions presented to me, and as such I am solely responsible for any errors. Two of the most difficult areas of research were the issues of human rights violations and Freeport's business relationships with the Indonesian elite. It is clear from only a cursory glance at the relevant chapters that I, like a number of pundits before me, have not succeeded in providing a complete picture of the company's business dealings with the Indonesian elite or the question of the company's involvement in human rights violations. In both cases people have been happy to pass on information but not to have their names made public, for to do so, they believe, would jeopardize their current employment or their chances of future employment. In every case I have had to make decisions whether or not to use such information. Because of the nature of the company's business dealings, I concede that I have probably made mistakes and would welcome a full and frank disclosure by the company of its business dealings with Indonesians during the New Order era, especially relating to its outsourcing program. I would also welcome independent investigations into the accusations of human rights violations to clear the company's name. All those working on Freeport acknowledge that no one person will ever be able to master the complexities of the company. I also hasten to add that it is clear to me that no one in Freeport has mastered all areas of the company either, for there appear to be not only physical but ideological divisions between the people in New Orleans, in Jakarta, and in the concession. At the time of writing there are a number of studies in progress or recently completed relating either to the company or to events in West Papua that deserve acknowledgment. Each of these studies uniquely assists in unlocking the long-held secrets of the company and the "forgotten" province. Carolyn Cook's dissertation, "The Amung Way: The Subsistence Strategies, the Knowledge, and the Dilemma of the Tsinga Valley People in Irian Jaya, Indonesia," explored the agricultural practices of the Amungme, the original landowning group, proposing ways they could use their traditional agro-forestry to gain the respect of outside factions and enter the market economy. J o h n Ondawame, a

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Preface

West P a p u a n in exile in Sydney a n d a traditional l a n d o w n e r f r o m t h e F r e e p o r t concession, has recently c o m p l e t e d a n a u t o b i o g r a p h y a n d a Ph.D. o n the history of t h e OPM. Chris Ballard f r o m t h e Australian National University was p a r t of a g r o u p that c o n d u c t e d a baseline study f o r t h e c o m p a n y of t h e traditional l a n d o w n i n g g r o u p s in 1998. Brigham G o l d e n , a s t u d e n t of a n t h r o p o l o g y f r o m Columbia, is writing his doctorate o n t h e long-term effects of t h e m i n i n g c o m p a n y o n the traditional p e o p l e s in its concession. A n t h r o p o l o g i s t Steven Feld a n d j o u r n a l i s t R o b e r t Bryce are working o n a b o o k that focuses o n F r e e p o r t ' s activities in t h e U n i t e d States, c o m p a r i n g its home-state policies with its environm e n t a l a n d social policies globally. J o h n Saltford's d o c t o r a t e o n t h e Act of Free C h o i c e e x a m i n e d official g o v e r n m e n t complicity in t h e denial of West P a p u a n d e m a n d s f o r self-determination d u r i n g t h e sixties. J i m Elmslie c o m p l e t e d his Ph.D. o n e c o n o m i c d e v e l o p m e n t in West P a p u a . T h e b o o k arising f r o m his work, Irian Jaya under the Gun: Indonesian Economic Development versus West Papuan Nationalism, is soon to b e published. Finally, b o t h R i c h a r d Chauvel f r o m Victoria University, Australia, a n d P e t e r King f r o m Sydney University are writing books a n d p a p e r s o n West P a p u a n i n d e p e n d e n c e . A n u m b e r of these p e o p l e have a i d e d m e greatly in my u n d e r s t a n d i n g of the P a p u a n p e o p l e a n d t h e company. My apologies f o r those I have inadvertently failed to m e n t i o n . In 1995 I naively aspired to know everything t h e r e was to know a b o u t t h e c o m p a n y ' s o p e r a t i o n s . S o m e time ago I willingly, a n d with a great sense of relief, c o n c e d e d defeat. W h a t follows is what I have l e a r n e d .

A NOTE ON USAGE T h e r e are t h r e e m a i n c o m p a n i e s in t h e F r e e p o r t g r o u p : FreeportM c M o R a n which is i n c o r p o r a t e d in the U n i t e d States a n d was the p a r e n t c o m p a n y eclipsed by its subsidiary; Freeport-McMoRan C o p p e r a n d Gold, which is currently t h e m a i n c o m p a n y in the g r o u p a n d the p a r e n t c o m p a n y of t h e g r o u p ' s o p e r a t i n g subsidiary in West P a p u a , P T F r e e p o r t I n d o n e s i a . To distinguish between the two m a j o r c o m p a n i e s , w h e r e necessary P T F r e e p o r t I n d o n e s i a will b e r e f e r r e d to simply as F r e e p o r t , a n d Freeport-McMoRan C o p p e r a n d Gold will b e r e f e r r e d to e i t h e r by its full n a m e o r as Freeport-McMoRan. W h e n it c o m e s to figures relating to the c o m p a n y ' s operations, w h e r e possible, t h e c o m p a n y ' s own official d o c u m e n t s have b e e n used. All dollar a m o u n t s a r e in U.S. c u r r e n c y unless otherwise stated.

Preface

xxv

The name used in reference to the western half of the New Guinea island indicates a political preference or orientation. West New Guinea was the Dutch name for the area until the Indonesians named it Irian Barat after the Act of Free Choice in 1969. In 1972, during the opening of the Freeport mine by Suharto, the president changed the province's name to Irian Jaya. In 1999 President Wahid, in response to mounting pressure for independence from the province and in an attempt to appease dissent, declared that the province would be called Papua. This name change has not, at the time of writing, been passed by the parliament. The traditional peoples call their homeland West Papua, which was the name given to it in 1961 when the Dutch declared its intention of awarding the nation its independence. Within this book, I will refer to this area as West Papua. The Suharto government did not like to make any distinction between the ethnic groups that made up the state of Indonesia; therefore it did not acknowledge any group as West Papuan, Papuan, or Melanesian, but rather as Irianese—the Indonesian inhabitants of the Indonesian provine. The terms "West Papuan," "Papuan," and "Melanesian" were illegal under Suharto, with their use being associated with the separatist movement or what the government referred to as "troublemakers." In this book, where necessary, the words "Melanesian" and "Papuan" will be used to differentiate the indigenous peoples of the province from those originating in other parts of the archipelago. The latter will usually be referred to as Indonesian.

LOCATION DIAGRAM

MINING A R E A ( C o W A )

Tembagapura

Otomona River

'Kuála'ííí; Kericána

Timika

Lorena: National Park

Mlnajefwi River

Amamapare

7 miles

1. Grasberg Mine 2. Ertsberg Pit 3. Puncak Jaya (glaciers) 4. Mill 5. W a n a g o n River 6. Banti Village 7. Aghawagon River

8. Tsinga Village 9. Aroanap Village 10. Airport 11. Koperapoka 12. Nawaripi 13. Kwamki Lama 14. Ajkwa River

Freeport's mining operation in West Papua.

Chapter I

Introduction

B Y THE BEGINNING of the twentieth century, the Dutch, British, American, and Japanese were aware of the probability of vast natural resources in the Dutch colonial outpost then known as West New Guinea. As early as 1907 a Dutch geological exploration had surveyed the northern region of the island and discovered oil seepages; the discovery led to the merging of Dutch and British petroleum interests in the form of the Royal Dutch Shell Company. Just before World War I, pressure from expanding American interests in the western Pacific had forced Holland to grant limited concessions in the border regions of the island to the Americans and the Japanese. Although the Dutch administration repeatedly refused requests for exploitation of the rugged central region of the island, it was later discovered that early agricultural concessions granted to thejapanese had, in fact, been used for oil exploration. Most significant for the future of today's West Papua, however, was the sight that greeted Jean-Jacques Dozy in 1936, while he was on an expedition to the rainforest center of the island. Dozy, a Dutch geologist working for Shell Oil, was struck by the sheer magnificence of a 180meter barren black rock wall covered in green splotches standing above an alpine meadow: I knew in a blink of an eye what this was about. It was hard to miss, with all the green and blue spots. T h e copper was obvious. I realized that no one could do anything with it. There were no roads, no harbors, no factories. It was just like a mountain of gold on the moon. 1

In 1939 Dozy published a report of his discovery of this copper mountain he named Ertsberg. However, because of the remoteness of the site, the onset of World War II, the German occupation of Holland, and the Japanese occupation of West New Guinea, the report lay forgotten for many years.

I

2

Chapter 1

Freeport Sulphur, the predecessor of today's mining giant FreeportMcMoRan Copper and Gold of the United States, first became interested in Ertsberg in 1959 when a Freeport geologist, Forbes Wilson, heard of Dozy's report from a friend, J a n van Gruisen. After meeting Dozy, Wilson was so impressed by the man and his report of the giant copper outcrop that he persuaded Freeport to send him to West Papua the following year to view the find firsthand.2 Wilson states that after seeing Ertsberg he also was so excited by what he saw and sampled that he predicted correctly that it would prove to be the largest above-ground copper deposit discovered up to that time. From Wilson's samples, Freeport analysts confirmed the geologist's forecast, estimating that the company would recover its costs within three years. Although Freeport Sulphur initially established good relations with the Dutch, the ensuing political turmoil in West New Guinea between Holland and the Indonesians proved a political deterrent to the company, and discussions terminated in 1962. O n c e the region came under Indonesian control, increasing concerns over Indonesian president Sukarno's perceived instability and pro-Communist bias also made investment in the area unattractive, especially considering that a few years earlier Freeport had had its lucrative nickel-mining projects at Moa Bay and Nicaro in Cuba expropriated by Castro. Finally, the only way for a mining company to get to the high-altitude site was by helicopter; and even with the most powerful helicopter available at the time, it would take months to move just one small drill rig and crew to the Ertsberg site. Thus, technical problems and political concerns saw Freeport shelving the Ertsberg project in the early sixties. However, in the boom times o f the sixties, mining was a powerful magnet for speculative international capital, so Freeport did not forget the possibilities it had glimpsed in West New Guinea. In early November 1965, more than one month after the military coup in Jakarta that effectively toppled Sukarno, the company officially opened negotiations with the generals in Jakarta. While Freeport's connections at the time to the highest echelons o f power in Washington were impressive and must have given it a measure of assurance and protection, the messages it was receiving out ofJakarta were also positive. With the country facing bankruptcy, one of the main priorities of the New Order regime was to gain international recognition and political support while attracting foreign aid and investment to foster stability, legitimacy, and development. To entice Western capital, Sukarno was sidelined while the regime promoted a decidedly pro-West, pro-foreign investment alignment. Purging the "Communists" from within its ranks and the nation at large, the

Introduction

3

regime employed a group of Indonesian economists trained in the United States together with International Monetary Fund (imf) and World Bank experts whose j o b it was to draw up a restructuring plan for the economy. Critical to this plan was the overhauling of Sukarno's contentious Foreign Capital Investment Law of 1958 and Mining Law No. 37/1960. In 1967 Freeport became the first foreign company to sign a contract with the new regime in Jakarta and became a significant economic and political actor within Indonesia. Today, with estimated reserves of 50.9 billion pounds of copper and 63.7 million pounds of gold, it operates the largest gold mine and the most profitable copper mine on Earth in the area surrounding the now depleted Ertsberg. For more than thirty years the American company, with its rigorous home-state laws against corruption, was able to operate with impunity by adapting to, and indeed thriving in, a business culture anchored in corruption, collusion, and nepotism. By maintaining a close relationship with the Suharto regime and its feared arm of repression, Freeport secured for itself a powerful political and economic insurance policy. Eventually this insurance policy came to threaten its very existence. With the company being protected both physically and politically by the regime, given contracts that eventually allowed it to explore and mine one of the most promising mineralized zones of the globe, and having a chief executive officer who enjoyed a relationship with Suharto that afforded him open access to the Merdeka Palace, it was perceived within Indonesia that their all-powerful president was unable to deny the American company anything. What such an assessment ignored was the complex and fluid nature of the relationship and the complementary interests that defined it. Suharto and Freeport shared an overriding desire to turn the copper and gold of the Carstensz Range into currency as expeditiously as possible. Eventually, Freeport was so successful in its allotted task that it became Jakarta's largest taxpayer, the largest employer in the province, and the source of more than 50 percent of West Papua's gross domestic product (gdp) . While this shared interest and the obvious rewards ensured that the relationship remained close, as noted, it was fluid. The power of foreign direct investment (fdi), which is inherently manifested in its mobility, generally allowed large transnational companies to either punish or reward states, thereby presenting capital controllers with significant influence over global investment policies. Jeffrey Winters argued that what existed under Suharto was an exchange relationship between the state and capital: policies for capital. 3 However,

4

Chapter I

once investment is made, the size of the investment and the long-term nature of the mining industry mean that mining capital generally loses its power of mobility relative to other sectors of the economy. Thus, while in 1967 power had rested with the American company with the powerful friends at home, over time this balance shifted. As Freeport's investment in West Papua increased and its power of mobility decreased, the new president was busy cementing ties with Western governments and securing his own position at home. With this fundamental power shift away from the company, the president's political and financial demands on Freeport rose exponentially. Initially, in 1967 Suharto's New Order government had been grateful for the political support it received from Freeport and the company's willingness to invest in the country. By the early seventies though, the regime had become confident enough to demand a 10 percent share in the operation. With the announcement of the discovery of Freeport's second deposit at Grasberg in 1988 and the extraordinary wealth that it promised, Suharto's demands on the company increased dramatically. Eventually, Freeport financed Suharto's government, his closest associates, and even the president into the company on exceptionally favorable, if not questionable, terms. 4 As a result, by the early nineties the American company had become an integral part of Suharto's patronage system while attempting to avoid violating the U.S. Foreign Corrupt Practices Act. The company was also put to good political use by the president. To all intents and purposes Freeport became a quasi-state organization for Jakarta in West Papua as the principal developer and administrator of its project area and surrounds. At the same time, through support for the transmigration settlements and the military, the company assisted Jakarta in its policy of "Indonesianization" of the area. Finally, back in the United States, Freeport became an influential public relations agent for the regime. Thus, far from Suharto's being a puppet of the company, as was the general perception in Indonesia, Freeport had become a compliant and valuable asset that, with the company's complicity, was exploited by the president. Although the common perception was that Suharto's Indonesia was a unitary state, Ariel Heryanto offered an alternate interpretation: Suharto's power entailed the collaboration of society at large. 5 By the late eighties the exclusionary nature of Suharto's corporatist state was tentatively being challenged by a slow diffusion of power. Ironically, the first of these challenges emerged from within the very organizations expressly formed by the president to defuse social tension. Initially iden-

Introduction

5

tified by Andrew Maclntyre as coming from within the pribumi (indigenous) business organizations, 6 by the nineties challenges were also arising from Suharto's mainstream corporatist structures, such as the National Commission for Human Rights (Komisi Nasional Hak Asasi Manusia; Komnas HAM). According to Heryanto's argument, the growth and radicalization of Indonesian civil society through these state sponsored corporatist structures challenged the foundations of the state and, by association, those who benefited from it. Thus, while Suharto was being challenged from within civil society, so too was Freeport. One of the greatest challenges to both the state and the company was to a large extent influenced and supported by the phenomenon of information technology. With the Internet and World Wide Web vastly enhancing the speed and effectiveness of communication, international capital experienced positive changes to its environment; however, it was also faced with unwelcome challenges. As Budiawan noted, "International civil society is [now] the global community . . . where modern social movements pursue their political goals." 7 In addition, "The present politics of the superstructure . . . in support of economic globalization are challenged by emergent social forces and social tensions, which are global in extent and evident in rich countries as well as in poor." 8 By exploiting this new technology, the groups that traditionally opposed the activities of transnational corporations were able to increase the international effect of "issue" politics such as environmental, human, and indigenous rights. In the process they began to undermine the power of authoritarian regimes such as Suharto's. In this new climate, once omnipotent transnational companies such as Freeport were no longer able to rely on the protection offered by these regimes, nor could companies operating even in the most isolated regions of the world continue to control information regarding their activities. Initially, in order to survive, all Indonesian NGOS emphasized their nonpolitical role. By the nineties those with a political agendajoined the corporatist structures that were daring to challenge state control on a number of ideological fronts. Toward this end their ability to link up with powerful international N G O s , through the exploitation of information technology, afforded them some degree of protection as they pushed at the boundaries of government tolerance. One of the most prominent NGOS of this genre, which has waged a persistent campaign against Freeport since the early nineties, is the Indonesian Forum on the Environment (Wahana Lingkungan Hidup Indonesia; WALHI). Public criticism of Freeport, a company that was close to the Suharto regime and a major employer and significant source of export revenue,

6

Chapter

I

served WALHI well during the Suharto era, for such attacks had wider political implications. By leading an international campaign against the American company, WALHI was demanding accountability not only from Freeport but, indirectly, from the Indonesian regime as well. Moreover, by keeping the issue o f human rights and environmental degradation permanently within the public arena and on the public agenda, through the Freeport campaign, such groups were also able to challenge the New Order's false construct o f the nation-state. T h e growing assertiveness o f these forces, which were careful not to directly threaten Suharto's rule or demand a political voice, was indicative o f a breakdown in elite consensus and represented a significant deviation from the general depoliticization and sense of powerlessness usually ascribed to Indonesian society—a description challenged by the writings of Heryanto. 9 Suharto's increasing inability to control such forces by the mid-nineties signaled a decline in his power that was either not recognized or was downplayed by numerous commentators overimpressed by the monolithic nature of the state and the military's position within it. While a good many Indonesia watchers failed to fully appreciate the significance of threats to the regime, so too did Freeport. By overestimating Suharto's power and underestimating the challenges from within civil society, Freeport failed to commit itself to adequately addressing the social and environmental problems that were growing around the mine site, leaving it ill-prepared for the criticism that was to come. In April 1995 the Australian Council for Overseas Aid (ACFOA) , an Australian NGO, issued a report, Trouble at Freeport: Eyewitness Accounts of West Papuan Resistance to the Freeport-McMoRan Mine in Irian Jay a, Indonesia, and Military Repression: June 1994-February 1995, based on information smuggled out o f Freeport's contract area by an Indonesian NGO in Jayapura. Within the report ACFOA accused Freeport's security forces, among other things, of being involved in the killing of indigenous people in the concession. T h e report highlighted the failure o f the Suharto government to protect its most disadvantaged, isolated, and depoliticized citizens and pointed to Freeport's complicity in these issues. Inevitably, Freeport's operations and community relations in the backwaters o f West Papua became public property and the focus of an international NGO campaign. For the first time Freeport was forced to contend with opposing versions of its operations. No longer was it free to write an unchallenged version of its history or dismiss the problems around its mine site simply as the natural by-product of a clash between the twentieth century and a "stone-age" people. With ACFOA'S report

Introduction

7

claiming international attention, the company was forced for the first time to defend itself against accusations of human rights violations, cultural genocide, operational double standards, resource exploitation, and environmental degradation. Despite the millions of dollars the company spent defending itself, including a one-page ad in the New York Times, the making and airing of a half-hour "infomercial," threats to take legal action against its most vocal critics, 10 and a demand that Loyola University in New Orleans return money the company had donated to endow a chair in environmental communication (after its students protested Freeport's environmental record), Freeport failed to satisfy or even quiet its critics. With the political changes toward the end of the New Order era threatening both the regime and the company, Freeport's political and economic insurance policy with the regime began to unravel. Although Suharto did what he could to protect the company within Indonesia, there was little he could do to control international criticism, which focused on the environmental and social problems associated with the Freeport mine. In response to this increasingly embarrassing situation, Suharto suggested to the company that it was its responsibility to resolve these issues and quiet the international critics. 11 As a member of the International Council on Metals and the Environment (ICME) , Freeport contends that it has always been committed to operating responsibly by adopting home-state standards. 12 However, the history of the Freeport operation in West Papua demonstrates otherwise. Conservation International recently announced that, because of the inclusion of West Papua, Indonesia could be considered the most bio-diverse region on the planet, possibly surpassing the Amazon. Yet the company's operating practices continue to destroy the environment with destruction exceeding that of the notorious neighboring mines of Ok Tedi and Bougainville, destruction predicted to last into the next century. While Suharto's control of the forces for coercion, the judiciary, and the executive offered Freeport legal protection within Indonesia, in the mid-nineties WALHI and international NGOS chose to launch two legal challenges against the company in the United States through the traditional landowners. Both lawsuits failed because of a lack of evidence. In 2001, however, with Suharto gone and a very public environmental disaster at one of Freeport's waste-dumping sites, WALHI successfully sued Freeport in the Indonesia courts over its environmental practices. As attention focused on the human rights violations committed by the military in the project area and as pressure over the close relationship between the company and TNI (Tentera Nasional Indonesia;

8

Chapter

I

Indonesian Defense Forces) mounted, fractures began to appear in this hitherto seemingly harmonious relationship. Until the ACFOA report, Freeport had welcomed the military in its contract area to protect it from the indigenous resistance movement, the OPM. At the time, structural and financial support of the institution was considered a small price to pay for protection of the physically vulnerable operation. However, with the publication of the report, the company's relationship with the military left it morally and legally vulnerable and threatened to implicate Freeport directly in human rights abuses. Thus, by 1996 Freeport was in the ignoble position of relying on the military to protect its operation while simultaneously attempting to distance itself from this increasingly discredited organization. With the military deciding to increase its presence in the Freeport concession, 1996 saw the area become one of the most militarized zones in the archipelago. At the same time, Freeport's decision to throw tens of millions of dollars at the recalcitrant institution to encourage separation only succeeded in strengthening the association between the two in the eyes of its adversaries. Finally, Freeport recognized that the continuation of this relationship precluded any improvement in relations with the indigenous community—which by this time was proving to be the company's most credible and damning critic. With regard to the complicated social issues that have resulted from the confrontation between a highly traditional peoples and a Western mining transnational, Freeport's record, until recently, has been far from exemplary. Initially, Freeport cared nothing for the landowners' rights and little for their concerns. Although the indigenous community and the company had shared the land for nearly thirty years, the benefits to the traditional owners were negligible, with the company professing to know surprisingly little of their customs and spiritual beliefs. However, with international attention turning to the area in the mid-nineties, the company attempted to address the expanding social problems in a more credible manner. Not surprisingly, the initial attempts at community development by a mining company failed miserably, resulting in inter-suku (tribe) war and even death, heightening tensions and increasing divisions within the community. Subsequent attempts at development have taken account of past errors, but the efficacy of these later attempts has generally been undermined by the culture of the company, its inexperience, the behavior of the local authorities, the fractures within the local community, thirty years of antagonism, or various combinations of these factors. In addition, Freeport's support for forced relocations and the Indonesian

Introduction

9

transmigration settlements (whether direct or indirect) has led to increased human rights violations in and around its contract area, exacerbating the existing atmosphere of distrust, which has proved hard to overcome. Finally, after the fall of Suharto, Freeport's relationship with the dictator, and the Indonesian misconception of that relationship, made the company a lightning rod for the country's anticorruption campaigners. Failing to develop a new response to criticism from within Indonesia in the light of the new fluid political situation, Freeport has continued to resort to the old methods, which, while working well when its friend was in the Merdeka Palace, simply draw further condemnation today. O n e change, however, would appear to benefit Freeport: its flamboyant chief executive officer, Jim Bob Moffett—whose past close association with Suharto is considered a disadvantage today—appears to have been persuaded to take a lower profile. Known for his effusive and aggressive style, he has in the past proved to be a public relations nightmare for the company. Some of his more memorable and culturally insensitive statements quoted in the press include describing his friend Suharto as a "compassionate man"; describing the effect of the company tailings in the Ajkwa River as similar to his "pissing in the Arafura Sea"; describing the West Papuan concession as the company's "slot machine"; and describing the spiritually significant Grasberg mountain as "a volcano that's been decapitated by nature" and in which Freeport is "mining the esophagus." 13 Rarely does Moffett speak directly to journalists, today preferring written communications. Because of operating difficulties and falling prices in the last few years, neither Moffett nor any of the directors of Freeport-McMoRan have bothered to attend the last three annual general meetings of the company where it was known that a number of "difficult" shareholders would be challenging the board over sensitive issues. At the 2001 meeting it was proposed that three shareholders be elected as advisers to the compensation committee so that directors and executive officers would receive fair compensation. It was pointed out that "bonuses and incentive compensation for executive officers [were] often skewed beyond reasonable and appropriate incentives for outstanding j o b performances. Six out of fifteen board members received remuneration ranging from $60,000 to $348,000, far exceeding the prescribed $25,000. From 1999 to 2000, Freeport's Chairman of the Board, James R. Moffett, received nearly $8 million in salary, bonus, and other annual compensation" 1 4 while the company's share price dropped from $25 in 1997 to below $10 in 2000. As noted, executive remuneration has

10

Chapter I

b e e n growing substantially while dividends have either fallen or b e e n eliminated. T h e motion, however, was defeated by Freeport's loyal coterie of shareholders. By examining Freeport and the changing power relationships between the company, Suharto, the Indonesian military, the traditional owners of the land (the A m u n g m e and Kamoro sukvs), and environmental a n d h u m a n rights groups, this book provides a study in the politico-business culture and the changing nature of power relations in Indonesia during and after the Suharto era. It is also a study of a transnational struggling to adjust in the changing era of information technology.

FREEPORT'S ENTRY INTO WEST PAPUA T h e island of New Guinea a n d its traditional Melanesian owners have a checkered history of colonial domination. In 1848 the powers of Holland a n d Britain artificially divided the island at the 141st meridian. T h e eastern half of the island, which came to be known as Papua New Guinea, was f u r t h e r divided between Britain and Germany in 1884. T h e southeastern part, British New Guinea, passed to Australia as Papua in 1906. T h e northeastern part a n d its offshore islands, formerly German, b e c a m e an Australian m a n d a t e d territory after World War I, and the two were administered by Australia as the Territory of Papua a n d New Guinea after World War II. Australia gave Papua New Guinea its indep e n d e n c e in 1975. T h e western half of the island, which was incorporated into the Netherlands as part of the Dutch East Indies a n d was initially known as West New Guinea, has never been afforded sovereignty. Except for a short period of J a p a n e s e occupation d u r i n g World War II, West New Guinea r e m a i n e d a mostly neglected Dutch possession. Unlike the early Asian traders who sought the richness of the islands, the Dutch, who administered West New Guinea f r o m Batavia (Jakarta), f o u n d it a useful site to house r e m o t e political i n t e r n m e n t camps a n d as a strategic controlling point for the sea-lanes of the Spice Islands. In 1945, just two days after the J a p a n e s e s u r r e n d e r e d at the e n d of World War II, a g r o u p of Indonesian nationalists proclaimed independ e n c e for the f o r m e r Dutch archipelago. I n t e n d i n g to reclaim its resource-rich colony, Holland refused to recognize the declaration; f o u r years of sporadic fighting ensued. After pressure f r o m the international community, an a g r e e m e n t was reached that gave the Republic of Indonesia its i n d e p e n d e n c e on 27 D e c e m b e r 1949 a n d n a m e d Sukarno, a nationalist, as president. To facilitate an early settlement between the

Introduction

II

two intransigent parties, the agreement stipulated that the colony of West New Guinea was to remain under Dutch rule with a proviso that within one year the Netherlands and Indonesia would settle the issue of West New Guinea's future. By the early fifties, talks had broken down, and the Dutch began to prepare the colony for self-determination, proposed for 1970. Under Dutch tutelage the West Papuan New Guinea Council (partly elected parliament) was installed in 1961 by almost universal suffrage. Political parties and trade unions were formed, public service positions were increasingly filled by Papuans, and a plan was launched to place West New Guinea under United Nations control pending independence. Finally, a Papuan crest, national anthem, and flag (the Morning Star) were introduced and the western half of the island officially renamed West Papua. 15 As the Dutch decolonization of the island progressed, Sukarno became increasingly concerned that his vision of Indonesia, which encompassed all of the islands of the former Dutch East Indies, would be thwarted by the Dutch in West Papua. After repeated diplomatic attempts at legal incorporation through the United Nations, Sukarno committed Indonesia to the use of force to prevent West Papua's gaining its independence. Under the command of the young Major General Suharto, Indonesian paracommandos were dropped into West New Guinea in late 1961. With the threat of war between the two protagonists, the Western powers eventually became involved in the West Papua issue on the side of the Indonesians. 16 Under pressure from the Americans, and lacking any significant support within the United Nations, Holland signed the UN-sponsored New York Agreement. In theory this agreement supported the principle of self-determination. In practice it ensured the subjugation of West Papuan sovereignty under Indonesian rule. 17 As a British embassy secretary noted in 1968, After all, one may say, nobody else wants a millstone like West Irian hung around their neck so it is probably better that it should go to the Indonesians who, with United Nations assistance, may be able to make something of it. Indeed one might especially be forgiven knowing that Indonesia is determined to get it by hook or by crook and that anyone who stands in her way is courting the wrath of 115 million people to whom we are trying to be friendly. . . . The freedom of a mere 800,000 people is moreover scarcely the point. . . . Naturally one sympathizes with the natives but colonialism is not always such a bad thing, indeed it is often beneficial and it may be that in the fullness of time, many years hence, Indonesia will feel that West Irian is ready to go it alone

12

Chapter I

supported by the wealth beneath and above her soil. . . and forget the delusions o f grandeur which she can ill afford. It may be but I doubt it. 18

According to the New York Agreement, Indonesia would have authority over the territory until a referendum was held in 1969 under United Nations supervision in which the West Papuans would be able to decide whether they wished to be incorporated into the new Republic. United Nations forces stationed in West Papua at the time of the changeover from Dutch to Indonesian control were given the task of maintaining an interim administration, which would supposedly ensure the protection of Papuan rights. In the face of Indonesian aggression and apparent Dutch complicity it failed appallingly in its appointed task.19 With the withdrawal of the Dutch in 1963, Jakarta usurped the power of the world body, took immediate control of the island, and during the next six years of military rule systematically dismantled the symbols of West Papuan sovereignty: the West Papuan police were confined to barracks; all political groups were disbanded; the use of national symbols, including the words "Papuan" and "Melanesian," were outlawed; public gatherings of any kind became illegal; freedom of movement and speech were denied, and the Papuan education system was destroyed. Under Indonesian control any chance of a free and fair election had vanished—as, it could be argued, the signatories to the New York Agreement foresaw. In a confidential report, the third secretary to the British ambassador to Indonesia noted, It is regrettable, o f course, that the Indonesians have already m a d e it clear that they d o not propose to h o n o r Article 1 8 ( D ) stipulating the eligibility o f all adults to take part in the deliberations and that they have already broken Article 22(1) which stipulates freedom o f assembly. But then both articles were absurd anyway and both parties to the a g r e e m e n t must have known that they could not possibly be carried out. 2 0

In 1969 the West Papuans ostensibly participated in the promised referendum called the Act of Free Choice. Contravening the rules of the New York Agreement, Jakarta chose 1,024 individuals who, under close military supervision, unanimously voted on behalf of approximately one million Papuans to incorporate West Papua into Indonesia. 21 Although the United Nations had requested one man, one vote, Jakarta refused, arguing that the physical difficulties of conducting such a vote and the

Introduction

13

"primitiveness" of the Papuans made such a process impossible. However, shortly after this all Papuans were allowed to participate in the Indonesian national elections. 22 Only two international journalists were allowed to be present and the United Nations observers, who were supposed to participate in the organization of the vote, were excluded from the process. 23 The referendum, which delivered an Indonesian-imposed outcome, attracted widespread criticism, for it contravened established United Nations rules. Some of the most vocal critics of the vote were the United Nations observers. 24 Although it is commonly claimed that the United Nations endorsed the referendum in November 1969, it only "took note" of the vote while the discredited and questionable Act of Free Choice is today disparagingly referred to as the Act of No Choice by the Papuans and their supporters with a legal challenge being prepared by an Australian legal academic. The new Indonesian province was named Irian Barat; later, at the opening of the Freeport mine in March 1973, Suharto renamed the province IrianJaya (Victorious Irian). In April 1967, two years after the military coup, Freeport became the first foreign company to sign a contract with the new Suharto government and by doing so helped fulfill the new regime's needs. In the long term the company exploited and turned into much-needed foreign currency the natural resources that Jakarta lacked the expertise and capital to exploit. In the short term the Freeport contract was seen by the regime as a way of gaining political security from the powerful United States while simultaneously reinforcing the legitimacy of its claim over West Papua. 25 Freeport also afforded the regime legitimacy by investing in the country when foreign capital had fled. As noted by Soetaryo Sigit, who was mining minister at the time, the importance of the company and its contract was that it indicated "to the world that Indonesia [was] serious about trying to accommodate foreign investment." 26 Initially, Jakarta tried to persuade Freeport to sign a contract under the old production-sharing agreement, which was highly restrictive and in all respects unacceptable to the company. 27 Because the balance of power lay firmly with the American mining company, there was little the insecure regime would not do for Freeport and its powerful friends. With new legislation governing foreign investment yet to be passed, and the company rejecting the old rules, Jakarta finally requested that Freeport produce its own contract. Forbes Wilson, who was head of the Freeport negotiating team at the time, believed that some high-level discussions must have gone on behind the scenes because to the negotiator's surprise Freeport's draft contract was accepted by the Indonesians. 28 With Freeport symbolizing the "new frontier" image Indonesia wished to promote, there followed a

14

Chapter I

flood of technical expertise and foreign capital—$1,226 billion by 1969. This influx of capital, in the form of aid and FDI, not only underwrote the Suharto regime for more than three decades, but foreign capital established and continues to maintain the viability of the Indonesian mining sector. In return for its services at such a critical time, Freeport's needs were fulfilled by an eager Jakarta: it got a highly favorable contract, the riches of Ertsberg, and the military to protect it. Today Freeport employees reside in closed, fully contained, and planned U.S.-style company towns while the Amungme and Kamoro, displaced from their land and livelihood, live around these company towns in ghetto conditions waiting for Freeport jobs or largesse. Nor surprisingly, the original inhabitants of West Papua have come to believe that the natural wealth of their homeland has become their curse. With Jakarta using the riches of the province as collateral against World Bank and other development loans aimed at holding the archipelago together, West Papua's importance to the center only continues to increase. Understandably, given the current economic and political difficulties, the state is intent on retaining control of such a valuable asset. However, Freeport is playing a dangerous double game today, for not only is it financially supporting the Indonesian military, but it is funding West Papua's independence movement through the Papuan Presidium Council. In the province's fight for independence, the political importance of Freeport-McMoRan in the United States and the financial importance of the Freeport mine to both Jayapura and Jakarta make Freeport pivotal to the future political status of West Papua and, by association, the Republic of Indonesia. In April 2001 Josepha Alomang, a feisty and well-respected Amungme community leader who was one of two protagonists to bring lawsuits against Freeport in the American courts, was awarded the prestigious Goldman Environmental Prize in the United States for her environmental and human rights activism against the company. The award, which is given to individuals who "have taken great personal risks to promote the common good and . . . inspire other ordinary individuals to do extraordinary things," not only carries a stipend of $125,000 but raises the profile of the recipient. 29 Embarrassed by the award, three days before its official announcement Freeport attempted to seize the initiative. To demonstrate its generosity and magnanimity, and to signify to the world the changed nature of its relationship with this difficult and longtime adversary, it announced that following a request from Alomang and as a result of ten months of negotiations between her and the company's special counsel to the chairman on human rights, Judge Gabrielle Kirk

Introduction

15

McDonald, 30 the company was awarding Alomang's fledgling human rights organization a grant of $248,000—nearly twice the amount of the Goldman prize. To the company's horror and embarrassment, Alomang, who had also received the Indonesian Yap Thiam Hien Award for human rights activism in 1999 and who the company had recently stated was a force for peace in its concession, not only denied she had ever requested such a grant, but rejected Freeport's money. She explained her decision as follows: They tried to trick Josepha using human rights. "Josepha has an NGO but she doesn't have money, how can she help the people?" And they began to bargain with her and they make offers. And especially Tom [Beanal]. He is a Papuan. He was a leader in the struggle, an educated person. He is the leader of my people but now he has been bought by Freeport. He has been made a commissioner of Freeport. The people say, "Tom, those Americans they fooled you. They do not bring all the wealth and money to make you rich." Now they are using my name. They are now offering me money in these tricky ways. Money for the entire community. They offer these persuasive words. This is the way they operate. The people run to Freeport. They are all bought this way. They are given good-looking women. "The woman you have is not good enough. We will give you this good woman." They give them beer and they let them gamble and all that sort of stuff. That's what they are doing now. In the past they came with weapons but now they give us these things instead. And this is how they do it with their sweet language. This is how they buy up Papua. 31

The above episode plays out in miniature one of the company's greatest problems. During the Suharto years, Freeport successfully used money and influence to paper over problems and, as the above incident would indicate, continues to do so seemingly unaware that the old certainties no longer exist. The inability to quickly adjust to new political realities not only leaves this wealthy company highly vulnerable, but arguably represents the greatest threat to its future.

Chapter 2

Business in Indonesia

I N D O N E S I A N B U S I N E S S UNDER Suharto had no concept of conflict of interest. To the contrary, politicians, the military, and the bureaucracy became essential elements of the business community. With the extended Suharto family and the president's friends as powerful role models, what was described as the traditional Javanese distaste for business was essentially abandoned in the late seventies in the rush for fortunes. 1 Indeed, Suharto, who used access to resources and business as the major lubricant of his patronage style of leadership, actively encouraged the involvement of all powerful groups in this sector of the economy. By controlling the patronage system through access to business, Suharto effectively controlled the military, the politicians, and the public servants. Under Suharto these groups were intimately involved in the most lucrative business ventures to the point that to be successful in Indonesian business one usually needed an influential partner in at least one of these institutional groups, preferably with direct access to Suharto. By controlling these groups, he controlled the state and the forces of coercion.

The late fifties saw the emergence of the politico-bureaucratic-military grouping that, along with selected Chinese businesses, came to dominate the state-run economy in Indonesia until the nineties, when the Suharto children's presence began to upset this balance. The powerful economic triad traces its roots to the fledgling years of Indonesian independence and through Sukarno's experiment with state-led capitalism and "guided democracy" (1959-1965). 2 In the early fifties the Indonesian economy, dominated by the Chinese traders and the foreign capital of the Dutch imperialists, and lacking a noteworthy pribumi capitalist class, was failing. 3 Giving economic priority to a policy of state-led industrialization, the first Indonesian governments encouraged the emergence of indigenous capitalists to displace the power of the "foreigners." In the early fifties, embryonic indigenous industries were given preferential treatment from the banking system and through the nationalistic 16

Business in Indonesia

17

benteng system of licensing (1949-1959). 4 Despite successive g o v e r n m e n t efforts to e n c o u r a g e t h e e m e r g e n c e of I n d o n e s i a n e n t r e p r e n e u r s in t h e sixties a n d seventies, such a g r o u p failed to e m e r g e until t h e early eighties, w h e n essentially its b i r t h h a d m o r e to d o with its access to p a t r o n a g e t h a n its business a c u m e n . In late 1957 to 1958, p r e s s u r e d by t h e u n i o n s a n d workers, S u k a r n o b e g a n to e x p r o p r i a t e D u t c h assets. With t h e failure of the e m e r g e n c e of t h e pribumi capitalists, these assets were seized by t h e central governm e n t , t r a n s f o r m e d i n t o state c o r p o r a t i o n s , a n d in m a n y instances placed u n d e r t h e c o n t r o l of t h e b u r e a u c r a c y o r t h e military. By t h e e n d of this process of e x p r o p r i a t i o n , "90 p e r c e n t of p l a n t a t i o n o u t p u t , 60 p e r c e n t of f o r e i g n t r a d e . . . factories, shipping, m i n i n g , banks" were in t h e h a n d s of t h e state. 5 T h r o u g h c o n s t a n t state p r o t e c t i o n a n d f u n d i n g , t h e state c o r p o r a t i o n s , which o f t e n translated i n t o m o n o p o l i e s , eventually domin a t e d nearly every area of investment in I n d o n e s i a . While eventually b e c o m i n g invaluable a n d c o m p l i a n t vehicles f o r S u h a r t o ' s state-led industrialization, they were, m o r e importantly, a lucrative source of p a t r o n a g e f o r t h e politico-bureaucrats a n d t h e military. D e c a d e s later t h e S u h a r t o g o v e r n m e n t was still d e f e n d i n g its participation in the economy t h r o u g h these c o r p o r a t i o n s , a r g u i n g that n o t only was private enterprise i n c a p a b l e of r u n n i n g these c o m p a n i e s , b u t that t h e state c o n t i n u e d to r e q u i r e t h e r e v e n u e they p r o d u c e d a n d t h e c o n t r o l over t h e e c o n o m y they e n s u r e d . 6 In f u n c t i o n i n g capitalist e c o n o m i e s , a structural b a l a n c e m u s t exist b e t w e e n state a n d capital. In S u h a r t o ' s autocratic state, however, a t h i r d variable u p s e t this e q u a t i o n : p a t r o n a g e . 7 By t h e nineties t h e structural b a l a n c e b e t w e e n state, capital, a n d p a t r o n a g e h a d t i p p e d so m u c h in the latter's favor that m a n y of t h e I n d o n e s i a n m o n o p o l i e s c a m e to b e l o n g to S u h a r t o ' s family a n d circle of f r i e n d s with hardly a single c o m m o d i t y free f r o m their influence.8

THE MILITARY S u h a r t o ' s reliance o n t h e military to r e i n f o r c e his power a n d m a i n t a i n c o h e s i o n within t h e a r c h i p e l a g o m e a n t that t h e military was e n c o u r a g e d to s t r e n g t h e n its existing politico-military role originally articulated by t h e army chief of staff, M a j o r G e n e r a l A b d u l Haris Nasution, in 1958 as t h e "middle way." 9 Eventually this institution p e n e t r a t e d all aspects of I n d o n e s i a n life. U n d e r its new a n d s t r o n g e r dwifungsi, o r d u a l - f u n c t i o n role, it b e c a m e a central political a n d social f o r c e that f o c u s e d n o t o n

18

Chapter

2

countering threats from external enemies or protecting its citizenry, but on fighting, controlling, terrorizing, exploiting, and suppressing its own people and those the regime defined as enemies of the state. In most instances these were individuals or groups who called for a more democratic Indonesia, a more equitable distribution of wealth, accountability within the Indonesian body politic, and an end to the regime's systematic violation of human rights. At the time of the expropriation of foreign assets, the military was no stranger to business, although its early forays into private enterprise were on a modest scale. Under Sukarno, military participation was generally through the division commanders, who were forced to supplement inadequate military funding to ensure the survival and loyalty of the troops, rather than for the express purpose of private capital accumulation. The mark of a good commander and the degree of loyalty he enjoyed within his unit was often commensurate with the funds he could dispense. 10 Having risen through the ranks of the military and seized control in Jakarta with the backing of that institution, Suharto was far from secure in his early years and was sensitive to a potentially unstable situation: although the state needed the loyalty of the troops to maintain national unity, it had always been unable to adequately support them. 11 Under such circumstances Suharto needed to maintain the patron-client relationship with the military if he hoped to remain in power. The pressure to provide for these forces of coercion only expanded as their numbers and his reliance upon them increased. 12 To address this concern Suharto continued the system of loyalty through patronage and threw the resources of the state—most specifically the state-run oil company, Pertamina—behind the military's entrée into business. Eventually the ascendancy of Suharto secured the military hierarchy's quantum leap from petty trader and extortionist to powerful economic and political actor to the extent that by the end of the Suharto era, the army was reported to have control of about seventy major companies. With the increase in the power of the military, Suharto successfully made liberal use of the carrot and the stick to control the military and suppress the rise of a credible opposition figure from within its ranks for thirty-two years. Officers were rewarded for loyalty and conformity with promotion or attractive business opportunities or, conversely, denied access to privilege and banished to the wilds of the archipelago for perceived disloyalty. At the same time lucrative sinecures were guaranteed on retirement with positions in the parliament, the bureaucracy, or business. With Suharto's blessing the most favored in the military also took the opportunity to exploit the powers of the central government

Business in Indonesia

19

while using army resources and infrastructure to further military-associated business enterprises. From its humble position in trade in the early years of the Republic, the military eventually became a vehicle for personal enrichment and power, TNI became the creator and protector of Suharto's ruling Golkar party (Golongan Karya [Functional Grouping]; formed by the military during the Sukarno years, it became a political party controlled by Suharto to validate his "democratic" credentials), was guaranteed a significant presence in the parliament, and was afforded key positions in Suharto cabinets. Originally apportioned 20 percent of the seats in the five-hundred-seat seat House of Representatives (Dewan Perwakilan Rakyat; DPR) TNI represented no more than .15-25 percent of the population. 13 In addition, TNI officers gained senior positions in all government departments so that they effectively ran a parallel administration through the domination of the bureaucracy. At its height this kekaryaan system, or the "cadre-ization" of the civil service, saw as many as twentyone thousand serving military officers simultaneously holding civil positions. 14 As bureaucrats, military personnel continued to draw an allowance from the military as well as their civil servant wage. Should one of their number be accused of impropriety, he was tried under a military court rather than civil. The military justified its bureaucratic and political presence with the argument that because in the forties "the people had placed their hopes in the army, there was a need for TNI to participate fully in all aspects of government." 15 Despite the power and wealth that accrued from military businesses heavily subsidized by the government, the military failed, with a few notable exceptions, to succeed as astute business managers. The military hierarchy was generally more interested in making a quick profit by siphoning off company funds than in embracing a prudent business approach. This phenomenon was reflected acutely by General Ibnu Sutowo's mismanagement of the state oil company, Pertamina. What should have been an extremely lucrative business was eventually left holding debts of approximately $10 billion when the general was forced to leave. 16 The demands that would be placed upon the military in its role as capitalists were foreseen in the sixties by Sukarno's chief of staff, Nasution, who made arrangements for army personnel to be trained in good business practices in the United States. This arrangement, however, was later cancelled because of Sukarno's perceived "anti-West" leanings. By the late seventies, Indonesian business, with an eye to expansion especially in the West, was demanding degrees in economics or business management for its top management positions. As a result, participation

20

Chapter 2

in industry was proving too d e m a n d i n g for the military. In the last few years of the Suharto regime, in a rather belated response to the lack of business acumen, the military h a d been sending its officers to business school. This was a case of too little, too late. Generally, the preferred solution to the shortcomings of the military businesses was always a shortsighted response: strengthen ties with the most influential Chinese e n t r e p r e n e u r s or Cukong;17 deal primarily in the resource exploitation industry, where not m u c h business acumen was required; and in the later years, join forces with the Suharto children. T h e military always held the mistaken belief that access to business afforded it some degree of i n d e p e n d e n c e f r o m the executive. Yet a reliance on business proved a two-edged sword, as Suharto's increasing control of the business sector m e a n t that the military's reliance on the president also increased exponentially. Its vested interest in the capitalist sector secured its ties to the palace, a n d t n i became what Suharto had envisaged it would be—a staunch protector of the economic, social, and political status quo. That is, t n i became the protector of the Suharto state rather than the nation. A gradual deterioration of the military's political power tended, in part, to be a natural by-product of Suharto's longevity. However, it was also a p r o d u c t of a deliberate policy aimed at consolidating the president's power over the o n e institution he was wary of. With compulsory retirement at age fifty-five, by the mid-seventies nearly all of Suharto's contemporaries had been either retired or replaced. While continuing to encourage the dwifungsi role of the military, Suharto successfully used the political tactic of divide a n d c o n q u e r so that by the last two decades of his rule the force was divided a n d low in morale. Eventually, by the nineties, his power over the military a n d the state allowed him to move his family in a n d out of senior positions within that institution while reducing TNl's seats in parliament. Having successfully eroded the military's political power, he also u n d e r m i n e d the institution's economic base. Some of the economic privileges a n d business opportunities traditionally afforded this g r o u p were increasingly bestowed u p o n the chosen (usually pribumi) businessmen closest to him a n d eventually u p o n his own children. Despite the illegality of the military's participation in business and its lack of business acumen, the military continued to prosper, although often as the essential "muscle" rather than as the "brains" of an enterprise, with many military personnel appointed to business expected to d o nothing m o r e than provide protection and the surety of the deal. In the e n d the military was often reduced to earning its keep by being the

Business in Indonesia

21

paid protectors of Chinese business—a phenomenon that led to its often being dismissed simply as the protector of the rich. Since the fall of the Suharto regime, the military, because of its shortsighted business policies, is facing a potentially disastrous situation. With the change in government, TNL's main aim was to ensure that it outlasted the old general and maintained the stability and legitimacy of the state and its own preeminent position therein. To achieve this end, TNI has been asked to sanction the very acts that could be its downfall: radical reformation of the institution and an investigation into the business dealings of the Suhartos and their associates. If the current campaign to end the corruption, collusion, and nepotism that has kept many military businesses afloat eventually proves successful—and that is debatable— the military faces the loss of many of its lucrative business ventures. If this happens, the government, already grappling with financial problems, will be forced to face the near impossible task of fully supporting the 450,000-strong Indonesian military and police from its own diminishing coffers. And if it increases military wages, it will be forced to increase the wages of the four million people in public service. In 1998 PricewaterhouseCoopers completed an audit of Pertamina covering the two-year period from April 1996 to March 1998. The audit concluded that inefficiencies and alleged corruption had cost the company nearly $4 billion. 18 Should the government decide to resume and transparently manage these military businesses, it could thereby offset the costs of supporting the military and the bureaucracy. Today the military has agreed to gradually withdraw from business with personnel being told that they must choose between their bureaucratic or military positions. Many have indicated that they prefer to collect their minuscule army pension and keep their far more lucrative jobs in the civil service. 19

THE CHINESE The Chinese have been important in commerce in Indonesia for centuries and can attribute their initial rise to the favored treatment they received under the Dutch. Their position as a pivotal link in the country's economy was enhanced during the New Order era, for although the Chinese were largely absent from the industries that came to be dominated by state-run companies, they dominated the essential distribution networks. Moreover, the virtual nonexistence of an alternative capitalist class meant that initially the emerging captains of industry—the military and the politico-bureaucracy—were forced into business with the Chinese.

22

Chapter 2

With the expansion of the economy, incoming foreign capital also sought out the Sino-Indonesian businessmen. With the withdrawal o f the Dutch from Indonesia in the mid to late fifties, the Chinese were forced into partnerships with the military, with the Chinese providing what TNI lacked: expertise, finance, and distribution networks throughout the region. 2 0 By replacing the Dutch as the new partners of Chinese enterprise, the military not only provided the political connections lost to the Chinese with the withdrawal of the Dutch but, until 1998, succeeded in protecting the Sino-Indonesian position in business. Despite the fact that most Sino-Indonesians consider themselves Indonesian and can be described as peranakan (having lived for generations in Indonesian and having few, if any, ties to China), they have always been viewed as a separate ethnic group, looked upon with suspicion in their home country and systematically discriminated against by the state. T h e New Order government simultaneously tried to assimilate and discriminated against the Chinese. They were excluded from positions of political power or from reaching prominent positions within the military, and their identity cards clearly displayed discriminating initials. 21 While being segregated they were simultaneously forced to assimilate: the display of Chinese characters was forbidden; Chinese schools and cultural or trade associations were prohibited; and although there was no official policy banning Sino-Indonesians from the civil service and the universities, they were reticent about applying, believing that unofficial quotas made placement difficult. Being excluded or discriminated against pushed many Chinese into business and societal enclaves; this "ghettotization," in turn, led to further discrimination and exclusion. Not content with discriminating against this group, the Suharto regime often used them as scapegoats simply because it was politically and economically expedient to do so. During times of political or economic dislocation, the New Order government deflected criticism from Jakarta and released social tensions by apportioning blame to the politically weak Sino-Indonesian minority. Although under Sukarno peranakan were recognized as an Indonesian ethnic group, in 1965 the Chinese were excoriated by the new regime as a fifth column loyal to the Chinese Communist leader, Mao Zedong, and as such suffered in the purges o f that "year of living dangerously." T h e most recent example of scapegoating of the ethnic Chinese community was during the economic crisis in 1997-1998, when a faction of the military aligned with Prabowo Subianto, Suharto's son-in-law, blamed the crisis on the "others" within Indonesian society. Historically, the Chinese have bought protection

Business in Indonesia

23

from the military, but in the riots of May 1998 they became more valuable to certain factions as scapegoats. Ironically, despite Suharto's policies to discriminate against the SinoIndonesians, his favored treatment of a couple of these Chinese capitalists led to their emergence as the most influential and wealthy businessmen (after the Suharto family) in Indonesia. Suharto's most enduring business relationships were with Mohammed "Bob" Hasan and Liem Sioe Liong (Sudono Salim). While Liem was officially the wealthiest, Hasan became politically more powerful so that after the death of Suharto's wife, Siti Hatinah (Tien) in April 1996, he became the president's closest adviser and was commonly seen as the "fix-it" man for the family. Moreover, the only exception to the rule of political exclusion for the Chinese in the more than thirty years of the New Order government was the appointment in March 1998 of Bob Hasan as minister for trade in Suharto's notorious last crony cabinet. Both Liem and Hasan enjoyed the benefits of control of a number of government-subsidized cartels and monopolies; in return, they were instrumental in helping Suharto build his fortune and later initiating the Suharto children into business.22 The phenomenon of victimization and exclusion of the Sino-Indonesians in general, juxtaposed against the enormous privileges of the few in the New Order period, only succeeded in heightening existing anti-Chinese sentiments. Despite these difficulties the Chinese, in general, proved tenacious in their ability not only to endure but to prosper. This phenomenon resulted from a number of complex factors. Generally, many Chinese throughout the Asia-Pacific region have benefited because of their willingness to maintain and exploit the strong familial and cultural networks that have existed for centuries within the expatriate community, providing ready access to both finance and established business networks. The argument also exists in Indonesia that the Chinese, simply by their exclusion from other areas of business such as the bureaucracy and agriculture, were forced into commerce to survive. In addition, Indonesian laws aimed at limiting Chinese businesses caused them to diversify, a phenomenon that directly led to the growth of the conglomerates for which the Chinese were so often criticized. 23 Even though by the seventies Jakarta was often under pressure from pribumi business to launch an assault upon Chinese capital, at no time was the regime willing to destroy the Sino-Indonesian element in business, for to do so would threaten the very fabric of the Indonesian economic community. Rather, their position generally grew as the economy grew. And although Chinese economic power failed to translate into political power, their position within the economy usually afforded them a certain degree of protection.

24

Chapter 2

While the ethnic grouping as a whole held a disproportionately large degree o f the nation's wealth in relation to the percentage o f the population they represented, this wealth was not dispersed evenly throughout the Chinese community; rather, it was controlled by a number of phenomenally wealthy and privileged Sino-Indonesians who had close links to Suharto. Far from being a wealthy homogeneous group, the majority o f Chinese were middle-class, urban-based traders.

T H E PRIBUMI Over the years pribumi resentment had been mounting against the domination of the Chinese conglomerates, which they believed to be the main beneficiaries of foreign capital and corporate state largesse. With the political instability of 1974 culminating in the Malari riots, Suharto dampened dissent by exploiting an increase in oil revenues to fund affirmative action on behalf o f the pribumi. Eventually many of these pribumi businessmen became the beneficiaries o f heavy state protection and legislation, making them both wealthy and powerful within the state. From the mid-seventies to the early eighties the government instigated a number of economic reforms, often in the form of presidential decrees that favored the pribumi: company ownership laws were changed to require increasing percentage ownership by pribumi-, indigenous businesses were favored with government loans and contracts; Chinese and foreign capital were excluded from certain areas of business; and banks were directed to give priority to the needs o f this group. 2 4 Affirmative action with regard to government contracts and infrastructure development, together with the exploitation of the assets o f the state corporations, often offered an entrée into business for this group. With more than 180 state corporations dealing in nearly every industry imaginable, Suharto eventually had a plethora of cash cows from which to disperse patronage. 2 5 Part o f Suharto's affirmative action on behalf of the pribumi involved the setting up in 1980 of a highly favored group called Team 10 to coordinate the purchase of state goods on behalf of ministries, government bodies, state-owned companies, and, eventually, the military. After successive presidential decrees, each affording it greater power, Team 10 was finally disbanded in 1988, but not before it made its ten indigenous members exceedingly rich, gave the Suharto children a helping hand in business, and successfully disposed of $48 billion of government procurements. 2 6 As a Team 10 member confided to Adam Schwarz, "It was

Business in Indonesia

25

Team 10 under Sudharmono that made Bakrie big, it made me big, it made a lot of us big." 27 In addition to the economic objectives of Team 10, which were well stated, the formation of this group had an underlying political agenda as its membership and the political positions they were to hold under Suharto clearly demonstrated: Sudharmono, state secretary, chairman of Golkar, and vice president; Ginandjar Kartasasmita, minister for mines and energy and minister of economy and development supervision; Bambang Rachmadi, minister of public works; Abdul Latief, manpower minister and minister for tourism, post, and telecom; and Aburizal Bakrie, head of the largest pribumi conglomerate and the Indonesian Chamber of Commerce and Industry (Kamar Dagang dan Industri; KADIN). In effect, Team 10 became just another vehicle for Suharto's patrimonial style and a loyal pool from which to choose senior bureaucrats and cabinet members. By the end of the eighties the extraordinary excesses of the pribumi in Team 10 had formalized and centralized patronage and feudalism in state policy. Like many objectives of the Suharto regime, however, positive discrimination on behalf of the pribumi fell far short of achieving its publicly stated aim. In this unequal economic order, it was the politically well connected, not the struggling pribumi trader, manufacturer, or landowner lacking in political connections, who prospered. 2 8 The more well connected one was, the more one prospered. Under Suharto an inherent weakness came to exist within the pribumi business sector that can be traced to the government's policies on behalf of this group. By supporting a patron-client relationship, Suharto created a damaging catch-22 situation: relying on the state for their profitability, and in a number of instances their very existence, the pribumi businesses, like the military, were slow to develop a cadre of successful and competent professional managers. In turn, this deficiency ensured that the sector developed slowly and, like the military, was tied politically and economically to the president and his state-supported patronage. 2 9 This situation changed somewhat in the late eighties, for the downturn in state largesse forced many to confront the difficulties before them, to diversify, and to begin competing. With the dramatic downturn in 1985 of oil and gas revenues, which had for some time prior to this accounted for approximately two-thirds of government earnings, Jakarta was forced to reconstruct the economy and substitute the waning petrodollars with other forms of taxation—a policy that, as Andrew Maclntyre noted, carried "a political price." 30 For the sake of stability, Suharto felt unable to abandon his "clients," who had come to expect and rely on

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state largesse. Eventually, Suharto found two solutions to this problem: privatization and foreign capital. In late 1993-earIy 1994, with the government holding the controlling interest in more than 180 limited-liability companies, it announced a privatization program for a number o f the larger corporations. Ostensibly this program was to encourage private investment, but in reality it was pure patronage and a transfer of state wealth to well-connected individuals. 31 Suharto's privatizing succeeded in producing a small shift in the economy from the state to the private sector, its most significant result, however, was an increase in the power and wealth of his favored pribumi entrepreneurs and the First Family. 32 While the resources of the state were increasingly used in this period to support the patron-client relationship, so too was foreign capital.

FOREIGN CAPITAL Until late 1997 Indonesia was considered an attractive place to invest because o f its political stability, sustained economic growth, abundant resources, and a generally compliant and low-cost labor force—even for Southeast Asia. In exchange for this conducive investment climate, Jakarta received access to foreign capital, markets, technology, and expertise. In the short term this inflow of foreign capital was used to provide revenue and establish legitimacy for the new government after the fiscal debacles of the Sukarno era. In the long term it was used to support national development strategies and Suharto's system of patronage. In the fifties Sukarno's highly contentious and restrictive foreign investment laws, together with the regime's expropriation of foreign assets, had caused a dramatic drain of foreign capital from Indonesia, so when Suharto came to power, his first economic priority was to address the need for state revenue through the inflow of foreign capital by either direct investment or Western aid. To fulfill the West's investment requirements, the regime promised not to expropriate foreign capital, returned some that had been expropriated, and employed a group of U.S. trained economists called the "Berkeley Mafia" 33 together with IMF and World Bank experts to oversee the dismantling of prohibitive government business practices and enact policies to link Indonesia to the international free market capitalist economy. 34 So accepting was the West of the bloodbath of 1965 and the transformation overseen by the Suharto regime that not only did private capital move to the Republic, but the Inter-Governmental Group on Indonesia (IGGI), which became an international chan-

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27

nel for state-to-state funding, was formed in 1966 and began immediately channeling large amounts of aid funds into the Indonesian coffers, i g g c (and later its replacement, the Consultative Group on Indonesia [ c g i ] ) funding was crucial in keeping the Suharto dictatorship afloat for its thirty-two years. Despite Jakarta's well-publicized objectives, at no time was the regime able to end its dependence on foreign aid. 35 By 1974, with the state's coffers buoyed by windfall oil revenue and his presidency politically secure, Suharto felt less need to satisfy the policy demands of foreign investment capital. However, from the late eighties the dramatic downturn in oil revenues saw a return of the relative structural power of capital and a return of foreign business. Historically, Suharto had encouraged foreign capital to enter into partnership with his main ally, the military, but with Suharto attempting to undermine the power of the military while currying favor with the pribumi businesses closest to him, this later group eventually came to be viewed by FDI as foreign capital's preferred partner. With Suharto personally approving all foreign investment over $100,000, he was able to control patronage through access to foreign investment capital so that the chosen pribumi were able to reap enormous economic rewards with little ouday or expertise required. Despite growing criticism over these partnerships, they flourished because they represented win/win situations for the elite groups involved. As partners the pribumi shared in the profits of the company, but with the initial debt being paid off from future profits and dividends—a policy called "carried interest" that effectively by-passed the U.S. Foreign Corrupt Practices Act 36 —they were usually called upon to provide only small amounts of private capital, if any at all. With favored government treatment, their profits were usually assured. Thus, under Suharto, the privileged pribumi were handed a no-risk investment and often guaranteed a healthy return. Suharto won because, in practical terms, the allocation of these partnerships was part of the patronage system. In ideological terms, these business partnerships also helped to defuse criticism of foreign exploitation within Indonesia by creating the illusion that Indonesians were sharing in foreign investment when in reality only a chosen few benefited. Finally, the foreign partner benefited from this relationship because it secured access to Indonesian resources and markets and a partner with knowledge of the local market and political connections that guaranteed access to licenses, concessions, and state-funded credit. The only group that had little, if anything, to gain from the deals was the remaining 99 percent of the Indonesian people. Increasingly, Suharto was seen to be saving the most lucrative foreign partnerships for his family and closest associates. At the same time, most

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foreign capital a p p e a r e d to consider the price of p a t r o n a g e small comp a r e d to the benefits o f f e r e d . T h u s , little reluctance was d e m o n s t r a t e d by foreign capital to pay f o r the services of a m e m b e r of the S u h a r t o family.

THE CHILDREN If t h e privileged pribumi were t h e m a i n beneficiaries of S u h a r t o largesse, t h e n by t h e nineties his c h i l d r e n h a d b e c o m e t h e privileged of t h e privileged. 3 7 S u h a r t o took great pains to advance his c h i l d r e n ' s interests to t h e p o i n t that eventually n o d e m a r c a t i o n was evident b e t w e e n t h e interests of t h e state a n d t h e interests of the First Family. As Michael B a c k m a n n o t e d , leaders such as Marcos a n d S u h a r t o c a m e to believe that I'etat, c'est moi (the state, it is I). 38 O n e A m e r i c a n b u s i n e s s m a n p o i n t e d o u t that "without t h e m [a S u h a r t o family m e m b e r ] , you w o u l d n ' t have a project. It's as simple as that." 3 9 With t h e c h i l d r e n rarely, if ever, b e i n g r e q u i r e d to provide capital f o r t h e i r stake in a project, they all, p e r h a p s with t h e e x c e p t i o n of t h e youngest d a u g h t e r , Mamiek, amassed p r e c r a s h f o r t u n e s estimated in t h e h u n d r e d s of millions, if n o t billions, of dollars. T h e n u m b e r of c o m p a n i e s in which they a n d their various c h i l d r e n , husb a n d s , wives, uncles, a n d in-laws were involved has b e e n estimated at m o r e t h a n twelve h u n d r e d in I n d o n e s i a alone. By the nineties, e c o n o m i c policy m a k i n g was characterized by S u h a r t o ' s unwillingness to limit t h e avarice of his c h i l d r e n a n d closest associates or, i n d e e d , recognize t h e d a m a g e such behavior was causing to the economy. In t h e last years of t h e S u h a r t o regime, t h e p r e s i d e n t ' s p a t r o n a g e increasingly i m p i n g e d u p o n t h e structural b a l a n c e between capital a n d t h e state. Initially, their sources of no-risk wealth a c c u m u l a t i o n were t h r o u g h links to the c o n g l o m e r a t e s of Bob H a s a n a n d Liem Sioe Liong, w h o o f t e n blessed t h e m with m i n o r partnerships. Alternatively, they were given gove r n m e n t supply contracts, especially with Pertamina, which by 1998 was estimated to have " c o r r u p t deals with n o less t h a n 159 separate companies, mostly linked to m e m b e r s a n d f r i e n d s of t h e S u h a r t o family." 40 All obstacles were r e m o v e d by their father, with presidential decrees b e i n g issued in their favor, state a n d public banks f o r c e d to s u p p o r t their projects, a n d state-run c o m p a n i e s f o r c e d to carry t h e m as partners. With little business a c u m e n o r e d u c a t i o n they favored no-risk investm e n t in I n d o n e s i a . Eventually, the c h i l d r e n v e n t u r e d o u t o n their own, taking t h e o p p o r t u n i t y o f f e r e d by their f a t h e r ' s position to p a r t n e r i n c o m i n g f o r e i g n capital a n d to build their own c o n g l o m e r a t e s . A short list of the first siblings' f o r e i g n business p a r t n e r s reads like a who's w h o

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of international business. 41 In all cases the children's modus operandi was strikingly similar. They chose to partner the most prestigious internationals bidding for the big government construction and infrastructure projects, and, in return for favored government treatment and the success assured by their name, they were often given a seat on the board and carried interest equity in the project. This equity was then seen as payment for services rendered. In nearly all instances, the government supported the children's projects unequivocally, and they were rarely required to participate in an open bidding process. The situation became difficult for the bureaucracy only when the children represented competing interests. 42 Having aligned themselves so closely with their father, they succeeded in operating above the law. The children's ventures into the highly profitable business of monopolies essentially meant they became superfluous middlemen, distorted the market, and raised the cost of business so that Indonesia's ability to move its economy from "low-wage assembly work to more sophisticated export industries" was retarded. 4 3 These practices invariably led to conflicts of interest between the greater good of the nation and the palace, but with the first siblings' interests at stake, the greater good of the nation always took a back seat under Suharto's "the state, it is I" philosophy. In 1997-1998 the IMF earmarked a number of family monopolies, including Tommy's clove monopoly, as one of the distorting monopolies that had to be dismantled. 44 Given that the Suharto oligarchy was the main beneficiary of the monopoly system, it is hardly surprising that Jakarta demonstrated reluctance by placing Bob Hasan, himself a direct beneficiary of monopolies, in charge of the dismantling process. Defying IMF pressure, Hasan defended these monopolies: "Monopolies are OK. As long as the monopoly is for the importance of all people, it's O K . . . and as long as it is in line with the constitution." 45 The clove monopoly, like virtually all other monopolies, was none of the above. The constitution states that the nation's resources and assets must be used for the good of all the people. 46 The monopolies that distorted the economy could hardly be categorized as doing so. After repeated warnings from the IMF reminding the government that it had signed a contract that committed it to the dismantling of the monopolies, Jakarta finally appeared to capitulate. Within weeks, however, it became clear that although officially dismantled, the monopolies belonging to the Suharto circle were intending to continue to trade in other forms. The great problem with the dismantling of the monopolies, apart from the reticence of those who profited handsomely from them and remained in power, was setting up new forms of trade.

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With their only real asset being their aging father, the children's schemes became more bizarre. In the late nineties Suharto's daughter Tutut, proposed to construct a three-tiered above-ground transit-way through the heart ofJakarta while her brother was simultaneously planning an underground system through the same area. Meanwhile Titiek, the second daughter, planned to build a ninety-five-kilometer bridge from the island of Sumatra to Malaysia. The last half decade of their father's reign saw the children's wealth leap dramatically as they scrambled for fortunes. From the ninety-third-richest family in Asia in 1996, they were reported, just twelve months later, to be the ninth-richest. By 1998 they partnered "no less than 66 Western, Japanese and Korean partners" some of which were the largest corporations in the world. 47 The Suharto children enriched themselves at the expense of the Indonesian people through access to cheap and often illegal bank finance, the control of monopolies, exclusive agencies, carried interest deals with foreign partnerships, state protection, subsidies, the exploitation of state-owned companies, and the use of government property. Examples of their avarice became increasingly unacceptable as the flaunting of their wealth became more ostentatious. While the opportunities available to the family and the children allowed them to become incredibly wealthy, they were outstandingly inept, blowing "a remarkable number of corporate schemes they touched." 48 While the privileges enjoyed by Suharto's children led to increasing and unprecedented criticism of this group during the mid-nineties, Suharto and his family were directly blamed for the 1997-1998 economic crash. In attempts to distance themselves from the children and to ward off an anti-Suharto backlash, many Indonesian businesses that had previously benefited from an alliance with the First Family announced plans to buy them out. Moreover, attempts to save failing businesses saw the children being forced to step down from the boards of many of the companies with which they were involved. In the case of Lamborghini, Tommy Suharto, defiant to the last, refused to stand down or sell his 40 percent stake to the parent company's Indonesian franchise. In response Lamborghini sold its own 60 percent stake to Volkswagen. The Suharto children's companies plummeted on the already ravaged stock exchange. Government officials also began to take their revenge. Those in charge of unprofitable state-run enterprises complained after the fall of Suharto that they had been forced to sign unprofitable contracts with the Suharto elite and then forced to endure in silence as their management abilities were criticized. While the Indonesian banking industry claimed that it was continually forced to bankroll Suharto projects without hope of

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31

repayment, contracts with the children's business interests were cancelled, with government authorities taking the opportunity to claim publicly that the contracts between themselves and the children's companies had resulted from corrupt practices. Within days of the riots and the resignation of Suharto, the Grand Hyatt Hotel in Jakarta, which was the haunt of the Suhartos, was devoid of customers while the children's shopping centers held clearance sales before closing their doors.

SUHARTO AND THE YAYASANS In contrast to his children, Suharto appeared to live a simple life. He wrapped his business dealings in a cloak of secrecy and seeming acceptability by disguising them as charities. Thus, confirmation of his wealth has been impossible. However, in the late nineties Forbes listed President Suharto as the sixth-richest person in the world and the thirdrichest head of state, with a personal net worth estimated to be somewhere in the magnitude of $16 billion (equivalent to the 1997-1998 national budget of Indonesia). During his time as commander of the Diponegoro Division, Suharto participated in business through necessity. Upon taking office his direct participation in capitalist activities appeared to cease, although his predilection for acquisition appears to have continued unabated, with Richard Robison stating that Suharto was rarely interested in becoming an active capitalist, preferring simply to take a cut from the Chinese businesses closest to him. 49 Other sources of Suharto wealth came through the business dealings of his late wife, Tien (often unflatteringly referred to as Madame Tien Per Cent and in the later years of her life, Madame Fifi [fifty]), and through Team 10 and the siphoning off of funds from Pertamina. Finally, Suharto's yayasans, (foundations) or "charitable organizations," which were commonly referred to as his "retirement funds," became potential receptacles of untraceable wealth. Under the law, Indonesian business and businesspersons were, in some instances, forced to "donate" a percentage of their wealth to these yayasans. Presidential Decree No. 92/1996 required that all Indonesian "individuals and companies earning more than $45,000 annually" "donate 2 percent of their profits to Yayasan Dana Sejahtera Mandiri. 50 In another instance, PT Bogasari, which was set up to exploit the wheat monopoly in Indonesia, was required by its articles of association to donate 25 percent of all profits to Mrs. Suharto's Yayasan Harapan Kita and the army's Yayasan Dharma Putra. 31 Officially, all Suharto's yayasans, were charitable

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Chapter 2

organizations, and f u n d s were to be used to improve the lot of the underprivileged. But with the organizations lacking transparency or accountability and control resting ultimately in the hands of Suharto, any investigation into their activities was impossible. It is widely believed that most of the funds were deposited in the Suharto's private bank accounts. George Aditjondro d o c u m e n t e d ninety-five yayasans, held by Suharto, his children, their relatives, in-laws, grandchildren, close associates, a n d the military; the most high-profile o n e was Nusantara A m p e r a Bakti, or Nusamba, which was f o r m e d in 1982. Until a b o u t 1995, 80 percent of Nusamba was officially held by Suharto t h r o u g h three o t h e r yayasans, Yayasan Dharmais, Yayasan Dakab, and Yayasan Supersemar (all h e a d e d by Suharto), with the remaining 20 p e r c e n t being divided equally between his eldest son, Sigit, a n d Bob Hasan. However, by 1996 the Nusamba articles of association listed Hasan as holding all b u t o n e of the shares. 5 2 Despite this anomaly it is widely u n d e r s t o o d that, at the time of his resignation, Suharto continued to hold the controlling 80 p e r c e n t interest, with Hasan continuing to m a n a g e the investments on his behalf. Nusamba supposedly used f u n d s acquired f r o m direct investm e n t in 150 companies, interest f r o m bank accounts, a n d taxes compulsorily levied on Indonesian companies to allocate scholarships and s u p p o r t o t h e r charitable organizations. Declaring that the yayasans were purely for philanthropic purposes, Hasan claimed that "when we [Hasan and Suharto] are not a r o u n d any more, [we want] the two f o u n d a t i o n s to be like the Ford Foundation a n d the Rockefeller Foundation." 5 3 In 1997 Nusamba began an aggressive acquisition drive that saw it acquiring stakes in what were widely regarded as blue-ribbon investments: it acquired the state banks' a n d pension f u n d s ' shareholding in o n e of the largest companies in Indonesia, PT Astra International; a 5.5 p e r c e n t holding in PT Freeport Indonesia; a n d a stake in the Busang gold mine in Kalimantan. As Hasan said, "In any good business, we will move in." 54 T h e obvious question of how m u c h , if any, of the f u n d s collected by the yayasans were used for the military, for patronage, for Suharto's private coffers, or, indeed, for the p o o r is repeatedly raised. In a country ruled by an autocratic dictator a n d having a business culture rife with corruption a n d predominantly r u n by owner-managers rather than professional managers, "trust remain [ed] the key currency in business." 55 Eventually, this trust disappeared. Only when the rupiah crashed did influential external groups with a stake in this system, such as the World Bank, the IMF, a n d the U.S. a n d J a p a n e s e governments, call for economic r e f o r m and, by association, political reform. Foreign capital operating in Indonesia was notable by its silence at this time.

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CORRUPTION, COLLUSION, NEPOTISM, AND THE WORLD BANK Corruption has been recognized as endemic in Asia, with Indonesia u n d e r Suharto having the dubious distinction of being perceived as the most corrupt nation in Asia for a n u m b e r of years. 56 In fact, the Indonesian brand of clientelist/feudalist corruption—corruption, collusion, and nepotism (commonly referred to as KKN [korupsi, kolusi dan nepotisme]—was well recognized and had long been accepted as part of the Indonesian business culture. During a seminar on corruption in March 1998, the former head of the government's Financial Comptroller Agency advised that corruption, which permeated all levels of society, was worst in the highest echelons of government; he blamed the continuation of the practice on a weak and highly secretive supervisory system. In Indonesia corruption can be categorized into two kinds: "need" based and "greed" based, or as Adam Schwarz says, "big" and "small" corruption. 5 7 While Jakarta accepted, and even encouraged, corruption at all levels of society, for the majority of Indonesians who existed on or below the poverty line, it became an essential way of life. 58 In a country devoid of welfare, where tens of millions of people barely eke out an existence, corruption had become the only safety net. Low-level government officials practiced need-based small corruption simply in order to survive. Small corruption existed in Indonesia because it became a necessity. W h e n discussing the big or greed-based corruption, we should note that the West's transnationals and lending institutions, with their laws against the practice in their h o m e states, became some of the system's beneficiaries. That is, corrupt Indonesian business practices continued n o t only because of the absence of internal accountability procedures for both business and bureaucracy in Indonesia, but also because of the West's indifference. After the fall of Suharto, the World Bank acknowledged that it knew that 30 percent or more of all development funds channeled directly through the government was being siphoned off. According to a project manager for the World Bank's Jakarta office, many within the organization were able to conveniently rationalize this corruption as "a kind of tax on an otherwise sound economy." 59 In early 1999, after the collapse of the rupiah and the regime and u n d e r pressure f r o m the international community, the World Bank completed a report on its performance in Indonesia to explain how it could have misrepresented the situation so completely. T h e report confirmed that the institution was aware of the level of corruption but laid the blame on "self-seeking" staff for whom "association with a 'successful' large

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country was beneficial to their career(s)." Italso blamed the bank's desire to maintain cordial relations with "one of its best clients." 60 Ignoring the obvious fact that there appears to be a need to question the criteria upon which the bank identifies a "best client," the above two motivations led to the nurturing of a destructive sycophantic relationship between bank staff and Indonesian government officials. One of the greatest services the World Bank did for the Suharto regime was to routinely "soften" or "sanitize" its influential country reports on Indonesia (including statistics with regard to the alleviation of poverty), which Jakarta and its Western allies could then use as a first line of defense against the regime's critics. With the World Bank allowingjakarta to alter reports before publication, economist Mari Pangestu stated that she could hardly recognize her own reports once they were returned to her. 61 The World Bank, which failed to use the word "corruption" in relation to Indonesia in any of its reports until 1997, was so good at promoting Indonesia to FDI that it effectively minimized its own power base with the government. In its defense the bank explained that with an economy that annually produced healthy growth rates and free-flowing FDI, Indonesia was not a country to which it felt it could dictate policy. In the words of a senior bank official, "We can kick Kenya around, or Costa Rica.... You can't kick Indonesia around." 62 Is it really any wonder that when pressured by the World Bank after the crash of the rupiah Suharto took litde notice? Dennis de Tray, head of the World Bank mission in Jakarta, remains pragmatic about the World Bank's policy toward Indonesia, pointing out that even though it was impossible to do business in Indonesia without dealing with a Suharto family member or associate, much of what the bank did helped raise living standards and alleviate poverty. De Tray argues that "in every country that we operate in there is a trade-off between . .. being pure and helping people." 63 Yet the fact remains that the World Bank did much to promote Indonesian business to the international financial markets without demanding accountability. The Suharto regime survived and the economy grew largely because the international community pumped foreign capital into a country where the labor force remained underprivileged, human rights violations were endemic, the rule of law was ignored, democracy was a sham, and the natural resources of the nation were squandered. When Suharto was pushed from power his legacy was a socially, culturally, and economically divided people facing deprivation, racial conflict, a dysfunctional economy, a crippling national debt, squandered natural resources, and irreversible ecological damage. The World Bank and other lending agencies must accept a proportion of the blame for this situation.

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THE FALL OF SUHARTO According to Benedict Anderson, Suharto was a product o fJavanese culture that holds that the power of the ruler is absolute, needing neither popular support nor legitimacy. 64 Within this model Suharto's rule was always a zero-sum game: either he had all the power or he had none. While the accumulation of wealth was one of the perks of the position it was, more importantly, the basis of his power within the Javanese model. Within this model, not to accumulate wealth, distribute resources, and wield power would be interpreted as weakness, which could be a fatal flaw. At the same time Suharto's rule was legitimized and promoted in Western terms as delivering social stability and development. Although the figures with regard to the rise in living standards and the elimination o f poverty were always highly questionable, and while stability was imposed by a military regime that denied the populace fundamental freedoms and violated human rights, what is clear is that, in general, Suharto did deliver both stability and development to the nation, albeit at a high political, economic, cultural, and social price. Thus, it was access to and the distribution of wealth that sustained his power in both the Javanese model and the Western model. When the Indonesian rupiah crashed out of control in 1997-1998, effectively cutting off Suharto's access to wealth and, by association, his ability to distribute patronage or deliver development and stability, then his power, according to both the Western and Javanese perspectives, was lost, and the end of his rule was only a matter of time. Suharto's fall was, for those who chose to look, foreseeable. Since the early nineties there had been a general but steady increase in tensions within the state that could no longer be hidden from the outside by the Indonesian facade of stability, which was so perfectly symbolized by Suharto's benign face and calm demeanor. T h e most obvious crack in the facade to the international community was the issue of East Timor, which became a global issue highlighting the brutality and illegality of the regime's control over that nation. In 1995 the release of a report by the head of the Catholic Church in West Papua, 6 5 which graphically highlighted systematic human rights violations by TNI in the province, also brought to the world's notice that all was not well in the republic. T h e release of this report was quickly followed by the highly public hostage taking of international aid workers by the OPM, which called for international pressure to bring an end to the violent Indonesian military control over the province. In addition, corporatist groups traditionally considered loyal to the regime such as Komnas HAM began to defy Jakarta, and NGO activism

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and strikes and demonstrations against the central government rose. With Suharto having few answers to such challenges, the increase in violence against the authorities exacerbated existing military repression. In July 1996 Suharto made what can only be considered in hindsight as a fatal error. By sanctioning, if not ordering the ousting of the politically inept Megawati Sukarnoputri from the senior position in the Indonesian Democratic Party (Partai Demokrasi Indonesia; pdi), Suharto created a figure around which opposition to the regime gathered. Highly publicized street demonstrations in support of Megawati quickly became violent demonstrations against the president. With the media and opposition groups taking their lead from the masses, they too began to openly criticize the regime. By mid-1996 huge cracks were appearing in the supposedly stable Indonesian nation. These existing domestic tensions were then exacerbated by the nation's growing economic woes caused by the drought and the forest fires that burnt out of control across the archipelago. These successive disasters heralded the end of the economic miracle for Indonesia. When Michel Camdessus from the imf stood with arms folded over the seemingly demure Suharto as the Indonesian president officially agreed to submit to the IMF economic demands, the symbolism for the Indonesian people was complete. No longer was the Javanese dictator with his avaricious children and privileged cronies all powerful. The economy, the body politic, and society were already under enormous stress when the increasingly distant seventy-seven-year-old Suharto made the decision in March 1998 to once again have himself appointed president for another five-year term. His subsequent appointment of a crony cabinet incapable of dealing with the problems facing the nation was seen as symptomatic of a dying regime. It also spoke of a man increasingly out of touch with reality. Whether examining the fall of Suharto from a Western or Indonesian cultural perspective it is the same: he fell because he lost the power to deliver the patronage and thus the development and social control upon which his rule was based. Suharto made mistakes because by the nineties he no longer understood his nation or the limits of his own power. With the erosion of his Western pillar of legitimacy and the First Family's unseemly grab for fortunes in the final decade of the century undermining Suharto's cultural legitimacy, the spotlight in Indonesia increasingly focused on the question of corruption and the palace's role in that issue. With his mistakes threatening the elite and without the promise of patronage, they sacrificed him to save themselves.

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CONCLUSION The economic collapse of the rupiah cannot solely be blamed on the shortcomings of the Indonesian business sector, reference should also be made to the disastrous business ethos overseen by the president. With corrupt business practices driving policy, and with patronage increasingly draining the economy and supporting inefficiency, there was little reason for the Indonesian business sector to seek independence, accept accountability, or mature. For three decades the wealth of the nation, its people, and its resources were plundered by Suharto's children, his cronies, the favored pribumi businessmen, and the military. In the rush to exploit the resources and share in the profits, foreign capital, together with the international lending agencies, supported the corrupt and ailing business ethos either directly by participating in business or indirectly by failing to demand accountability. One such company was PT Freeport Indonesia.

Chapter 3

The Business of Mining in Indonesia M

I N I N G is A C A P I T A L - I N T E N S I V E , long-term, high-risk, and often unpredictable business. This is no more so than in the often inhospitable and underdeveloped regions of Indonesia that straddle the same fertile geological fault that has supported, in some cases continues to support, such mines as Ok Tedi, Lihir, Porgera, Panguna, and Grasberg. The Indonesian archipelago, which stretches for 5,200 kilometers east to west and consists of more than sixteen thousand islands, was formed at a time conducive to "the formation of gold and copper ore deposits." 1 For more than three hundred million years the area has remained the collision point for two of the Earth's crustal plates—the Indo-Australian and the Pacific, in what is dramatically called the "ring of fire." The continual movement has caused layered zones of mountain building and volcanic activity that periodically resulted in overlapping areas rich in base and precious metals. Because of the potentially spectacular mineral wealth, this phenomenon has meant that Indonesia, while traditionally being acknowledged as rich in oil and gas and hard minerals, is today considered one of the most promising areas for gold, silver, and copper in the world. 2 Given this geology and the fact that much of the archipelago is underdeveloped, with more than half of the land mass yet to be surveyed, it is generally considered a potentially rewarding but physically daunting region for mining. However, by the end of the eighties, Indonesia was becoming a destination for serious mining capital. 3

Because of the difficulties of the terrain and the provision of infrastructure, a mining project in Indonesia can take anywhere from eight to twelve years to move through the initial stages to the production stage, with initial research costs, depending on the size of the contract of work area (the area the company has a license to explore), averaging from $5 million to $40 million. If economically viable mineral deposits are iden38

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tified, then it will generally cost anything from another $100 million to $1 billion plus to develop the site to operational level. Because of the financial market's reluctance to commit funds before positive feasibility results are announced, the first three stages are usually financed by the foreign mining company through listing on a stock exchange, by privately raising capital, or both. This process, which spans the initial decision to explore up to the production stage, generally takes longer and costs more in developing countries such as Indonesia than in the more advanced industrialized nations, which frequently have smaller, less complex deposits often found in easily accessible clusters. Factored into any risk/reward equation for the operator must be the uncertainty of the marketplace. Despite the fact that over the long term the relative price of most base metals has not risen in the last 150 years, 4 short-term market fluctuations can have a devastating effect on mine viability. After spending many millions of dollars, the company may find that a mineral that was viable to mine at stage three is no longer so by stage five simply because of a movement in price. The precarious nature of the industry and the long time frames involved in bringing a project to fruition are amply demonstrated by figures pertaining to the success rate of foreign mining operations in Indonesia; according to Beni Wahu of the Indonesian Mining Association, that rate averages less than 5 percent. 5 Of the 197 contracts of work approved by the government between 1967 and 1997, only ten had made it to the production stage by late 1997; 92 had folded, having failed to discover commercially viable mineral deposits; and the remaining 95 were still in the exploration stage in August 1997. A number of problems associated with the geology of the region await the would-be miner and have traditionally inhibited many new ventures. The zones of mineralization are often difficult to reach, with infrastructure sometimes nonexistent, while the drilling in the assessment stage (which requires three-dimensional models of the mineralized area) is usually difficult in such inaccessible sites. Moreover, because of the formation process, deposits in Indonesia frequently have quite complex ore structures, increasing the difficulty of assessment of the deposit during the feasibility study and in the procedural stage of defining the extraction process. Because of these problems the transnational miner in Indonesia is usually looking for an "elephant," that is, an extremely large and rich mineral deposit to offset the enormous costs of exploration and mine development. Therefore, while the terrain is the lure in Indonesia, it is often the curse. Yet difficulty of site does not usually rate a mention in the mining company's criteria for investment, for if the

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mineralization is sufficiently rich, then site-specific difficulties can be categorized as engineering problems and associated costs offset by profits. For any mining company the decision whether or not to proceed with a mining project is always a competitive process, not only between potential projects within the same company, but ultimately between the industrialized and the underdeveloped states and between states within the same economic grouping or region. Given that transnational mining companies are accountable, in the first instance, to their shareholders, profit will always remain the defining criterion for any decision to commit capital; and in the case of mining-venture capital, high risk demands a commensurate reward. The profitability of any foreign mining venture in the developing world is probably more reliant upon a great many unpredictable variables than nearly any other sector of the economy. Mining companies ranked investment criteria upon which decisions to invest and explore were made in the following order: 6 Exploration investment decisions geological potential political stability security of tenure mining law mining law stability tax stability/level of taxes deposit characteristics

Mining investment decisions profit potential political stability repatriation of profits tax levels/tax stability market cost mining law stability

Despite the recognized difficulties associated with mineral exploration in the archipelago and the fierce competition from its neighbors, through the Suharto era Indonesia proved to be one of the most successful nations in the region at attracting foreign mining capital because it consistently offered a relatively positive and secure investment climate. 7 This fact was amply illustrated by a 1995 survey of mining companies published in the Asian Mining Review (detailed below), which listed Indonesia overall as the preferred Asian mining investment destination and first in the categories of mining law, government imposts, and political risk (table 1). As would be expected (given the survey), the ability to attract FDI to the sector in Indonesia was a successful exponential process. Many large transnational mining companies are by nature conservative, and will commit capital only after evaluating the experiences of preceding firms. Therefore, Indonesia under Suharto acquired an advantage over many

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Table I Company Perceptions of Mining Investment Attractiveness of Asian Countries Country Indonesia India Malaysia Thailand China Vietnam Philippines Lao PDR

Overall Position 1 2 3 4 5 =6 =6 8

Geological Prospectivity 3 2 8 =5 1 =5 4 7

Mining Law 1 3 2 5 =6 =6 4 8

Government Imposts 1 7 2 3 8 4 6 5

Political Risk 1 3 2 =4 =4 =4 7 8

Source: ANZ McCaughan, "Company Perceptions Survey Overview on Mining Investment Attractiveness of Asian Countries," as quoted in Kuntoro Mangkusubroto, "Mining Investment Policies in Indonesia," in AJM Asia Pacific Mining Yearbook 1996 (Australia), p. 81.

of its newly emerging regional rivals, such as Vietnam and China, and came to be regarded as a safe destination for mining capital for many years. Most importantly, the regime of Suharto was seen as providing a stable political and economic environment in which foreign mining capital could operate. This included a relatively predictable mining code and unique contract of work (CoW) system that was so well regarded within the industry as to be emulated by its neighbors. Moreover, the geoscientific data of surveyed land is readily accessible to the public. 8 During the Suharto era the Indonesian mining system also had a number of attractive provisions for foreign capital; perhaps most important is that the system guaranteed that the contract had the status of law and stood above any changes in government regulations, thus ensuring immunity from retroactivity. The fact that Indonesian contracts of work are usually signed in lots, or generations, was seen to provide further security for the foreign miner as governments have demonstrated less inclination to pressure a group of contract holders than to alter the terms of an individual contract. Although environmental and social obligation clauses were added to the contracts only relatively recently, these were often less onerous than those of the more developed nations simply because of the government's inability or disinclination to police these provisions. Because of the perilous nature of the industry, the contract usually favored the miner with concessions during the long lead-up period to the production stage. It also ensured security of tenure as it usually lasted for thirty years with options to extend the contract in either two ten-year increments or for another thirty years, depending on the type of contract signed. At the same time it provided the security of

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international arbitration should difficulties arise between the signatories. Finally, from 1967 to 1997 the Suharto regime usually offered a relatively well defined mining policy and attempted to standardize the application process so that mining contracts were expeditiously processed. This latter point was one of the most obvious attractions of the Republic to foreign mining capital, especially when compared to its rivals the Philippines, Vietnam, and Pakistan, where the contract process has been generally laborious and uncertain. T h e Indonesian Foreign Investment Law Act 1/1967, together with its subsequent amendments and regulations, and the mining law (Basic Provisions o f Mining and Law No. 11/1967) define the terms and conditions under which the contract between the foreign mining company and the government could be negotiated. Within the provisions o f the foreign investment law, the state maintained ownership of the resource, with the foreign miner acting only as contractor to the government.

IMPORTANCE OF THE MINING INDUSTRY TO THE SUHARTO GOVERNMENT In the past a mining project was a matter of engineering and geology, with problems being primarily o f a technical and nonpolitical nature. Today mining is no longer purely an engineering problem; even the most remote mine site is open to public scrutiny. With the social and political effects on local societies highly visible, most mineral prospects around the world are usually now the site of intense environmental, social, and political negotiation. Each o f these dimensions is complex, and the consequences far-reaching. Today the Indonesian contract o f work system ensures that in return for a license to exploit the nation's hard mineral resources, the foreign miner must fulfill a number of requirements of the central government: supply raw materials to the growing domestic market, promote regional and manpower development through value added and local content in production, and facilitate the transfer o f technology. In an attempt to address the growing domestic criticism of the foreign mining sector and to encourage positive developmental linkages from large-scale mining projects, in the latter years the Suharto government required a Business Development Program 9 together with environmental and social impact studies. In Indonesia the inclusion of environmental and social impact studies in the contract o f work in the late eighties was a direct result of inter-

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national criticism of the country's poor environmental and human rights record. Within Article 33 of the 1945 Indonesian Constitution, the framework for protection of the environment is outlined. Yet the first environmental law was not passed in Indonesia until 1982, and not until 1986 was industry required to submit an environmental impact assessment. Four years later the Environmental Impact Management Agency (Badan Pengendelian Dampak Lingkungan; BAPEDAL) was formed to police the environmental laws. While these environmental laws governing investment were of some value to the host nation and the foreign mining companies in that they clearly defined a legal environmental framework within which the foreigner must operate, they were undermined in Suharto's Indonesia by weak governmental and legal controls and the inability of the general public to participate in the environmental assessment process. Moreover, the environment, under Suharto, usually came a poor second to mining, especially when the mining sector was categorized as "public/national interest." The social impact studies, which examine the effect mining will have on the local population, were also systematically undermined— although in this instance by the constitutional provisions that effectively negated indigenous land rights by giving primacy of natural resources to the nation as a whole. While resources were officially under the jurisdiction of the state so that foreign mining companies dealt only with Jakarta and local government, rather than with the traditional landowners, in 1993 the central government decided to withdraw from the messy process of land rights. Under Presidential Decree No. 55/1993 it became compulsory for companies to negotiate directly with the existing landowners over this issue. Few traditional landowners, however, were aware of the governmental requirement to legally register communal land in defense of future land claims. Moreover, only land under cultivation and clearly in the possession of a community could be registered, not land held under shifting agriculture. In this regard Indonesian mining law gave no recognition to subsistence agriculture or to the spiritual connection to the land that is part of the culture of many of the nation's ethnic groups. Therefore, in practice indigenous landowners, ill-informed and devoid of political or economic power, were unable to defend their lands and traditional belief systems against such laws and such powerful foes. Furthermore, because the people do not legally own the resource, any compensation paid was only for the improved value of the land and had to be paid in kind rather than currency. In this regard the price the foreign miner was legally required to pay for the loss of simple housing and subsistence gardens has been minuscule. With the

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extraction of minerals in practice taking precedence over indigenous rights, the Suharto government undertook to remove local people from the foreign mine sites. In the last ten years the global mineral exploration industry has expanded dramatically, especially in the Asia-Pacific region. In just two years, from 1994 to 1996, there was a global increase in investment in the industry of 66 percent. In regional terms, Latin America and the Caribbean had an increase of 71 percent, while the Asia-Pacific increased a staggering 137 percent, with Indonesia being the most successful in attracting investment funds. 10 While the percentage of mines reaching the production stage has remained small in Indonesia because of the time required and the difficulties of bringing a mine to economic viability, from 1984 to 1997,167 contracts of work were signed, with another 300 applications awaiting processing. 11 Today the archipelago's neighbors are intent on challenging Indonesia's position by offering even more attractive conditions while potential miners and existing operators in Indonesia watch the political machinations in Jakarta after the fall of Suharto with intense concern. Under Suharto foreign mining capital fulfilled some of the government's needs. Primarily the government required foreign mining corporations to stimulate development, satisfy domestic market needs for metals, and turn the state's mineral resources into revenue in the form of levies and foreign exchange dollars. While the ministry stated that there was "no reliable statistical data on the minerals contribution to the G D P , " 1 2 it is generally thought to have remained low, at about 1 percent, until the last years of the millennium, when it rose significantly, to the extent that by 1996, at the height of the Bre-X/Busang frenzy (see below), mining had earned for Jakarta $3 billion in foreign exchange and accounted for 8.6 percent of the nation's GDP. 1 3 With the free fall of the rupiah in 1998 to 20 percent of its previous value to recover only to 40 percent of its precrash level by mid-1999 and many Indonesian businesses technically bankrupt, foreign mining companies bringing in foreign exchange dollars and providing employment and infrastructure have become more important than ever to the central government. In mid-2000 the minister of defense, Juwono Sudarsono, proclaimed the importance of the mining sector to the country's economic recovery by noting that in 1999 it accounted for approximately 14 percent of GDP and 20 percent of total export earnings and generated approximately $10.5 billion. 14 Although in proportional terms the mining sector's capital contribution to the economy until 1998 may have been small, most economic indi-

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cators fail to take into account the linkage or flow-on contributions made by foreign mining companies, in particular, to the economic growth and the security of the nation—contributions that Jakarta viewed as one of the most important aspects of this sector. Foreign mining concessions, which are often located in the most remote regions where government services are few and infrastructure undeveloped, can act as a stimulus to local employment, infrastructure development, social services, and small-scale industries. 15 Moreover, the minerals they supply can provide raw materials to other industries within the wider national community. With regard to these issues, the regional or local obligations of the foreign mining company are detailed in the contracts of work. For instance, all infrastructure built by the company, including harbors, roads, and airstrips, is to be made available to the general public. The miner is also required to maximize employment opportunities for locals and to supply free medical services and basic education to all employees, government officials, and their families in the area—a service that reputedly is often expanded to include many local nonemployees. Since the beginning of the nineties, the government has also encouraged the foreign mining sector to support downstream processing within Indonesia. Foreign miners are required to provide training and transfer of technology essential to the growth of the local mining industry—technology that would, without the cooperation of the foreign miner, need to be paid for on the open market. The theory behind this regulation was that the freeing up of state capital, which may otherwise have been spent on infrastructure development, social services, employment around the mine, and technology transfer, afforded Jakarta the opportunity to allocate these funds constructively to other sectors of the economy. 16 The theory did not always match the practice. Finally, mining concessions have helped provide justification and support for the government's program of transmigration, whereby migrants have been moved from the more populated islands to the remote mining areas in the outer regions of the Republic. The foreign mining company, through its employment of these new settlers, often became essential to the survival of the transmigration settlements. By supporting transmigrants and directly drawing these often remote regions into the economic development of the nation, foreign mining companies were viewed by the New Order government as making a valuable contribution to the important security goal of national cohesion. In the belief that this group alone had the knowledge, technical expertise, and capital capable of developing this sector, the central government always positively discriminated on the foreign mining investors'

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behalf. The continuing dominance of the industry by foreign capital is one obvious result of this policy; in addition, much of the domestic mining industry has generally remained underregulated and small in scale, while the larger state-run mining concerns, starved of capital, have been characterized by inefficiency and an absence of profits. 17

THE BRE-X FRAUD In 1996 what became known as the Busang, or Bre-X, fraud rocked the foundations of the erstwhile stable Indonesian mining industry and sent shock waves through the wider international mining community. While the ease with which the hoax had been perpetrated was of concern, the main issue for the mining community was the machinations of the Suharto family and the Indonesian mining ministry. Foreign mining capital, which had rushed to the archipelago on the back of Busang, became acutely sensitive to the threat posed to current and future investment by the corruption and greed of the Suharto clan, which seemed to be invalidating what had long been the most stable aspects of foreign investment in Indonesia: the foreign investment law and the contract of work system. As the Bre-X saga unfolded, the international mining community began to reassess investment in Indonesia. Junior mining companies are the advance guard or the greatest risk takers in the highly speculative industry. They care little for the politics of a nation, often have limited capital and mining expertise, take pride in a Wild West mentality, and gamble high risks for high returns. Sometimes disparagingly referred to as "penny dreadfuls," they borrow capital from the public and institutions willing to fund highly speculative exploration projects in some of the most remote regions of the globe in the hope of reaping high rewards through a discovery rich enough to attract the attention of one of the "majors" with a takeover offer. This short-term agenda means that the juniors have little regard for their reputation in the host nation and care little for its politics. Conversely, the long-term operating schedules of the majors make them highly sensitive to the political situation in a state and far more protective of their international reputation although, ironically, it is often those major mining companies that portray themselves as risk takers that have the most respected reputation within the mining fraternity. 18 In 1995 a junior Canadian mining company, Bre-X Minerals, announced that it had found economically viable gold deposits at its Busang site in East Kalimantan. At the time Bre-X owned 90 percent of

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the find while its Indonesian partners, PT Askatindo Karya Minerals and PT Amsya Lyna (both owned by the Syakerani family, who were the original holders of the mining lease), held a combined 10 percent interest. Over a period of eighteen months, Bre-X continually reevaluated the gold reserves at the Busang site until it claimed it had proven reserves of seventy million ounces, valuing the find at $30 billion. Eventually, Bre-X hinted at the unheard-of possibility of two hundred million ounces, which would have made it one of the largest gold deposits in the world. Not many within the industry or the media questioned these figures because Indonesia was considered an area of untapped wealth and already home to the largest known gold deposit in the world, Freeport's Grasberg mine. Perhaps, too, people wanted to believe it; the promise of unheard of wealth was what drove the industry, and for the media, headlines sold copy. With the ever-increasing estimates of reserves, which saw Bre-X sharesjump from less than 9 cents in 1994 to a presplit value of just over $200 in 1996, it appeared that Bre-X was to be one of the luckyjuniors; and as expected, the majors began to circle. But BreX, unlike a lot of the juniors, was reluctant to part with its find, preferring to retain a controlling interest. In August 1996 the Indonesian mining ministry, without the public's knowledge, cancelled the company's exploration permit, prompting Bre-X to enter into what it hoped would be a protective agreement with an influential partner who would facilitate the reinstatement of the permit and the issuing of the contract of work. In October 1996, after being approached by one of Suharto's eldest son's stable of companies, Bre-X announced its intention to operate the mine with Sigit's protection. According to the deal between Sigit and Bre-X, the Suharto son's company would not only receive $40 million and 10 percent of the Busang find for acting as a "consultant" in relation to "administrative and technical matters," but Bre-X was to give Sigit's company the money to buy out the Syakeranis. Potentially, this deal was worth billions to Sigit. Typically, Suharto's offspring was not required to outlay capital; his share in the company was to be paid for out of future profits. Looking for a major to assist with costs and expertise, Bre-X had also entered into negotiations with a Canadian major, Placer Dome. However, on 26 November 1996 Bre-X was stunned when the minister of mines and energy, Ida Bagus Sudjana, told the company to forget both Placer and Sigit as it was required by the government to form a partnership with the Canadian mining company Barrick Gold. 19 Although Bre-X had known that the government was interested in its forming an alliance with Barrick, it had believed that its association with Sigit protected it against such an

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option. Moreover, the terms of the agreement Sudjana instructed it to reach with Barrick—Bre-X would be allowed to keep just 25 percent of its find while Barrick would receive 75 percent—were unacceptable to the junior. At the same time the government expected a 10 percent interest, with the two companies being left to decide how the government's share would be allocated. They were given four days to close the deal. Under this arrangement, no mention was made of the fate of the Syakeranis. Bre-X was left wondering what it would hold if the Syakeranis were to retain their 10 percent, the government wanted 10 percent, and, Barrick was to be given 75 percent. Not long after this announcement, Bre-X shareholders in the United States launched court action against what they saw as Barrick's illegal attempts at expropriation. Given the machinations of business in Indonesia under Suharto, it was clear to the market that Barrick had powerful associates. Not only did it boast George H. W. Bush, the former U.S. president, as an honorary adviser (Bush wrote a personal letter of recommendation for Barrick to Suharto) and Brian Mulroney, the former Canadian prime minister, as a director, what was more important, Barrick had powerful Indonesian business and political contacts. Barrick had formed its own alliance with Airlangga Hartarto, the son of Hartarto, the coordinating minister of production and distribution, and the mining minister's son, Dharma Yoga Sudjana, worked for Barrick. Most significantly, however, Barrick had entered into a business deal with a powerful company called Citra Lamtoro Gung, one of the stable of companies headed by Suharto's powerful eldest daughter, Tutut. Tutut and Dharma Yoga Sudjana were also friends. Under this deal Tutut's Citra would become the main construction contractor for the mine. As usual, Tutut was not required to outlay capital. Despite repeated deadlines and threats from Sudjana, Barrick and Bre-X failed to close a deal, for they found it hard to agree on anything. Moreover, the government, while wanting to be a 10 percent partner, refused to be a signatory to the deal. In legal terms it was a difficult arrangement between reluctant and obstructive parties. On 16 January, just four weeks before what was to be the second final deadline expired, Placer Dome made a last desperate attempt to win Bre-X from the clutches of Barrick. In Placer's estimation it made an offer that would not only attract the attention of the government but one that it believed the government could not refuse inasmuch as it appeared far more attractive than the Barrick offer. Placer proposed a merger between itself and Bre-X with a $4.5-$6.4 billion stock swap that included a 40 percent stake in the mine for the government, the Indonesian minority partners,

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and the public. Although J o h n Willson, Placer's chief executive officer, had congenial meetings with Bob Hasan (who was acting on behalf of the government although he held no official position), to his amazement the offer was rejected. What few people, including Willson, could possibly have known at the time was that Hasan and Suharto had formulated their own plans for Busang. While Willson was furious at what he saw as the typically heavyhanded tactics of Barrick and the unwarranted interference of Jakarta and the Suharto children, the market was in turmoil. 20 Under the terms of the Indonesian foreign investment law, Bre-X had already fulfilled the Indonesian equity requirement of its permit with the Syakerani family's holding of 10 percent. Therefore, the instruction to cut a deal with Barrick at such a disadvantageous rate, while also accommodating the government's demands for 10 percent, was unprecedented, unexpected, and highly unsettling to the industry and the market. During the extended negotiation period there also ensued a very public tussle between the two Suharto children's interests until Sigit, believing that he was being outmaneuvered by his sister and her heavyweight associates, approached Bob Hasan with an alternative deal. 21 With the failure of the minister to end the impasse, Suharto overrode Sudjana by authorizing Hasan to end the unseemly and damaging battle between his two children's interests. The day before the last deadline for Bre-X and Barrick, Hasan had signed his own agreement with Bre-X, leaving Tutut out in the cold while bringing himself, Suharto, and Sigit, together with their partner in West Papua, Freeport, in on the deal. The Hasan-brokered deal rapped Bre-X on the knuckles and saw its stake in the mine drop from 90 percent to 45 percent. The Syakeranis had their stake increased from 10 pecent to 30 percent; the government got 10 percent, while Freeport, as sole developer and operator of the mine, got 15 percent. It soon became known that the negotiations for this deal had begun as far back as December 1996, when Hasan had brought Freeport-McMoRan's chief executive officer, Jim Bob Moffett, to meet with Suharto. Shortly after this meeting Suharto's "charitable foundation," Nusamba, privately acquired a controlling interest in the Syakerani family's Busang holding. Therefore, when Hasan increased the Syakeranis' stake from 10 percent to 30 percent, he was taking care of business for himself and Suharto. Moreover, Nusamba actually took 25 percent of the 30 percent Syakerani share with the Syakeranis being left with only 5 percent of Busang. Thus, Suharto/Hasan effectively gained a 25 percent share in Busang over and above the 10 percent interest given to the government. As is often the practice, Nusamba took this 25 percent interest in the

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biggest gold find in the world cost free, with no monies being paid to either the Syakerani family or the Bre-X shareholders. Freeport, which was required to provide 25 percent ($400 million) of construction costs and arrange the financing for the projected costs of $1.2 billion, was the only partner required to outlay capital. At the time, the combined Indonesian stake of 40 percent (Syakerani, Nusamba, and the government) was estimated to be worth tens of billions. Until this deal was announced, Freeport had not been mentioned as a prospective partner in Busang, and, by some accounts, it was a cautious partner, with Moffett professing a healthy skepticism of the Busang results. However, after the deal was announced, Moffett stated that to him it was obvious that Freeport should have been the government's choice given the size and experience of the Freeport operation. 2 2 What probably influenced the decision to choose Freeport, apart from its operating experience, was its financial ties with Suharto. Not only did the government have a direct 10 percent stake in Freeport, which would give Jakarta another indirect stake in Busang through its Freeport holding, but Freeport was just about to sign a deal that would personally finance Suharto and Hasan into another 5 percent, or more than $300 million, stake in Freeport. Therefore, by giving Freeport equity in the find, Hasan was effectively giving himself and the president a further indirect interest in Busang through Freeport. The deal, brokered by Hasan and under the watchful eye of Suharto, meant that if one included the collective Freeport, Nusamba, and Syakerani voting rights of 45 percent, together with the government's voting rights of 10 percent, then Suharto had effectively gained control of 55 percent of what was believed to be the biggest gold find in the world without being required to pay out a single rupiah: an example of business Suharto style. One could have argued that the great loser was Bre-X, who was paid nothing for handing over 45 percent of its find—except that Bre-X handed over 45 percent of nothing. After an initial investigation by Freeport geologists and the independent Canadian firm of Strathcona Mineral Services, it was shown that Busang had no viable gold deposit and that the assay tests justifying ever-increasing reserves had been salted. 23 The greatest mining fraud in history, however, should have been uncovered earlier because during the negotiating period Barrick had apparently run its own assay tests and discovered no viable gold deposits, yet chose to remain silent. At the same time J o h n McBeth of the Far Eastern Economic Review says he was told by a mining industry worker that his own tests on core samples had come up blank. 24 It would appear that there were people who, with justification, could be skeptical of Bre-X's

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claims, but no one really wanted to know. Too many people not only wanted to believe the dream, but were making fortunes on the Bre-X find, including Barrick, whose shares were rising on the back of the proposed merger. When questioned on how much he and Suharto had lost through Nusamba's stake in Busang, Hasan replied "nothing," simply because, as usual, they had paid out nothing. 2 5 Business Suharto style was always norisk business. No capital was ever paid out, so none could ever be lost. Hasan's statement that "sometimes you make money, sometimes you don't. But then if you don't make money, you're still even," 26 highlights the fact that losing was never figured into the Suharto business equation. Before the Busang fraud was uncovered, the division of the asset, and the way in which it was accomplished in favor of the government and the president, rang alarm bells in Western mining circles. Never before had this sector been faced with the overt greed of the family, who had previously shown no interest in the risky and long-term business of mining, preferring instead to peddle their influence and sell their names to ventures that assured quick returns. However, considering the size of the prize and the fact that there was no risk for the Suharto children, there was no reason for them not to take an interest. Moreover, as their father aged, long-term investments could be of benefit. It was only months after the event that the cancellation by the ministry of Bre-X's exploration permit on 15 August 1996 came to the public's notice. The secrecy around this very significant event was maintained for some time simply because neither of the principals wished it to become public knowledge. Bre-X, ever conscious of its share price, especially when the company was due for listing on the NASDAQ, was reluctant to let the market know that its only asset was far from secure. This decision not to inform the market was illegal. At the same time Jakarta did not want the cancellation made known to the public because its illegal action would reflect badly upon its reputation with foreign capital. It was obvious that the minister was attempting to use the cancellation as leverage to force a deal between his son's associates and Bre-X. Officially, however, the permit was cancelled by his subordinate, Kuntoro Mangkusubroto, the director-general of mining, because of an Indonesian dispute over ownership of the area. 27 The permit episode only served to deepen already existing tensions within the ministry between Kuntoro, a highly respected public servant who had built an excellent reputation over the years, and his direct superior, Sudjana, a former military general with no industry experience and by most accounts an incompetent military appointee. Given the machinations in Jakarta, one

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mining executive, reflecting the industry's general attitude at the time, is purported to have commented, "Thank God it's a dictatorship. If it were a democracy, it could [have been] tied up in court for years." 28 However, it still had potentially long-term negative ramifications for foreign mining in Indonesia and what had hitherto been considered a reasonably predictable ministry and licensing procedure. At a time when there were 178 applications for contracts of work held up in the ministry awaiting signature, the cancellation action signaled to nervous foreign mining capital that the government could randomly change its policy toward hard mineral investment in the country without notice. Moreover, with Sigit and Tutut aligning with competing interests, there ensued an unseemly, but not uncommon, tussle between the children's associates, a tussle that eventually led to problems within the ministry: how did a Suharto government public servant satisfy both Suharto children when their interests were diametrically opposed? The damage to Indonesia's mining reputation caused by the direct involvement of the children, the infighting within the ministry, and the usurpation of its powers by the president had prompted the Indonesian Mining Association to join Kuntoro in calling for an open auction to find a suitable partner for Bre-X. But this option could never have been a serious alternative given the value of the assets, the interests involved, and who was now ultimately determining policy. The Busang saga cannot be viewed in isolation. Until Busang, the mining sector was traditionally the reserve of the foreign mining companies, a number of state-run concerns, and small-scale indigenous companies. The Suharto children had not bothered to venture in any significant way into the high-risk, long-term mining business. However, as the Busang saga unfolded, the family's move into this sector was a worrying development inasmuch as few speculative mining companies could afford to hand over large percentages of their finds to the First Family. While it was generally preferable in business to have one of the inner circle as a partner to smooth the way, this had never been necessary in the mining industry, which was considered relatively clean. The entrance of these influential groups fuelled uncertainty and speculation within the mining fraternity, especially within the ranks of those waiting for their contracts to be signed, and changed the landscape in unpredictable ways. The messages being picked up by foreign mining capital were that the foreign investment law could no longer be regarded as indisputable, the all-important security of tenure no longer existed, and the ministry was no longer in control. By demanding a stake in such a world-class gold discovery and then fighting over the division of the asset, the children

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drew attention to the damage the family's increasing nepotism was having on foreign capital in Indonesia. The goalposts were shifting, and although everyone knew who was shifting them, no one knew where they were moving to. The political wrangling surrounding Busang received worldwide press coverage and was generally viewed as the most damaging issue for foreign mining investment in Indonesia since the beginning of the New Order regime. Yet what happened just a few months later, although receiving far less press coverage, was also of great importance to foreign mining capital and the Indonesian contract of work system. While the pressure on the remaining foreign contracts resulting from the division of the Busang find in favor of Indonesian intersts may have caused alarm in the West, it was popular in Indonesia. Concomitant with the rise in reserves at Busang had been calls for the government to reassess its policy toward the exploitation of the nation's mineral resources so that the owners of the resources—the nation—received a greater share of the profits. Conveniently, the government was able to use this demand to justify its allocation of a 40 percent indigenous stake in the find. In attempting to explain why the government took only 10 percent and Nusamba and Syakerani were given 30 percent, Sudjana presented the argument that "it is impossible for the government to allocate all of its funds to exploit such a high-risk project because the government also needs to develop other sectors." 29 Quite opportunely for Suharto and Hasan, the minister said he had then called on other Indonesians to take a stake in the company. 30 But Sudjana's argument was clearly fallacious because whatever percentage the government took was always going to be free. Therefore, there was no reason to restrict the government's cut of the Indonesian share to only 10 percent if financing was the determining criterion—unless, as it became apparent, the government was making room for another, more powerful, shareholder. Nusamba staked its claim by partnering the Syakerani family and then arranging for that shareholding to be increased to 30 percent. Within the context of demands for Indonesians to take a stake, the government's 10 percent stake, together with the increase in the Syakerani and Nusamba stake to 30 percent, was generally seen in Indonesia to be justified by the demands of national interests and, as such, a fair and reasonable outcome. Nevertheless, it was not the nation's interests thatwere being served with the division of the Busang assets, but the interests of the usual elite. Finally, the calls for increased national interests in the exploitation of the country's natural resources took on a dangerous retrospectivity

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with demands that existing mining contracts be revisited. The internal critics were arguing that the foreign investment law had been formulated at a time when Indonesia was desperate for foreign capital and therefore the resulting contracts of work were skewed in the foreign investor's favor. Their argument continued that, in the climate of late 1996-early 1997, the state was in a much stronger bargaining position, relative to foreign capital, and should no longer be literally giving away the nation's precious and finite resources for so little return. Moreover, the nationalists claimed that they had the weight of the law behind them because the constitution stated that the natural resources of the state belonged to all the people and, as such, were to be used for their greatest good, and not for the good of the transnationals, as was perceived to be the case. 31 What the nationalists failed to appreciate, and the ministry under Sudjana failed to remember, or was forced to ignore by those more politically connected than he, was that the defining of a mining policy was always a delicate balancing act between the government's need for revenue and the foreign miner's need for profit. If the government's demands became too onerous, foreign capital would flee. In the Busang case the taking of a significant and free stake by Suharto led to a distortion of the balance between government revenue and foreign capital profits that, in turn, led to a critical reassessment of the Indonesian mining industry by the international markets. However, despite the significance of the Busang saga for the mining industry, it was only a reflection of what was happening within the wider Indonesian business community as the Suharto family's acquisitions distorted the marketplace and the fine balance between state and capital. In early 1997, at the height of the calls for increased national interest in the resources of the nation, Amien Rais, leader of the thirty-million-strong Muhammadiyah (Muslim organization), was reported to have voiced a popular sentiment when he stated that Indonesia's minerals should remain in the ground until an indigenous mining sector capable of replacing the foreign mining companies as the major exploiter of the nation's mineral resources emerged. This statement, while politically popular, was exceptionally naive. In the light of the extreme economic downturn that followed, it became absurd. Jakarta's need for revenue had always been threefold: to support social and economic development projects, to service the nation's increasing foreign debt, and to support Suharto's patronage system, which was the mainstay of his power. While the autocratic government had always paid scant attention to calls to protect the national interests, its continued need for

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foreign exchange has always meant that it could ill afford to alienate the foreign mining companies. As far as Jakarta was concerned, the foreign exchange dollars the large mining companies generated, the levies that they paid to the government, and the development that they supported ensured that this group remained an essential element in the economy. Moreover, with the failure of an indigenous mining sector capable of displacing foreign miners, their position appeared to be secure. With the calls for retrospectivity with regard to all foreign mining contracts, the giant copper and gold mine held by Freeport was specifically singled out for attention. Amien Rais claimed, incorrectly, that only 10 percent of Freeport's income went to the nation. In fact, Freeport, along with all other foreign mining companies, was required to pay about twelve different taxes or royalties to the central and provincial governments. 3 2 According to Freeport's figures, more than 80 percent of the company's revenue went to the government annually. It should be noted, however, that figures based on capital payments to the government fail to take into account the positive flow-on effects or linkages such as infrastructure development, social programs, and employment. After a meeting with Suharto in January 1997, and in an attempt to end the criticism of the government's mining policy, the minister of mines and energy was ordered to explain the policy to the public and detail the various forms of revenue that accrued to the nation from the operations of the foreign mining sector. Moreover, the public needed to understand that it was necessary to sign the contract of work, which set out all the conditions and requirements of the mining contract, before detailed exploration began and that the contract of work needed to be relatively attractive to foreign capital. Soetaryo Sigit, one of the developers of the contract of work system, pointed out the benefits of this system whereby more than a hundred foreign companies had spent hundreds of millions of dollars only to eventually withdraw because of an unviable deposit. In other words, there were financial benefits to the nation from the contract of work system as it stood. Eventually, Indonesians with influence and an interest in the continued good health of the Indonesian mining industry successfully worked behind the scenes to have Suharto replace Sudjana. 33 By 2001, Indonesia's foreign mining industry was holding its breath: exploration investment fell from $75 million in 1998 to $50 million in 1999. Not only was mining capital concerned by the instability in the Republic, but with the announcement of proposed regional autonomy laws aimed at holding the archipelago together, no one quite knew what the future held for the industry. As Benny Wahju, chairman of the

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Indonesian Mining Association, explained, the existing mining law was made unworkable and, indeed, obsolete with the proposed decentralization of power promised by regional autonomy. In such circumstances the respected contract o f work system may be abolished. 3 4 In response to the concerns within the industry, Jakarta was considering retaining control of mineral resources. At the time of writing, no decision had been made.

CONCLUSION While foreign mining capital has been interested in the possibilities of the archipelago, the difficulties of site location and the associated costs have meant that the movement of capital has remained highly sensitive to the idiosyncrasies o f each generation of contracts. In turn, these generations have reflected a balance between attracting capital and maintaining the stability o f the state through the delivery of patronage and development. Although foreign mining operations were not generally direct sources of patronage funds to Suharto, they did represent important engines for development in the most isolated regions o f the archipelago and relieved the central government of much of the financial burden o f developing these areas. At the same time, given the government's and pribumi capital's inability to fully exploit the nation's abundant mineral resources, foreign mining capital's ability to do so made it an important source of revenue to the government. Until the Bre-X fiasco, hard metal mining in Indonesia had been, in legal terms, a relatively predictable business for foreign capital. And while the industry had not been immune from the corruption that permeated the Indonesian business culture, this corruption had been on an "acceptable" small scale. Essentially the Suhartos and their inner circle, with their propensity for quick returns and grand corruption, had never been attracted to the mining sector, which was considered too unpredictable and too long-term to be o f interest. Without the distorting effect of this group and their brand of corruption, collusion, and nepotism, the balance of power between the state and capital had remained stable and the rules clearly defined so that the Indonesian contract of work system was well respected. With the entry of the Suhartos into this sector everything changed. T h e new but important lesson the foreign miner needed to learn from watching Busang was how not to do business in Indonesia when the Suhartos were involved. Notwithstanding the considerable power Bar-

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rick had with the backing of Tutut, Mulroney, and Bush, together with its associations with the minister's son, the giant mining company failed in Indonesia because Barrick's chief executive, Peter Munk, conducted business like an old-style imperialist and failed to realize that business in Indonesia was different from business in the West. In so doing he succeeded in antagonizing Suharto, the only person who really counted. Barrick initially intimidated or persuaded the mining officials to support its bid by parading its heavyweights, but as Munk flew in and out of the country negotiating business on what was believed to be the biggest gold discovery in history without bothering to directly participate in the highly personalized style of business in Indonesia or to consult with the most important people involved, Hasan and Suharto, his bid failed to gain support where it counted the most. As Hasan stated, they were the real owners of the mine site, and they did not like being ignored. Munk, like Bre-X, probably made the fatal error of believing that his association with a Suharto offspring, together with his high-power executives, was enough. Yet, as Indonesian economist Hatojo Wignjowijoto stated, "Barrick chose the wrong strategy. They worked on the assumption that if you get the support of the senior minister and the eldest daughter of Suharto, everything will be okay. But politics and business don't recognize daughters and sons [if their father is involved]." 35 At the same time Bre-X, by its offensive and offhand treatment of the Indonesian authorities, also failed to win over the people who counted in Jakarta. With the junior's listings on the prestigious Toronto Stock Exchange and Wall Street's NASDAQ, Bre-X forgot where it was doing business and who actually controlled the asset. In the excitement of having made the "big time," the Canadian junior insulted the Indonesians by continually bypassing mining officials in Jakarta and the power brokers at the palace, preferring to make announcements through the two powerful Western institutions it had newly gained membership in. By failing to keep Jakarta informed, Bre-X often placed the government in the embarrassing position of being the last to know what was happening with its own resource. When the president divided the spoils, Bre-X was shown who was in control and, like Barrick, was made to pay dearly for its ignorance. While Bre-X and Barrick never knew how to do business in Indonesia under Suharto and paid the price, Freeport had always known.

Chapter 4

Freeport and Jakarta

U

NTIL BUSANG, INTERNATIONAL m i n i n g capital h a d o p e r a t e d in

an environment relatively free from the personal interests of the Suhartos. However, like all large corporations in Indonesia, Freeport could not conduct business within a political vacuum, so it nurtured a mutually supportive, lucrative, and harmonious relationship with the regime. From the beginning the company was an important part of the Suharto political landscape, and as the balance of power shifted between the state and foreign capital, so it did between the company and the president.

FREEPORT'S ENTRY INTO WEST PAPUA Within two months of the military coup that eventually toppled Sukarno in late 1965, 1 Freeport geologist Forbes Wilson says he received a call from Freeport's CEO (chief executive officer), Langbourne Williams, who informed him that he had been privately approached by two Texaco executives from Indonesia with close associations to the new military government and that negotiations would begin immediately over Ertsberg. 2 In fact, five months before this, in April 1965, Freeport had already reached a "preliminary arrangement" with officials in Jakarta to mine Ertsberg. 3 The company's decision to proceed with the risky project—which would see the company making a financial commitment of well over a hundred million dollars—seemed extraordinary given the politically volatile situation in Indonesia at the time. Freeport's confidence, however, may be understood in the context of its connections to the highest echelons of power in Washington and that nation's expanding military role in the region and its interest and influence in the events unfolding in Indonesia. 4 In time Washington was to direcdy support Freeport's association with the new regime by guaranteeing $60 million worth of loans the company received from U.S. lending agencies that enabled it to proceed with the project. 5 58

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The chairman of Freeport Sulphur was, for a time, John Hay 'Jock" Whitney, a power broker in the New York Republican establishment whose grandfather, John Hay, had been Theodore Roosevelt's secretary of state. Whitney's money had supported the Eisenhower presidential campaign and helped him found the New Republic and become editor in chief of the New York Herald Tribune. One of his companies, Vitro (which had Laurence Rockefeller on the board), had contracts with the Defense Department. Whitney is also reputed to have maintained ties with the cia after having worked alongside business partner Nelson Rockefeller for the Office of Strategic Services.6 Another board member, Robert Lovett, was an influential Cold War leader of the Washington establishment, having served under four presidents as assistant secretary of war for Roosevelt, undersecretary of state for Truman, deputy secretary of defense under Eisenhower, and adviser to President Kennedy on appointments. He also served as a member of Kennedy's secret Executive Committee of the National Security Council during the Cuban missile crisis.7 Lovett, like Whitney, boasted close links to the Rockefellers.8 Another influential board member was Admiral Arleigh Burke, who served as chief of naval operations under Kennedy and as the navy's representative on the Joint Chiefs of Staff. Burke was a ardent anti-Communist and one of the architects of the Bay of Pigs invasion.9 Besides these luminaries the company had links to the Rockefeller family through two family members, Jean Mauze (married to Nelson's sister Babs) and Godfrey Rockefeller, and a Rockefeller associate, Benno C. Schmidt, all of whom held seats on the Freeport board. Augustus "Gus" Long was one of the two Texaco/Caltex executives who approached Freeport, suggesting it open negotiations with Jakarta in 1965. At the time he was also a member of Presidentjohnson's Foreign Intelligence Advisory Board involved in the planning of covert operations. The other Texaco/Caltex executive was Julius Tahija. A former Indonesian military man, Tahija had close links with Sukarno; these had enabled him to keep Caltex and Texaco property safe during the expropriation process in the fifties. Later he was able to successfully switch allegiance to Suharto with his influence intact. The circle of influence then moved back to the Rockefellers, with Caltex being jointly owned by Texaco and Rockefeller's Standard Oil of California. Eventually both Tahija and Long were to acquire interests in the Freeport operation, with Long being given a seat on the board. Given such connections, it is not implausible that the company was privy to information that satisfied it that, with the backing of Washington, the new military regime in Indonesia would be able to ensure political stability. At the same time, the generals were overhauling the nation's regulatory system and economic policies to encourage foreign

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investment. Thus, with political concerns minimized, advancements in helicopter technology stimulated by the Vietnam War now made the project technically feasible. 10 In April 1967, the unique and highly favorable First Generation contract written by Freeport was signed, making Freeport Sulphur the first foreign company to sign with the new government and the only one to sign under such extraordinary conditions. Given that Indonesia did not have sovereignty over the area at the time, Nils Kindwall, who was part of the Freeport negotiating team, expressed his concerns: "The legal basis for an agreement was vague, and Irian Jaya's national status was still subject to a forthcoming act of self-determination." 11 Moreover, the contract did not have the president's signature but rather that of General Suharto as head of presidium of the Ampera cabinet, while regulations current at the time stipulated that Indonesia was not open for foreign mining investment. Finally, the contract only covered the mining of copper by Freeport, not gold. 12 Mohammad Sadli, who was one of the so-called Berkeley Mafia and a Suharto cabinet member at the time, attributed Indonesia's acceptance of the contract to the inexperience of the new government and as part of a desperate drive to attract foreign investment rather than as an act of favoritism or as a result of covert political pressure as suggested by Forbes Wilson. According to Sadli, Jakarta was not only naive but not in any position to bargain or refuse overtures from foreign capital. 13 However, given that Dutch and Japanese companies were also bidding for the Ertsberg concession, Jakarta could have driven a harder bargain with Freeport if economics had been the only determinant. Moreover, the regime rapidly lost this apparent naivete, for, as noted, no other First Generation contract was signed. Recently, Sadli acknowledged that Jakarta's signing with Freeport was indeed a political decision aimed at exploiting the "unsubtle connection" between letting foreign companies in and securing international support. 14 As Michael Backman argues, "In Asia the connections are forged first, then the opportunities are allowed to arise. . . . Privilege or approval. . . come later and fall naturally from a good relationship once it has been established." 15 In other words, by signing with Freeport Sadli confirmed that Jakarta hoped to gain for itself economic and military support and a political insurance policy from the largest economy and most powerful state in the world.16 Given the level of Freeport influence within the U.S. government, the "connections" Jakarta made through Freeport were impressive, and its objectives seemed feasible. With the Freeport contract confirming that Indonesia was "open for business," by 1969 $1,226

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billion of foreign capital and aid had found its way into the country.17 This influx of capital and the associated technology, which basically continued unabated under Suharto, kept the regime afloat for more than thirty years, providing, as Robison argued, "the basis for growth without redistribution of wealth or power." 18 Under the contract of work Freeport was given mining rights for thirty years within a 250,000-acre concession free from land rent or royalties. It was also afforded a three-year corporate tax holiday (after commercial production) followed by an applied tax rate that kept Freeport's tax under normal rates for copper mining at the time. The contract had no Indonesian equity requirements and few controls over the use of foreign personnel and goods. Moreover, the contract did not hold Freeport under any obligation to the traditional Papuan owners of the land, the Amungme and the Kamoro peoples, who were excluded from the consultations. Freeport was not required to pay compensation to the traditional landowners, nor was it obliged to participate in local or provincial development. Finally, there were no environmental restrictions on the mining operation. At the time the terms of the contract clearly demonstrated that power lay firmly with the American company with the right connections.

CREATING THE MINE Because only small towns and oil exploration sites on the coast existed in West Papua in the late sixties, the project took five years to complete. The first task was to cut an access road through the inhospitable terrain. Rising 4,500 meters in the space of 120 kilometers, the road traverses twenty-seven degree gradients and sharp ridges and includes eleven hundred meters of tunnel through the Carstensz Range. At the time of its construction, the road accounted for almost one-third of total mine expenditures and took twice as long to build as all the other infrastructure combined. Bechtel, the American engineering company contracted to build the project for Freeport, claimed that the access road was the most difficult project ever undertaken by the company. 19 Most bizarre of all, given the surroundings, was the company town of Tembagapura (Copper Town). Built ten kilometers below the mine complex at an elevation of 2,062 meters in a highland valley surrounded by dense vegetation, it is a completely self-contained Western dormitory-style town. While the construction of the mine itself in the central mountains of West Papua was nothing short of an engineering miracle, the company also built a port and airstrip in the lowlands to service the mine. The

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company provided all goods, services, infrastructure, and utilities for Tembagapura and the mine, including such basic necessities as water, power, roads, medical support, transportation (air, road, and sea), accommodation, schooling, recreation, food, and waste disposal. The building task was so daunting that in 1970 the problems Bechtel was experiencing and the extent to which the budget had been exceeded (expectations of about $120 million were exceeded by approximately $80 million) saw Freeport's funding at risk and the company threatening to cancel Bechtel's contract. 20 In response Bechtel offered to guarantee financing and called on the services of its friend Henry Kearns who, as a close friend of Richard Nixon and head of the Export-Import Bank, overrode the bank's objections to have the Freeport loan approved. Despite the financially advantageous contract, the enormous construction costs and falling copper prices meant that Freeport did not operate in the black until 1974.

THE BEGINNINGS OF THE RELATIONSHIP WITH THE INDONESIAN ELITE The mutually supportive relationship that developed between Freeport and the Suharto regime was evident from the beginning. At an international conference convened in Geneva in November 1967 to sell the New Order's business credentials, Freeport actively lobbied on its new partner's behalf. Signaling the significance of the company to the regime, in March 1973 Suharto surprised everyone by officially changing the province's name to Irian Jaya when he opened Freeport's Ertsberg mine. According to the company the uncertainties of the new mining venture and the inexperience of the government in the early years meant that it was often only the closeness and goodwill within the relationship that held it together and kept the mine operating through difficult periods. 21 By the mid-seventies the balance of power between the company and the president was shifting. Having invested about $300 million in the project, by 1974 the company had lost its previous advantage of capital mobility. At the same time Suharto had become politically more secure on both the domestic and international stage. Needing to service Pertamina's debt and bolstered by nationalist sentiment at home, Suharto requested that Freeport, which had just begun to record a profit, forgo the last eighteen months of its tax holiday. At the same time, despite Freeport's having a contract devoid of Indonesian equity requirements, Suharto also requested that the government be given an 8.9 percent equity in the operation. Given that Freeport Indonesia was an unlisted

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company and had, at that stage, invested approximately $300 million into the project, an 8.9 percent interest should have been valued at approximately $29 million. Instead the government's share was valued at only $9 million. In the late seventies Jakarta returned the favor by coming to its partner's aid. With copper prices plummeting and Japanese buyers pressuring the company to cut prices or close down the operation, Freeport was faced with serious problems. Jakarta responded by protecting the Freeport operation by threatening the supply of Indonesian oil to Japan. 2 2 Ron Grossman, who worked in the financial department of Freeport and later was senior vice president of FreeportMcMoRan, noted that rather than strictly adhering to the letter of the contract, both parties accommodated the concerns of the other: "nothing was accomplished unilaterally, it was give and take. It was a very, very good relationship." 23 The company believed that it might have folded in the early years had it not been for Jakarta's assistance. Even before the government was given this share in the company, however, influential Indonesians had been given a similar interest in the unlisted company. Freeport-McMoRan's successful practice of trading largesse for political power (consider its American board members) was repeated in Jakarta. As noted, Julius Tahija had been given a share in the company. On his recommendation Freeport had engaged Ali Budiardjo to assist with contract negotiations. Budiarcyo, who had just set up his own law firm and took Freeport on as his first client, was also given an interest in the new operation and eventually inherited the presidency of Freeport Indonesia upon the resignation of Forbes Wilson in 1974. Budiardjo had been secretary-general of defense, director of national development, and assistant to Prime Minister Juanda under Sukarno in the fifties but apparently fell out with the president.24 The American engineering giant Bechtel, which built the Freeport mine and infrastructure, also provided another important link between the company and the Indonesian elite. Steve Bechtel Jr., who was friends with both Long and Tahija, had highly lucrative contracts with Caltex, Texaco, and Pertamina. 25 Most important, however, Bechtel had contacts in the highest level of the U.S. government and indeed, on a personal level, to Suharto. 26

DISCOVERY OF GRASBERG AND THE NEW CONTRACTS For nearly twenty years Freeport operated quietly in West Papua. However, by the late eighties Ertsberg was virtually dead, leaving behind an

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open pit more than 360 meters deep and two kilometers wide filled with green, copper-impregnated water. During its life it had produced approximately thirty-two million tonnes of copper, gold, and silver and had succeeded in generating on average $300 million of revenue annually for the company. In 1988, about 2.2 kilometers away from Ertsberg, Freeport announced that it had discovered its El Dorado, Grasberg. There had been rumors of the discovery more than a decade before it was announced. Why the company decided to withhold the announcement of the discovery until 1988 is open to conjecture. Jan van Gruisen, who was Forbes Wilson's Dutch geologist friend, had taken out a concession from the Dutch for the area in 1959 in the name of his company, Oost Borneo Maatschappij (obm); obm did not have the finances to join in developing Ertsberg, but one of its subsidiaries had retained a 5 percent interest in Freeport Indonesia. It was not until Freeport-McMoRan was able to buy out obm's interest in Freeport Indonesia that it announced the discovery at Grasberg. Moreover, Freeport did not sign the new contract for Grasberg until the mining laws were amended. 2 7 The discovery of Grasberg caused Freeport to sign two new contracts with Jakarta in 1991 and 1994; these effectively gave the company exploration rights for approximately nine million acres and the right to mine any discoveries for a further fifty-year period. The 1991 contract superseded the original 1967 contract and covered not only the existing 24,700 acres (Block A) of the original Ertsberg mine but approximately another contiguous 6.5 million acres called Block B, part of which was the new Grasberg site. In 1994 a second contract was signed by a PT Freeport Indonesia subsidiary, PT IiyA Eastern Minerals Corporation, for another 2.6 million acres. This new contract of work encompassed three separate areas of land, which are referred to as the Eastern Mining Block and are next to Freeport's Block A and Block B. These three blocks gave Freeport a total of nine million acres of exploration leases with a guaranteed thirty years of operating and the option of two ten-year extensions. Once again Freeport was not forced to operate under restrictive environmental laws or made to compensate the traditional landowners for loss of land. 28 The elephant that was Grasberg dwarfed Ertsberg in every respect. Not only was it physically more imposing (standing 4,270 meters above sea level, it was 500 meters higher and 2.5 kilometers in diameter), but Ertsberg's productivity pales into insignificance compared with the riches unearthed at Grasberg. In 1999 alone, Grasberg produced more than double the ore recovered from Ertsberg during its life. What can be considered the Grasberg complex 29 constitutes the world's largest known

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deposit of gold (91.4 tonnes of gold compared to its nearest rival, Freegold in South Africa, at 60.44 tonnes) , 30 Grasberg also currently holds the world's third-largest open-pit copper reserves (32 million tonnes). At extraction rates of less than 10 cents per pound, it is the lowest-cost copper producer in the world. Estimates of Grasberg's worth continue to increase so that despite all predictions the final worth of the mine is impossible to establish; it is classified as "open at depth," which is a euphemism for a bottomless pit. Grasberg is yielding a greater percentage of gold per tonne the lower the mine goes. While at its peak Ertsberg processed 25,000 tonnes per day (tpd) of ore, Grasberg is currently moving approximately 600,000 tpd of earth and rock while discharging about 230,000 tpd of these into the local river system as tailings.31 The open-pit Grasberg mine is so large and located at such a high altitude that, except for early morning, the site is continually shrouded in cloud; thus satellite tracking of the gigantic mining trucks, which operate twenty-four hours a day, 365 days a year, allowing Freeport to move more tonnes of earth per day than any other mine in the world, is necessary. On current figures Freeport is expected to earn anything from $40 billion to $80 billion from Grasberg over its projected life of more than forty-five years. 32 Positioned along the ring of fire, the Freeport mining concessions are in one of the highest potential mineralization zones in the world. And while the worth of Grasberg is impossible to establish, so too is the potential of the Freeport concession. Exploration on more than six thousand sites has identified about seventy potential mining sites with drilling commencing on about ten of these. The most recent Freeport estimates are that the concession, which includes a significant new discovery in the old Ertsberg Block A area called the Ertsberg East Surface (previously referred to as Guru Ridge), will yield 50.9 billion pounds of recoverable copper and 63.7 million ounces of gold. Its proximity to both the surface and already existing mines will mean that this new discovery can be developed in conjunction with existing ore bodies to create yet another massive open-pit/underground complex processing more than five hundred million metric tonnes of ore. Freeport's Moffett realistically believes that the area will eventually produce other Grasbergs, eclipsing the riches of the Panguna, Ok Tedi, Lihir, and Porgera mine in Papua New Guinea. To exploit these minerals Freeport had invested approximately $4.5 billion in West Papua by early 2001. 33 The dollar wealth that is Freeport is, however, only half the story. Outsiders do not understand the strong emotional attachment that results from working on, and creating, such a mine. This is not to understate or negate the indigenous peoples' attachment to the land, which is

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examined in the following chapters, but it is necessary to recognize that there is another emotional attachment involved in the supposedly rational arguments surrounding the Freeport mine. Like the attachment of the indigenous peoples who traditionally own the land, that of the engineers and geologists to the land has, in many respects, little to do with its wealth per se. In the small world of mining geologists, the ring of fire is seen as potentially the most promising area for mineral discovery on Earth. Moreover, the mine is in one of the, if not the, last untapped wildernesses in the world. Lowered into the jungle by helicopter, tracking for days through harsh conditions, geologists can easily come to regard themselves as the twentieth century's explorers searching for undreamed of wealth. Therefore, for many geologists, being part of Freeport and its discoveries is the pinnacle of their profession. This perception is mirrored by the engineers, with the Freeport mine being viewed as one of the great modern-day engineering feats. All of these emotions are held by the executives of the company, who not only receive lucrative rewards for their service but are seemingly proud of what they are achieving in West Papua. In the words of Freeport-McMoRan's CEO in an address to company executives, "This is not a j o b for us; it's a religion." 34 Once a company has committed large amounts of capital to a project, the host nation is in a much better bargaining position. Between 1967 and 1991 the power relationship between the Indonesian state and foreign capital shifted a number of times; between the regime and the company it shifted significantly—in the state's favor. No longer was Suharto plagued by political insecurities or desperate to please as he had been in 1967. Instead twenty-four years of authoritarian rule allowed him to exploit incoming foreign capital to support the patron-client relationship that characterized the state. Conversely, once having heavily invested in the province, Freeport lacked mobility. In this situation the company was willing to concede much to the state in its second contract to secure the mining rights to Grasberg and further exploration rights. Notwithstanding the parading of Freeport "heavies" in the form of Henry Kissinger, William Rogers, and former ambassador to Indonesia J o h n Holdridge, and the return of Kissinger with Moffett to finalize the details of the contract, the resourceful Suharto drove a hard bargain with the company. Higher payments to the government, restrictive exploration conditions, incorporation in Indonesia, Indonesian equity in the company—which threatened to have Freeport violating the U.S. Foreign Corrupt Practices Act—together with an unwelcome commitment to build a smelter on Java were just some of the contract conditions demanded by Jakarta.

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In accordance with the terms of the contract, which Freeport signed on 30 December 1991, the operating subsidiary, Freeport Indonesia, was incorporated in Indonesia and changed its name to PT Freeport Indonesia. Unlike the 1967 version, this new contract required Freeport to pay royalties with an effective tax rate of 45 percent. In 1992 Freeport began an expansion program that would bring its total investment since commencing mining in West Papua to $4.5 billion ($3.5 billion of that since the discovery of Grasberg). Not only did Freeport need to extend its mine and mill facilities to cope with the continual upgrading of throughput rates of the new Grasberg mine, but it also had to extend its established mill and work area from the dying Ertsberg site, 2.2 kilometers away, to Grasberg. This entailed the building of new access roads because initially all heavy equipment was disassembled and carried up the aerial tramway and assembled again at Grasberg. Also neceessary were five miles of tunnels and vertical shafts to move ore from the new mine to the existing milling site near the Ertsberg hole. Port facilities were expanded as was the capacity for electrical power generation to cope with the increased rates of production. With exploration staff, food, and materials being lowered into the jungle by helicopter, and equipment, including exploration rigs, being assembled piece by piece on site, the company needed to construct a hundred helipads and four runways. Most visually amazing of all in Freeport's expansion program was the $500 million new town, Kuala Kencana (River of Gold) opened by Suharto in late 1995. Kuala Kencana eclipses Tembagapura in every respect. Built in the middle of the jungle on twenty-five thousand hectares outside Freeport's concession and only eighteen kilometers from the town of Timika in the lowlands, it is an enormous Western-style township housing up to twenty thousand inhabitants. It looks like no other Indonesian town or West Papuan village. Its neat manicured lawns divide the town into sections defined by income. The town center houses a modern air-conditioned shopping complex and company and government offices. An imposing mosque sits at one end of the central park, a church at the other. The town has its own health clinic, two schools (one for the Indonesian children and another for the ex-pats), a gym, and a swimming complex. An extraordinarily beautiful eighteen-hole golf course, Klub Golf Rimba Irian, surrounded by fifty-meter-high rain forest, was designed by Ben Crenshaw and sits at the edge of the town. Another seemingly inappropriate Freeport transplant in West Papua is the four-star, eighty-four-room $100-$280 per night Sheraton Inn, which Freeport built for its guests just outside the shabby mining service town of Timika.

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The smelter on Java also represented a significant financial burden for Freeport-McMoRan, which was a 25 percent partner with Mitsubishi Materials (60.5 percent), Mitsubishi (9.5 percent), and Nippon Mining (5 percent). Construction costs for the smelter, completed in 1999, skyrocketed from an estimated $300 to $700 million.

FREEPORT'S DEALS WITH THE INDONESIAN ELITE 1 9 9 1 Contract As in 1967, when Freeport signed its second contract in 1991 it was the first company to sign under a new foreign investment law. Within these new regulations the Fifth or "frontier" Generation of contracts of work stipulated that preference was given to foreign mining companies, such as Freeport, that invested in the nation's underdeveloped eastern provinces. Under the new law such companies were allowed to initially retain 100 percent foreign ownership; within twenty years they had to divest 20 percent to Indonesian nationals. However, foreign companies operating in the other provinces were required to gradually divest up to 51 percent of their shares to Indonesians. Speaking on the day of the signing of the Freeport contract, and referring to the above recent changes in investment conditions, the minister for mines and energy, Ginandjar Kartasasmita, stated, "This contract, which is the first since the change in the government's policy, hopefully will serve as a model to encourage other companies to invest in the eastern part of Indonesia." 35 However, the Suharto government demanded more from Freeport than the law required. The contract required Freeport-McMoRan to divest 20 percent of its Freeport Indonesia equity within ten years to Indonesian nationals and thereafter another 25 percent in 2.5 percent lots. Moreover, should the company fail to sell at least 20 percent of this second allotment of shares on the Jakarta Stock Exchange, the company would be required to divest 51 percent of Freeport Indonesia shares to Indonesian nationals. 36 This second, unpalatable clause was apparently not made public at the time. 37 Perhaps Freeport was relying on the article within its contract that stated, "If after the signing of this Agreement then effective laws and regulations or Government policies or actions impose less burdensome divestiture requirements than set forth herein, such less burdensome divestiture requirements shall be applicable to the parties to this Agreement" (Article 24 [2d]).

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In January 1991, a year before the signing of the new contract, the government had increased its own holding in PT Freeport Indonesia from 8.9 percent to 10 percent for $18.1 million. As was standard procedure with the Suharto government, Jakarta was not required to outlay capital. Instead, the transnational skirted the U.S. Foreign Corrupt Practices Act, while managing to finance a foreign government into the company, by negotiating carried interest, 38 withholding 40 percent of the dividends owed to Jakarta for its shares until the purchase was paid for. Because the remaining 90 percent of the company was held by the parent company, Freeport-McMoRan, an Indonesian buyer for the other 10 percent had to be found within the next nine years in order to fulfill its contractual obligations. Freeport-McMoRan sold this 10 percent of PT Freeport Indonesia to the Indonesian conglomerate Bakrie Brothers headed by the minister's friend, Aburizal Bakrie. Bakrie was Indonesia's most prominent pribumi businessman and, along with Ginandjar, had been a member of Suharto's notorious Team 10. At the time he was also close enough to Suharto to be considered a family member. All parties concerned with the negotiations have publicly stated that Freeport-McMoRan's decision at the time to sell to Bakrie was purely a business decision with no pressure from the government. In 1996 Paul Murphy, who was then the executive vice president of PT Freeport Indonesia, related to the author an entirely different version of events. Murphy claimed that when the company was informed of the contractual obligations, Freeport-McMoRan was thinking of listing the Freeport Indonesia shares on the Jakarta Stock Exchange. Given that at the time the total value of the Jakarta Stock Exchange was reported to be only $60 million, the suggestion that Freeport-McMoRan was considering listing more than $200 million of PT Freeport Indonesia shares is questionable. According to Murphy, Freeport-McMoRan was saved from listing the shares because Ginandjar told the company not to do so; instead, the government would send three potential partners from which it could make a choice. In late 1990 Aburizal Bakrie paid a private visit to Moffett in Louisiana informing him that he was the partner Freeport required. 39 To Murphy's knowledge Bakrie was the only potential partner ever sent by Jakarta. Although he described the decision to sell this 10 percent of the company years before the sale was contractually required as a "sign of good faith" between the company and the Suharto government, Kosim Gandataruna (director general of mines) claimed that Ginandjar had recommended to Freeport-McMoRan that it sell immediately. 40 According to Freeport-McMoRan's 1991 annual report on 31 December 1991, just one day after signing the new contract with Jakarta,

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Freeport-McMoRan issued 10 percent of PT Freeport Indonesia to Bakrie Brothers. Freeport-McMoRan was then paid $212.5 million on 6 January 1992 for the stock. However, the purchaser, Bakrie, supplied only $40 million of this. Freeport-McMoRan Inc. and FreeportMcMoRan Copper and Gold Inc. jointly guaranteed the remaining $173 million of the purchase price on behalf of the Indonesian businessman with close links to the minister and the president. Although the first repayment of the loan by Bakrie Brothers was due exactly one year later, in December 1992, Bakrie never made this repayment because one week before this date it sold 49 percent of its Freeport shares back to FreeportMcMoRan for approximately $211.9 million. There appear to be problems with this deal. Having sold down its holding in Freeport Indonesia to 80 percent so that it had a 20 percent Indonesian shareholding, Freeport-McMoRan could not directly buy back 4.5 percent of Freeport Indonesia shares from Bakrie Brothers as this would increase its direct holding to approximately 85 percent. In an attempt to overcome this legal impediment, Bakrie Brothers listed its holding of Freeport Indonesia shares on the Jakarta Stock Exchange through a company it created expressly for this purpose, PT Indocopper Investama, whose only asset at the time was the Freeport shares. Freeport-McMoRan then purchased 49 percent of PT Indocopper Investama on 23 December 1992 for just short of $211.9 million. Given the terms of the new contract (20 percent Indonesian equity), Freeport-McMoRan's indirect purchase of shares in 1992 through PT Indocopper Investama violated the terms of the 1991 contract. Nevertheless, exactly one year after purchasing the 10 percent interest in Freeport, for $212.5 million, and precisely when Bakrie Brothers was due to make its first installment on the Freeport shares, Freeport-McMoRan paid Bakrie close to the original purchase price for half the number of shares. 41 In other words, not only was Bakrie saved from making its first payment, but the twelve-month deal gave Bakrie approximately 5 percent of Freeport for virtually nothing with Bakrie making more than $200 million on an outlay of $40 million. In 1998 an Indonesian e-mail bulletin reported the rumor that the Freeport shares were held by Bakrie on behalf of Ginandjar. 42 Even though the original purchase by Bakrie Brothers officially occurred on 31 December 1991, when the market price of FreeportMcMoRan shares (FCX) was approximately $32.88, the company has claimed that the purchase price for the deal had been negotiated twelve months earlier, in January 1991. At that time Freeport-McMoRan Class A common stock—the shares upon which the deal was calculated—were

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trading at approximately $19.50. With the stock rising to $43.76 (adjusted for share splits) by December 1992—when FreeportMcMoRan bought back the Freeport Indonesia stock from Bakrie—the company could justify paying Bakrie double the purchase price. However, if the purchase price had been calculated on the official date of the transaction, that is, 31 December 1999, Bakrie would have needed to pay $73 million more for the shareholding. Not only are the financial calculations questionable, but if Freeport had agreed in January 1991 to sell 10 percent of the asset, were not the shareholders of Freeport-McMoRan and the market legally entitled to be informed at that time?

Outsourcing and Purchasing an Insurance Policy After the signing of the contract, Freeport's actions were dictated by the time constraints built into the contract, constraints that, in turn, exacerbated existing financial problems. Freeport needed to acquire as much capital as quickly as possible to expeditiously complete an extensive exploration and expansion program. Eventually Freeport was forced to take on the well-resourced Rio Tinto as a minor partner and to outsource or privatize most of its nonmining activities. Freeport's restructuring program saw it subcontracting the building of new, nonmining infrastructure to outside companies and selling off nonmining or nonoperating assets such as service industries (e.g., electricity, shipping, residential). In all instances, the assets were sold to Indonesians with close associations with the First Family, with Freeport maintaining a minor partnership. The purchaser guaranteed that it would operate these assets and provide the goods and services back to Freeport; in return, Freeport would provide a fee and a guaranteed income. By giving individuals with power, wealth, and political influence a risk-free interest in the continued operation and profitability of Freeport, the outsourcing program effectively strengthened the company's political insurance policy with the Suharto regime. Although Freeport liked to argue that its outsourcing program was devised to redefine its role in the community and accumulate wealth by selling off assets, the arrangements made were economically lucrative for the Indonesians and of dubious economic value to the company. However, such deals appeared at the time to be politically astute moves. The biggest winner in the outsourcing program was Abdul Latief, who became Suharto's minister for manpower and, like Bakrie and Ginandjar, was one of the favored members of Suharto's Team 10. According to Kosim, Latief was also introduced to Freeport by Ginandjar, although

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Ginandjar has denied this. 43 Freeport and Latief became joint partners in an operating principal called PT ALatieF Nusakarya Corporation (ALatieF), which bought housing and shopping complexes in Tembagapura and the Sheraton Inn in Timika from Freeport. As was usual business practice, the Suharto favorite was well looked after by the company, for not only did Freeport-McMoRan guarantee a minimum rate of return on Latiefs investment (15 percent after taxes), but Freeport-McMoRan raised and guaranteed most of the finance for the purchase. By 1997 ALatieF had purchased from Freeport nonmining assets worth approximately $270, million with Freeport—the 33 percent partner—guaranteeing 66 percent of the purchase price through the parent company, Freeport-McMoRan. Abdul Latief, with a 66 percent share of ALatieF, was required to provide only $90 million. By March 1995 ALatieF also partnered the international transport company P&O in a number of Freeport contracts. Not only were they given the contract to supply food to the company, but PT ALatieF P&O Port Development Company signed a $100 million agreement to purchase, maintain, and operate some of Freeport's port facilities. 44 I do not know the financial arrangements for these contracts. In March 1997 Freeport Indonesia sold its 30 percent share of the partnership to ALatieF for an undisclosed amount, although the parent company stated that in the first quarter of the year it realized $35.9 million cash from these transactions. In 1994, when Freeport signed the new contract for the Eastern Mining Block it took on another influential Indonesian partner. PT Setdco Ganesha (Setdco) and PT Indocopper Investama were each given a 10 percent interest in the new area. Like Bakrie, who shared ownership of Indocopper with Freeport-McMoRan, Setiawan Djody, owner of the Setdco Group, was also introduced to Freeport by "someone in the ministry."45 Djody was not only friends with Sigit and Tommy Suharto but was a partner in a number of Suharto family ventures. By his own admission Djody's success rested on his association with the Suhartos, especially Tommy. 46 Moffett claimed that when Djody failed to carry his share of exploration costs, the company confiscated his interests. 47 Julius Tahija, through a subsidiary called Austindo Nusantara Jaya, was also given a 10 percent interest in a joint venture between Duke Energy (30 percent), PowerLink (30 percent), and Freeport (30 percent). This joint venture, called Puncak Jaya Power, entered into an agreement with Freeport in December 1994 where for approximately $215 million it would purchase and expand Freeport's existing powergenerating project and sell the electrical power service back to the company. As usual, Freeport was required to guarantee Puncak Jaya Power a

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minimum rate of return and agreed "to make minimum payments sufficient to allow the joint venture to meet its debt service." 48 In 1997 the company sold new power facilities associated with the mill concentrator expansion for $366.4 million to Puncak Jaya Power and sold its 30 percent interest in this venture to the other partners for an undisclosed price. 49 In 1999 the company's "obligations under these infrastructure asset financings totalled $72.4 million." 50 Ginandjar's brother, Agus Kartasasmita, originally sought an interest in this deal through a partnership with Duke Energy and Fluor but was allegedly rejected by the companies because he refused to outlay any capital.51 However, he did secure other partnerships. In June 1995 Freeport sold 76 percent of its aviation assets for $48 million to a joint venture that reputedly included Agus's company, PT Catur Yasa.52 Freeport guaranteed loans for this venture. On the recommendation of Freeport, PT Catur Yasa was also given a 20 percent interest in another Duke-Fluor Daniel venture associated with Freeport's power system.53 Despite the fact that Catur Yasa contributed only one employee out of a workforce of approximately two hundred people in 1998, Agus made the claim that his company was chosen by Duke-Fluor Daniel on its professionalism "without help or direction from any third party."54 According to a source close to the Ginandjar family, other members of the family have larger interests in the power facility at the port site through Duke Energy.55 Finally, supposedly on the recommendation of Ginandjar, Golkar party faithful Prihadi Santoso was employed by Freeport and today holds the powerful position of executive vice president responsible for government and external relations. Nor had Suharto been left out. Apparently Suharto's yayasan, Nusamba, is Mitsubishi's partner in the Gresik smelter venture. Under the contract with the government, Freeport-McMoRan agreed to "support an after-tax return of 13 percent to the larger partner [Mitsubishi Materials, with 60.5 percent of the operation], if necessary, for the first twenty years of commercial operations." The 10 percent partner [Mitsubishi] was given an option, "exercisable on the third anniversary of commercial operations," to require Freeport-McMoRan "to purchase the 10 percent interest at a 10 percent annual return." 56 As part of the deal Freeport was also committed to supplying the smelter with 40 percent of its copper concentrate—part of which would satisfy domestic requirements. The smelter was then required to sell the 500,000 tonnes of sulphuric acid it would make to the state-owned fertilizer company, Petrokimia Gresik. By 1996 it was rumored that Suharto was upset by the lucrative contracts Ginandjar and his friends had with Freeport, and, in turn, Ginand-

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jar was upset with how much Latief was getting. As a result a number of the Latief projects were retracted and given to Bob Hasan's company, PT Pangansari Utama. Although ALatieF and P&O had been given the contract to supply food to the company, in 1996 Freeport entered into a $6 million joint venture with Hasan's PT Pangansari whereby this concern would breed cattle to supply Freeport with beef. Shortly thereafter it was announced that Freeport would no longer be buying vegetables from the farmers in the Baliem Valley as these would also be supplied by Pangansari. Hasan's company remains today a major catering contractor to Freeport in West Papua. Finally, not only does Suharto and his son Sigit Haijojudanto have a financial interest in Freeport through Nusamba and possibly through Pangansari, it is also possible that two other Suharto children, Bambang Triatmodjo (cargo ships) and Tommy, together with Tommy's associate Ricardo Galael, have or had power contracts with the company. 57 In March 1997 Bakrie was forced by the president to sell his remaining Freeport shares held in PT Indocopper Investama to Suharto's yayasan, Nusamba, for $315 million. Nusamba supplied $61 million of the purchase price, Freeport underwrote the balance. While Bakrie, Ginandjar, and Latief were falling out of favor, the cash cow's star was rising. Just one month before the deal between Nusamba and PT Indocopper Investama was finalized, Freeport had been offered a 15 percent interest by the president in what appeared at the time to be the biggest gold find in history, Busang. According to Freeport-McMoRan's 1997 annual report, the company is guarantor for the Nusamba loan, which was due to mature in March 2002. At maturity, the company must either "purchase the [PT Indocopper Investama] stock or the lenders' interest in the commercial loan for the amount then due." 58 Should FreeportMcMoRan choose to purchase the stock, then it will hold approximately 90 percent of Freeport Indonesia, far exceeding its contractual agreement. At the time of writing, it is not clear what "purchase the lenders' interest in the commercial loan" would entail. Before Suharto was forced from office, the original deal brokered between Bakrie, Freeport, and Ginandjar would never have been allowed to make front-page news, but in late 1998, with the issue of corruption, collusion, and nepotism dominating the political agenda, the ethics of this deal were questioned by American academic Jeffrey Winters when he suggested that Ginandjar's involvement in the deal between Freeport and Bakrie was worthy of investigation. It was also claimed at the time that Ginandjar's son Agus Gumiwang was given a waste disposal contract with Freeport. Ginandjar denied any impropriety and stated that none of his children were involved in the waste disposal for

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Freeport. However, Freeport's records seem to contradict Ginandjar's statement, for in a 1996 Freeport publication the company noted that its sewerage treatment systems would be privatized and run by PT Agumar Rust Indonesia, of which Agus is a 30 percent shareholder. 59 When questioned about this in late 1999, Freeport advised that the contract no longer existed. Although members of the former minister's immediate family have been employed by the company, both Ginandjar and Moffett claim that their relationship was not out of the ordinary. What was reported by Freeport to be an asset-raising exercise simply resulted in further debt for the cash-strapped company; journalist Peter Waldman calculated in 1998 that between "1991 and 1997 Freeport made at least $673 million of loan guarantees to finance three Indonesians with close ties to Mr. Suharto or his ministers" into the company.60 In March 1998, just one year after selling its 30 percent interest in the ALatieFjoint venture to Latief, Freeport inexplicably repurchased this original 30 percent holding for $30 million. 61 By the end of 2000 Freeport had repurchased what was left of the ALatieFjoint venture from Abdul Latief and had assumed the existing bank debt for $60 million. Freeport's agreement to subsidize interest payments on the Nusamba loan back in 1997 means that Freeport's debts are mounting. Because dividends have not covered interest costs, within twelve months Freeport paid $7.6 million to Nusamba to cover interest on the loan. By 1998 this figure had risen to $25.4 million; it was $43.7 million in 1999 and $56.1 million by 2000. At the end of July 2001 Freeport-McMoRan announced a $525 million offering of convertible senior notes; these, it said, may be used in part to pay the balance of the $254 million loan taken out on behalf of Nusamba should Nusamba default on the loan due in March 2002. By selling its nonmining assets to influential Indonesians, Freeport was making expensive payments on an insurance policy and doing business the New Order way. Today it continues to pay on an insurance policy that is not only worthless but is a liability. While the partnerships were distinctly politically advantageous to Freeport at the time, the company argues that it had little choice in the type of partners it chose. The outsourcing and subcontracting of these interests dictated that any purchaser or potential partner had to be financially secure, if not politically well connected. Although many of them eventually proved not to be financially secure, they were all well-connected. By outsourcing to wealthy and well-connected pribumi companies close to Suharto and Ginandjar, Freeport was confident that its new partners were politically powerful. It could not foresee the imminent end of the regime. In defending itself against charges of corruption, Freeport states

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the obvious that, given the size of the investment, it was hard not to deal with the president's favorites.

Rio Tinto Despite share floats and the company reconstruction—and perhaps because of the outsourcing program—further borrowings by FreeportMcMoRan on behalf of the subsidiary were severely limited by 1994; as a result, Standard & Poor's temporarily placed it on credit watch. This continuing liquidity problem eventually forced the company to look elsewhere for an experienced and capitalized partner. The company rationalized that it was far better to share future profits than to lose the opportunity of finding another Grasberg for want of adequate exploration capital. In May 1995 Freeport-McMoRan signed contracts with RTZ Corporation PLC (Rio Tinto) that, in effect, gave Rio Tinto an interest in PT Freeport Indonesia of about 14 percent for an initial payment of approximately $1.7 billion. The payment by Rio Tinto was divided into two amounts. Half of the purchase price, $875 million, went directly to Freeport in lieu of shares, while the remaining $850 million was, in effect, a loan to be spent on future exploration and development in Freeport's two contracts of work in West Papua. For its investment Rio Tinto received shares in Freeport-McMoRan and "acquired a 40% undivided interest in the CoW held by Eastern Mining and a 40% undivided interest in the CoW held by PT Freeport Indonesia." 62 The Grasberg operation has been treated separately in the contract so that Rio Tinto's interest in Grasberg is limited to 40 percent of discoveries and expansion proven after December 1994, together with any output at Grasberg above 118,000 tpd. 63 In other words, for $875 million Rio Tinto bought a 40 percent interest in all future Freeport discoveries and will, in future, share in an incremental amount of the costs and profits thereof. In signing the contract, Freeport ensured the continued expansion and operation of Grasberg and freed up the mine's cash flow for further borrowings to fund expansion and exploration. 64 By the end of 1995, Freeport had secured a cash flow, influential partners, and an Indonesian insurance policy, all of which seemed to guarantee its future.

THE IMPORTANCE OF FREEPORT TO JAKARTA From the very beginning Freeport had been considered by the New Order regime to be one of the nation's most valued assets and accord-

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ing to Suharto essential to the economy. Initially, Freeport's importance arose from the political ramifications of the 1967 contract. Throughout the seventies and eighties Freeport's continued capital investment, its ability to extract the precious metals, and its political importance to the regime increased the company's stature. Not only did the company become the principal developer and de facto administrator of the area around its mine in West Papua, but the company and its associates have the distinction of being one of the most successful and outspoken Indonesian lobby groups in the United States. With the discovery of Grasberg, the potential political and economic worth of the Freeport operation to the government became incalculable.

Economically From 1975 to 1986 Freeport paid the government, on average, $28.2 million per year and in 1988-1989 became the nation's largest taxpayer. By 1995, with a rise in copper prices together with the increased extraction rates, Freeport paid direct to the government $295 million in dividends, taxes, and royalties out of gross revenues of $1.48 billion. In the same year indirect benefits totaled another $997 million. By 1999, however, with a fall in resource prices, direct payments to the government fell to $173 million and $29 million toward local development. In total, between 1991 and 2000 Freeport paid direct benefits to Jakarta of $1.6 billion. 6 5 But direct benefits were always outstripped by indirect benefits, which in the same period totaled approximately $7 billion 6 6 (it should be noted that this last figure is inflated by the inclusion of funds reinvested in company operations). In sum, since the company began operating, it calculates that by the end of 1999 it had paid directly and indirectly a total of $10.2 billion to Indonesia with 87 percent of the company's total revenues remaining in and benefiting the nation. 6 7 Freeport also became one of the largest private employers, responsible directly for 6,934jobs and indirectly for approximately another 7,000jobs, by its own account ran one of the largest social-economic development projects in Indonesia, and remained the largest nonoil and gas exporter. Paradoxically, with falling copper prices at the end of the century resulting in a dramatic decline in Freeport's contributions to the government, the company's financial importance to Jakarta only increased. With the crash of the rupiah in 1997-1998 and the majority of the Indonesian conglomerates insolvent or technically bankrupt, Freeport's foreign currency earnings, although reduced, increased in relative value.

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Freeport dominates the economy of West Papua, with its operations a n d offshoots making it the largest purchaser a n d employer in the province. In 1996, by its own account, it was responsible for m o r e than 50 percent of gross domestic product although the Jakarta Post credits its royalties as accounting for 70 percent of gross domestic product between 1985 a n d 1998. Moreover, in 1995 Freeport accounted for 86.52 percent of total imports to the province from outside Indonesia. In the first half of 1997 alone, Freeport's increased copper concentrate production was said to have accounted for 88.8 percent of a $56.6 million rise in West Papuan exports. At the same time, it is today transferring technology and skills to the people who work for the company a n d the community a r o u n d its area of work. Theoretically, Freeport's exploitation of the copper a n d gold in West Papua should have benefited the province greatly, for Indonesian mining law stipulates that 80 percent of all land rents a n d royalties is to be channeled back to the province of origin. In practice, however, the province benefited little from the taxes Freeport paid direct to Jakarta.

Politically T h e Suharto regime focused development on the west of the country, most specifically Java, a n d accumulated wealth at the center in order to support the patron-client state. Rather than supporting social a n d economic programs within West Papua, Jakarta focused on the control a n d dispossession of the Melanesian population through the militarization and "Indonesianization" of the province. At the same time, J a k a r t a delegated responsibility for social a n d economic development a r o u n d the mine site to the company so that Freeport remained in the inappropriate role of developer a n d administrator of its project area. Until the midnineties, Freeport assumed this role not simply because the central government was not interested in accepting its responsibilities, but because it suited the company to d o so. In the absence of any recognizable bureaucratic presence, Freeport created its own fiefdom in and a r o u n d its project area, with J a k a r t a supplying the military to protect it. When Freeport arrived, West Papua was a remote and isolated backwater. By early 2001 the company had invested approximately $4.5 billion into the area and was by far the largest single American investor in Indonesia. Without aid or assistance from the government, in thirty years the company created an extensive U.S. standards road system around the mine and built an international airport, a four-star hotel, a hospital, telephone systems, power stations, a deepwater port, and two Western-style towns. In the

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later years, and especially after the company faced criticism over its social and human rights policies, it committed large amounts to social and community services, spending $153 million between 1992 and 1999 on schools, scholarships, health care, and housing. The company also maintains its own water, electricity, sanitation, and garbage utilities and, in the later years, assisted the local government with these services in the project area. The company's purchasing power and its ability to employ large numbers of people made it a magnet for population transfer (approximately two thousand residents in the mid-sixties to more than a hundred thousand by the end of the century). It also made it an area of increasing economic activity, both legal and illegal, and an obvious high-profile target for anti-Indonesian protest from within the province. In response to these changes, together with the increasing economic importance of the company to Jakarta, the military presence increased so that in the same period the occasional foot patrol had grown to a military presence that saw the Freeport contract area having the dubious distinction of becoming one of the most militarized zones in the archipelago by 1995. Despite these enormous social changes the bureaucratic presence remained inadequate; the area was traditionally considered the lowest rung of the civil service ladder. Until the last three years of the Suharto regime, the area could boast only about forty government employees, with the nearest major government center and courthouse more than 550 kilometers away in Fak Fak. Under these circumstances the company and the military—both needing the other to function—developed a close and mutually beneficial relationship. Until the mid-nineties, Freeport was more than happy to have the military to protect it and virtually no bureaucracy to interfere in its activities. If the local population proved difficult, the company called upon the military to maintain order. In 1995, however, two damaging human rights reports detailing the killing of the indigenous people in and around the project area were released. With these reports being closely followed by riots targeting company property, international attention was focused for the first time on Freeport's operations and its relationship with the military. In response the company claimed that it was being unfairly held accountable for the violent actions of the Indonesian military and the appalling conditions in which many of the traditional landowners lived. The blame, it stated, lay firmly with the government; the company's role was not "to be all things to all people." 68 Supported by U.S. Undersecretary of State for Global Affairs Tim Wirth and by J. Stapleton Roy, who at the time was U.S. ambassador-designate to Indonesia and in 2001 was appointed to the Freeport-McMoRan board,

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Freeport declared that it was time the government accepted its responsibilities and requested that the bureaucratic presence be increased and more of the tax dollars it paid to Jakarta be invested in the development of the local area. Suharto chose the well-publicized opening of Freeport's new town, Kuala Kencana, in December 1995 to respond by suggesting that the company needed to build better relations with the people living in its project area. This simple statement effectively returned the responsibility for any social problems to the company. At the same time it reminded the company just who had the power in the relationship. Jakarta, however, did feel the need to answer international criticism and announced the bureaucratic upgrading of the region and the allocation of more resources for socioeconomic development. Although there have been some changes in the area, little of substance has been achieved, for Suharto and his successors have seen little reason to actually commit resources when Freeport is so capable of doing so. While the mining company may have become critical of the government's neglect and disenchanted with its socio-development role, the Suharto regime regarded Freeport highly because of its economic contribution to the economy, honoring it with a number of awards including the prestigious Wreksa Parahita award in 1995 for "investing for the sake of the people's welfare." 69 At the same time the parent company played a vital political role for Suharto, acting as a high-profile public relations agent and becoming one of the most outspoken and successful lobby groups for Indonesia in the United States. After 1991 the disintegration of the Communist threat removed part of the legitimizing rationale of Western support for authoritarian regimes while the increasing political activism of nongovernment organizations forced these regimes to adopt "informal diplomacy"—that is, the hiring of high-profile public relations firms and the manipulation of lobby groups to protect their interests in the West. In this regard the Suharto regime was able to rely upon its powerful corporate and bureaucratic friends, with companies such as Freeport more than happy to assist. Financial support of politicians in the United States usually compels them to support the interests of their benefactors. Between 1991 and 1995, Freeport and its company affiliates officially gave $650,000 to politicians. One politician generously supported by Freeport was Louisiana senator Bennett Johnston, who was so successful in promoting Indonesia that in late 1995 he was described as "the most pro-Indonesian member of the U.S. Congress." 70 He also had the dubious distinction of being Washington's biggest supporter of American arms sales to

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Indonesia. By 1998 Johnston was retired from politics and on the board of Freeport-McMoRan. Between 1999 and 2000 the company gave $262,703 to politicians, making it the second-largest contributor from the mining industry for that period. 7 1 Freeport is also a member of the U.S.-Indonesia Society—a group that actively works to maintain the Jakarta-Washington relationship. Formed in 1994 to counter threats posed to the Indonesian business community by the lobbying efforts in Washington of human rights nongovernment organizations and trade unions protesting Jakarta's labor and human rights record, the society has today become an influential pro-Indonesia group. Is membership, which reflects the level of U.S. investment in Indonesia, is impressive. Business community representatives include Freeport-McMoRan, Texaco, General Electric, Mobil, Chevron, American Express, Edison Mission Energy, Hughes Aircraft, and Merrill Lynch, many of which have or had business associations with the First Family. 72 Former ambassadors and senior bureaucrats in the society have included Paul Wolfowitz, Edward Masters, George Benson, and George Shultz. Indonesian elite under Suharto also took defining roles within the society including Emil Salim, Mohammad Sadli, Hasan Habib, Arifin Siregar, and Prabowo's father, Sumitro Djojohadikusumo, brother Hashim, and sister Bianti Djiwandono. Also included in the list of Indonesians was the infamous J a m e s Riady of the Lippo Group who in January 2001 was fined $8.6 million for arranging illegal donations to U.S. politicians. Today his name is missing from the list of trustees of the society. The society claims it is not a lobby group and plays no advocacy role but rather is a nonpartisan and educational organization. This assertion deserves to be questioned. With nongovernment organizations having sway in Washington, the U.S.-Indonesia Society'sjob has been to counter the influence of these groups by downplaying the issues of human and labor rights. During the Suharto years it promoted the concept that it was more productive to work with Jakarta than to confront it over these issues. In this way the society and its board lobbied to ensure that U.S. political and financial support to the dictatorship and its military was maintained and, by association, its own investments protected. In this regard the most persuasive argument an American corporation can make in Washington is not necessarily the overt promotion of a foreign government's interests per se but the assertion that the company's interests, and by association those of the host nation, are identical to the home government's national interest. In this way American companies promote their own interests, and if those interests coincide

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with those of the host nation—as Freeport's did with Suharto's—then they are effectively p r o m o t i n g the interests of the host nation within their own government. T h e adoption of this promotional role by Freeport a n d the society, however, was never purely altruistic. By working for the Suharto government in Washington to ensure that the stateto-state relationship r e m a i n e d stable, Freeport was reaffirming its political worth to Jakarta a n d safeguarding its investment. Given the public nature a n d d e p t h of the relationship between Suharto and Freeport, it was essential to Freeport's own welfare to keep its friend secure in the Merdeka Palace. However, for those within Freeport who apparently possessed greater foresight than the flamboyant Moffett, the closeness of the relationship between the company a n d the president foreshadowed u n c o m f o r t a b l e complications. With the fall of Suharto, these complications, as predicted, manifested themselves.

POST-SUHARTO With Suharto gone, pressure m o u n t e d over the perceived "unofficial" relationship between the president a n d the company. Just two m o n t h s after Suharto left office, the Indonesian publication Prospek ran a story claiming that in 1996 a n d 1997 Freeport paid $20.3 million directly to Suharto t h r o u g h his Dana Sejahtera Mandiri foundation. 7 3 This alleged payment was apparently in response to the Presidential Decree No. 9 2 / 1 9 9 6 that m a d e it compulsory for all Indonesian companies or individuals e a r n i n g m o r e than $45,000 p e r year to "donate" 2 p e r c e n t of their profits to the yayasan. Prospek also claimed that, in exchange for the 1991 contract and the president's protection, the company paid $5 million to $7 million "tribute" each year. 74 W h e n Wiwoho Basuki, a n o t h e r of Ginandjar's friends, asked a E u r o p e a n mining executive how Freeport could possibly "skim o f f ' 2 to 5 p e r c e n t of its profits, the mining executive came u p with the following scenario: the smelter, which takes the c o p p e r / g o l d concentrate, needs only to understate gold recoveries so that revenues in excess of official figures, or even the physical gold itself, could t h e n be shipped directly to an account in Europe. If this scenario was correct, Suharto's d e m a n d for a smelter in Gresik takes on a greater significance. Four m o n t h s after Suharto left office a parliamentary commission released a report that called for renegotiation of the Freeport contract so that the company's role in developing the area could be clearly defined and legally based. With the company's contract protecting it

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from such revisions, there was no legal basis for the recommendation unless, as stated in article 20 of the contract, Freeport neglected its obligations. In the following month Freeport made front-page headlines in Indonesia when it was suggested that those committed to fighting corruption should investigate the deal between Bakrie, Freeport, and Ginandjar. Politicians flexing their muscle in the new democracy took the opportunity to establish nationalist credentials by attacking the highprofile company now devoid of its powerful protector. Demands quickly escalated to the cancellation of the Freeport contract. Belatedly realizing how damaging such a move would be to the Indonesian economy, the politicians again settled for calls to renegotiate the contract—this time focusing on a more equitable distribution to Indonesians. The focus of attack then shifted to Freeport's mining operations. In response to these threats, Moffett reverted to what had always worked and in January 1999 flew to Jakarta to pay a private visit to President Habibie who, in response, informed his ministers by letter that they were to give the company every assistance to complete its expansion plans. Kuntoro, however, continued to confront Freeport. The company eventually conceded to his request to double the royalties it paid to the government but took the opportunity to counterattack by pointing out that government regulations stipulated that 80 percent of these royalties should be returned to the province of origin. The focus on Freeport within the parliament then moved to the issue of environmental damage, with the result that there have again been calls from parliament either to have the operation in West Papua closed down or the contract renegotiated. While stating that the company welcomed a government-sponsored investigation of its operations, Henry Kissinger, then a member of the Freeport-McMoRan board and an employee of the company through Kissinger Associates since the late eighties, paid a private visit to Habibie's successor, President Wahid. In response the mines and energy minister confirmed the surety of the contract while the president's office announced that Kissinger would become an unpaid adviser to Wahid. For a short time it appeared that Freeport had been able to assert its influence within the new Indonesian democracy.

CONCLUSION Although the relationship between Suharto and the company remained amicable and mutually beneficial for thirty-two years, there was a shift in

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the balance of power as reflected in the company's two contracts. In 1967 Freeport's contacts in the United States and the promises of riches the company offered the struggling new government meant that it could dictate the terms of its investment. In 1991, however, Suharto was able to define the terms of the relationship and demanded a much higher price from the American mining company for rights to the largest gold mine on Earth, the copper mine with the world's lowest extraction price, and exploration rights to nine million acres. While Jakarta had always been content to provide the political and physical security for the company, by 1991 Freeport was required to contribute to the president's patronage system. Until the fall of Suharto, Freeport had been able to operate in West Papua with relative impunity for much of that period because it had a close, multifaceted, and mutually beneficial relationship with the government, the military, and, in the later years, the Suharto elite. As the above incidents indicate, Freeport is today struggling with the loss of its friend in the Merdeka Palace. Clearly, it has been in Freeport's interests to obfuscate its business dealings with the New Order elite so that penetrating the wall of secrecy proves exceedingly difficult. It is also clear from the above incomplete reconstruction of business associations that for me, many pieces of the jigsaw puzzle are missing and indeed may even be misplaced.

Chapter 5

T h e Difficulties of Development

T w o T R I B A L G R O U P S , the Amungme and the Kamoro, traditionally, lived on and worked the land that eventually became the Freeport concession area and that today extends from just below the equatorial glacier, Puncak Jaya, to the coast. The Amungme lay claim to the highland area, which encompasses the Grasberg and Ertsberg mines, the mill, and the company town of Tembagapura. When Freeport arrived, about eight hundred Amungme lived in the Wa Valley—where Tembagapura is— and used the surrounding area for hunting and cultivation of gardens. Another twelve hundred Amungme resided in the two adjacent highland valleys of Tsinga and Aroanop. Although the mine and the mill, which are above the tree line at 14,000 and 10,000 feet respectively, had no commercial use to the Amungme, trails indicate that the area was used for hunting. Most significant is that this land held deep spiritual and cultural significance for the original inhabitants. The Amungme's first contact with Europeans was not until 1912, when a Dutch climbing expedition (Wollaston), which enlisted guides from the Amungme clans in the area, reached the base of the glacier. Believing that these strange new people would lead them to a magical place promising eternal life, many Amungme followed the Wollaston expedition down to the lowlands, only to have whole families and villages die from disease, possibly malaria. Contact was not made again with outsiders until 1936, when JeanJacques Dozy arrived with the Colijn expedition, also to climb the glacier. Once again these strangers drew the attention of hundreds of villages, and once again the welcoming Amungme led them to Puncak Jaya. It was on route to the glacier that Dozy made the discovery of his "mountain on the moon." Once again large numbers of Amungme who followed this second expedition to the lowlands died. From these experiences the Amungme initiated contact with missionaries in the low85

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lands, although the first of these groups did not arrive in the remote Amungme villages until the fifties. Because of the inaccessibility of the area and the small number of inhabitants, the Dutch administration made only sporadic visits to the area following the missionaries, primarily for medical purposes. For the Amungme the most dramatic disruption to their lives came with the arrival of Freeport. The second landowning group, the Kamoro suku, which owned the land that now houses the tailings deposition area, the town of Timika, the company town of Kuala Kencana, and all lowland areas down to the port of Amamapere, was penetrated much earlier. For a number of centuries these coastal dwellers suffered from slave traders originating from nearby islands and periodic and aggressive attacks from the Asmat headhunters in the east. First contact with Europeans for the western Kamoro was in 1623 with the sighting and subsequent quest to "discover" the snowcapped mountains by Jan Carstensz. The next documented contact was not until 1826, after which time contact became a more common occurrence. At the turn of the century, the Dutch began mapping the area and allowed Chinese traders increasing contact with the Kamoro. While original contact with Europeans had led to the death of many of the visitors, relations between the two groups gradually became more congenial. The first government post in the area was established in 1926, and in the early thirties the missionaries (who arrived about the same time as the government) joined the government in establishing schools and embarking on programs to resettle the Kamoro into permanent villages. Contact between the Kamoro and the highland Amungme increased after the Colijn expedition in 1936. It is estimated that when Freeport arrived, 947 Kamoro lived in the two villages of Koperapoka/Nawaripi (tailings deposition area and Timika) and Tipuka (Amamapere port area). 1 Arriving after this long history of penetration, including a brutal Japanese occupation, the first Freeport personnel described the Kamoro as exhibiting a seeming indifference to outside influence and disinterest in their own future: "Mimika strikes me as a dead area filled with Zombies.... The past is gone forever. The present lacks vitality. The future holds no hope." 2 Wyn Coates, assistant to the president of Freeport Indonesia in the seventies, asserted that at this time "malnutrition and smoke-filled huts condemn [ed] most tribes people to an early death" with infant mortality standing at close to 50 percent and the average lifespan being only thirty-five years.3 The company also frequently points out that when it arrived, many of the indigenous peoples were living in the Stone Age, participating in cannibalism, ritual killings and tribal wars—the larger of which became "the chronological markers of Amungme history.'"4

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Despite the amount of human resources expended and the millions of dollars that Freeport eventually pumped into community development in the last decade, the indigenous people living around the mine site have essentially remained disadvantaged, underprivileged, and disenchanted. Much of the criticism of Freeport's relations with these peoples is based on three principal concerns: the traditional landowners argue that no one consulted them about the mine's presence, that no one ever appropriately compensated them for their loss, and that Freeport's development programs have been paternalistic and inappropriate. Difficulties in delivering development arose for myriad reasons: the need to identify primary stakeholders in a complex and diverse social structure; the absence of strong government and indigenous institutions through which dialogue could be sustained and development implemented; fundamental cultural differences, which have impeded effective communication; and the payment of compensation in ways that have divided the community. Moreover, the initial mistrust that arose because of Freeport's patronizing attitude toward the local peoples and its close relationship with the military, together with its "can do" development policies, continue to sour relations and mar development today.

IDENTIFYING PRIMARY STAKEHOLDERS According to the social-cultural report commissioned by Freeport from LABAT-Anderson and completed in July 1997, an intricate and interconnected (both vertically and horizontally) network of stakeholders complicates development programs. 5 This network includes the various levels of government; the company in Timika, Tembagapura, Jakarta, and in New Orleans; the population of the concession area, which now includes seven regional tribes (Amungme, Kamoro, Dani, Ekari, Moni, Nduga, and Damal); and the transmigrants and voluntary immigrants from other parts of Indonesia and West Papua. 6 Finally, there are the representatives of institutions such as the Protestant and Catholic churches, the NGOs (national and international), and the international donors who are involved in development. It has been difficult to define and meet the development and social needs and demands of such a diverse community, so diverse that the original landowning groups are now a minority within a minority.7 Moreover, the population of the concession area has grown from about three thousand in 1967 to more than a hundred thousand by the turn of the century, making it one of the fastest-growing areas in the Republic and one of the most densely populated regions in the

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province. Within this labyrinth of stakeholders, things are f u r t h e r complicated by the c o m p e t i n g cultural forces within a n d between these groups, which are characterized by widely varying developmental needs a n d expectations, a d h e r e n c e to belief systems, levels of education, a n d political a n d bureaucratic expertise. Freeport recognizes three villages—Banti (Amungme), Koperapoka/Nawaripi, and Tipuka (Kamoro)—as the principal stakeholders, together with the A m u n g m e residents and their descendants f r o m the three adjacent valleys in the highlands ofTsinga, Hoea, a n d Aroanop. As such it has come to accept responsibility for development in these areas. Responsibility t h e n moves out in diminishing circles to cover the two tribes in their entirety, the five o t h e r s u r r o u n d i n g tribes, and then all others (newcomers) who live in the contract area. Finally, as the circle of responsibility diminishes, it encompasses the whole of West Papua. Like the A m u n g m e a n d Kamoro, the five sukus on the third level of the stakeholders' ladder claim that they have also b e e n adversely affected by the mine to varying degrees—although all groups now accept that the A m u n g m e and Kamoro are the primary stakeholders. It has generally been believed that the A m u n g m e are the sole traditional owners of the land that has b e c o m e the Freeport contract area. This misconception has arisen in part because the A m u n g m e are the customary owners of the land where the gold a n d c o p p e r has b e e n f o u n d a n d in part because the A m u n g m e a n d Kamoro sukus have reacted differently to the presence of the company. A n u m b e r of individuals who have worked with the two groups a n d a n u m b e r of studies have generally concluded that the u n i q u e physical environments of the two sukus have e n g e n d e r e d distinct characteristics that have d e t e r m i n e d the strength of the two tribes, their representative tribal councils, and their relationship with Freeport. 8 Generally it is believed that the harsher life of the A m u n g m e in the isolated highlands, together with their n e e d t h r o u g h the centuries to form strong political allegiances for survival, has resulted in a relatively politically savvy tribe with a strong sense of unity, cultural pride, a n d desire to define their own future. As such they have adapted m o r e readily to a Western political organization model a n d consistently d e f e n d e d the sukus rights against Freeport. Conversely, the Kamoro, because of their easier lifestyle in the lowlands and their historical experiences of cultural penetration and subjugation, are a less cohesive suku a n d suffer f r o m weakened social structures and a loss of self-esteem. Because of this they have b e c o m e relatively m o r e accepting of the inevitable superiority a n d presence of outsiders generally, entering a state of passive resistance, resigning themselves

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to allowing others to dictate the pace and type of change within their society.9 However, the Kamoro Baseline Study cautions against blanket acceptance of these conclusions. It states that the Kamoro are not passively accepting change, but rather, adapting to change. 10 Nevertheless, it has proved far easier for Freeport to manipulate and define the needs of the less politically savvy and more compliant Kamoro than the politically astute Amungme. 1 1 At the same time, the strength and unity of the Amungme tribe have made them the ideal partners of the NGOs opposed to the company. As a result of these factors the Amungme have been able to form a strong tribal council, or foundation, called Lembaga Masyarakat Adat Amungme (LEMASA) . Although predominantly Amungme, LEMASA is representative of the six other sukus in the region. 12 Set up in 1996 with the help of Freeport to aid in dialogue between the company and the tribe, LEMASA today has a representative in every village in the highlands and is generally seen as a source of authority in the village. Eventually, after aligning itself closely with those national and international NGOS that have exploited the grievances of the suku in their own campaigns against the company, LEMASA quickly became the company's strongest and most vocal indigenous critic. Subsequently, the foundation has received financial and tactical support that makes it possible for it to spread its message of opposition to a wider national and international audience. Conversely, the Kamoro tribal council, Lembaga Adat Masyarakat Suku Kamoro (LEMASKO), which was also set up with Freeport's assistance, lacks cohesion. As a result outside NGOs have never been able to successfully exploit the Kamoro, whose seeming disunity makes them, in the words of one NGO, difficult to deal with. 13 Moreover, because it reputedly has close links with the military, LEMASKO is generally regarded with suspicion and has been unsuccessful as a representative group. With the Kamoros' identity, needs, and history therefore being more easily defined by the powerful company, the sukus opposition to Freeport is weak and easily stifled. Thus, to the outside world the outspoken Amungme are usually perceived as the only traditional owners of the Freeport concession.

CULTURAL DIVISIONS Each of the layers of stakeholders has different demands, different understandings of "development," and different methods of communicating. These differences are reflected in the vast cultural divide

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between the indigenous peoples and the company and continually obstruct dialogue and impede development efforts. Generational Divisions among the West Papuans In the Freeport contract area the company and its promise of development have undermined the traditional culture, fracturing tribes along generational lines. Within the tribal groupings the greatest resistance to Freeport and its development policies often comes from the elders, or the traditionalists, who have the most to lose from the challenges to customary values and the redistribution of power this often entails. When "their beliefs, their rituals, their world view suddenly cease [s] to have meaning [they feel] impotent in the face of the new, powerful and effective rational culture." 14 Moreover, with the implant of an unfamiliar and confusing world constructed around foreign values and customs, the hitherto respected tribal laws often fail to offer solutions, thereby undermining the authority of the tribal elders. As Mathias Kelanangame, an Amungme tribal elder, stated, "The only one who will help us is God. I look to my left and I look to my right and no one wants to help me. . . . The bad dogs want to eat me." 15 The young and the educated are the first to reject the elders' beliefs and what they see as the discredited traditions of the past. They are also the ones most responsive to developmental changes and the promises of education, employment, and luxury that the company represents. At the same time, they are the most explosive when these expectations are not met. Disappointment and disillusion can see support for change, even advocacy for change, metamorphose into confrontation and direct action. Cultural Perceptions Cultural differences can blur lines of communication, leading to misunderstandings, resentment, and inappropriate development programs. The indigenous peoples within the concession area find it difficult to respond quickly to the dramatic changes being demanded of them. However, just as the indigenous peoples are being forced to adjust, so too is the company, with Freeport's resistance to change strong. The company's ethos sees profits, Western development, and technology as superior to traditional culture so that many within the company have found it difficult to accept alternate cultural values and communication styles.

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Indigenous groups argue that they have hierarchical systems and strict codes of conduct that the company needs to understand if negotiations are to remain open, and they insist that traditional ways of life do not indicate backwardness or racial inferiority. Thus, the traditional landowners demand to be treated as equal partners in the development process. Although by 1996 Freeport was arguing that it was able to accommodate these cultural differences, today there are still some within the company who find little to respect in the indigenous culture. Cultural Definitions According to the indigenous people, Westerners measure quality of life by indicators such as infant mortality, life expectancy, and education levels, whereas traditional cultures measure quality of life by kinship relations, familiar and comforting rituals, strength of culture, and closeness to the land. When asked "How many people does Freeport feel that it has adversely affected by its mining operations?" Edward Pressman responded, None. We have seen life expectancy among the local Irianese rise dramatically since we entered the area. We have seen infant mortality drop drastically since we entered the area. The Irianese people in the area have been afforded educational and j o b opportunities that they never would have been given if not for Freeport's presence. And for many people, Freeport has provided hope that the next generation will enjoy even more benefits than the present. 1 6

Freeport asserted that the small number of people adversely affected by the mine needs to be weighed against the benefits its programs affords thousands of people: 17 Has our presence disrupted traditional lifestyles? Yes, but in many more positive aspects than negative. We have provided the means with which the local people can avail themselves of a better standard of living; whether they participate or not is entirely up to them. 1 8

Participation, however, is not a simple lifestyle choice for the indigenous people as this statement would indicate. Rather, it is a difficult and daunting process. While one might argue that with the arrival of a transnational mining company change was inevitable, then so too must one concede that not all change will be for the best, nor could such rapid and dramatic change ever be harmonious or easy. John Cutts, an Amer-

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ican missionary who grew up in the highlands of West Papua and has often been employed by Freeport, argues persuasively that "a lot of people say why don't you leave them the way they are? But it's a rugged life up there then [szc] there's a lot about their culture they don't like themselves."19 In its defense Freeport poses this question: in the face of inevitable change, should the local villagers' way of living be preserved as if they were some endangered species in a wildlife refuge? 20 However, what Westerners see as development and an improvement in life the holders and keepers of customary values may see as destruction. These two separate and distinct realities are equally valid within their cultural frameworks. While Freeport can boast that in its concession area education levels have increased and infant mortality and life expectancy have improved, the negative aspects of development have surfaced. While it is true that traditional tribal life was difficult and dangerous, it is also true that before the company came everybody had ajob, a home, land, and most important, a strong, spiritual culture as a point of reference. Today the negative effects of development are evident around the mine as the social fabric of Papuan life disintegrates. Unemployment, lawlessness, AIDS, drug abuse, and social, spiritual, and economic dislocation are evident today in the towns of Timika and Kwamki Lama and are beginning to be seen in the villages. In 1996 Freeport was still arguing that it had conducted business responsibly. It steadfastly refused to take responsibility for the plight of those displaced by the mine, emphasizing that they were the victims not of the company but of more assertive and aggressive people from other areas and tribes. By 1998, however, the company was far more willing to concede mistakes, arguing that they arose from a regrettable cultural ignorance rather than from indifference. Freeport now argues more realistically that the traditional landowners are both victims and beneficiaries of the inevitable encroachment of modernization.

Differences in Communication and Negotiation Techniques Successful communication and negotiation have been stymied in the Freeport contract area by the inability of various cultural groups to understand their differing negotiating styles. Misunderstandings are common on both sides, with Freeport personnel often complaining that they believe they have reached an agreement or understanding with the local people only to find the next day that the issues need to be revisited. For their part, the people believe that they are pressured by the company to reach decisions before they are ready.

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This difficulty of communicating between cultures and power levels was clearly evident when on 13 April 1996 Freeport announced that it had reached an agreement with the tribes in its contract area regarding its new development plan. To its embarrassment this claim was repudiated the next day by LEMASA and finally rejected outright two months later. It was apparent that communications between the two had broken down, leading Freeport to then sign an agreement with AMUNGKAL, a rival Amungme group formed with Freeport's assistance. Essentially, differing negotiating styles had caused LEMASA to distrust Freeport. With the language and manner in which the concepts were communicated being difficult for the people to understand, LEMASA believed that the company was deliberately obfuscating the issues and attempting to railroad it into a decision. For how does a tribesperson readily understand what 1 percent of Freeport's profits are? How much is $500,000 or $15 million dollars? And what is a dividend stream? What in their own experience and culture could these people draw upon to understand what was being offered, how it would affect them, and whether it was a fair and reasonable offer? Moreover, under the glare of the international press, the sense of urgency that the company felt to conclude the negotiations was not shared by the tribespeople, who needed time to digest what was being offered within their "own traditional rhythm of discussion and deliberation." 21 At the same time, the negotiations were undermined from the outset. Brother Theo van den Broek, head of the Catholic diocese office and the Office for Justice and Peace in Jayapura, believed that the people mistrusted the government, which not only supported Freeport but appeared ready to start spending this money even while the traditional landowners were struggling to understand what was being offered. 2 2 In the end, the different negotiating styles found the indigenous people believing that they had simply reached a higher stage of negotiations while the company believed it had reached an agreement. Whereas the company has rigid channels of communication and decision making that focus on quick outcomes, the indigenous groups have multiple voices and can lack clear channels of decision making. The Amungme begin negotiation speeches with a discourse on how God created the heavens and the earth. They then progress through history until finally they come to the point they want to make. Timeoriented administrators often swear they have heard the same speech a thousand times, they become bored before the Amungme have a chance to make their point. Some tribal leaders have modified their

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Chapter 5 traditional speech patterns in order to be heard. Still, each tribal representative has to have his say because persuasive "talk" is a necessary element of becoming a "Big Man". A meeting is unfinished until all aspiring Big Men have had a chance to speak. A few of the younger fellows then chime in, in an attempt to gain prestige among their peers. Some typical Amungme patterns of behavior during negotiations are aggressive jumping toward others, spitting, yelling, and at times brandishing bow and arrow. 23

Time is of the essence for the company, which focuses solely on the outcome. Conversely, time is of lesser relevance to the traditional landowners, whose focus is primarily on the process. As noted in the LABAT-Anderson report, Freeport's corporate culture has also been far from conducive to successful communications: Standard corporate operating procedures and management philosophy—e.g., materialism, individual property rights, formal written law, hierarchical, non-consensual decision making—result in different perspectives, conflict of messages, misunderstandings, and lack of reciprocity with respect to the indigenous peoples. 24 And as Kal Muller noted, There are no quick answers, and long consultation times are needed, yet everyone at Freeport wants quick results to impress the outside world. You have to spend nights in the villages to have time to talk to the Kamoro (they are busy during the day feeding their families) yet Freeporters have not done this, due to the primitive conditions, inertia, whatever. 25 Exacerbating these different negotiating styles is an ethnic trait flagged by the Amungme Baseline Study that undermines communication and understanding: In a society where symbolism, ceremony and rumor are significant, every company action (the moving of Community Affairs offices, shifting of staff to other sections etc.) is read and interpreted, usually in ways of which the company is unaware. This is often the form of communication which has the greatest influence within the community. 26

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Finally, constructive dialogue and acceptable outcomes are difficult when the negotiating parties come from hugely different power levels. Often the indigenous tribes are underrepresented and feel pressured, confused, and afraid in their negotiations with the company and the government. Living under military occupation, suffering a sustained attack on their culture, and feeling relatively powerless in confronting the transnational company, the indigenous groups have, generally, suffered a loss of self-esteem. In belated recognition of these problems, Freeport helped the sukus form the representative councils in 1996 and has, at times, offered to pay for legal counsel or mediators to assist these groups in negotiations. 27 Distrusting Freeport's offers, some groups have preferred assistance from NGOs. Yet attempts by NGOs to address the power imbalance has led to breakdowns in dialogue as was evident in 1996 when, at the insistence of WALHI, Beanal, the recognized leader of the Amungme suku, filed a lawsuit in the United States against Freeport. Emmy Hafild of WALHI, who was advising Beanal, stated that the lawsuit was launched, in part, to address the power imbalance between the negotiating parties and to encourage more constructive dialogue. Not surprisingly, however, the lawsuit caused a breakdown in dialogue.

Difficulties of Three Cultures Cultural differences that may retard a positive development process are exacerbated within the Freeport contract area because of the forced interaction between three distinctly different cultures. Few West Papuans find any commonality between themselves and the remote central government in Jakarta. Moreover, what government there has been is overwhelmingly in the form of the Indonesian military, whose relationship with the indigenous peoples has been characterized by systematic abuse and fear. Colonization by the Indonesians has been enforced through education, militarization, and transmigration together with the subsidized and large-scale movement of Indonesian migrants onto traditional Melanesian lands. In turn, the Indonesians regard the Melanesians as less developed, backward, and inferior. In most respects, traditional Melanesian culture, with its pagan beliefs, nudity, moral and dietary habits (including the raising and eating of pigs), is seen by Muslim Indonesians as anathema. Not only do they treat the Papuans with derision, but they are often also fearful and mistrusting of them. While the population of the area today is estimated at about a hundred thousand, the West Papuans, who number about forty thousand,

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have b e c o m e a minority in their own land, a n d t h e A m u n g m e (approximately forty-three h u n d r e d ) a n d K a m o r o (approximately eight thousand) are, in t u r n , minorities within the minority. A d d e d to this cultural mix is the explosive situation in t h e lowlands, w h e r e traditional h i g h l a n d e n e m i e s are f o r c e d to live side by side. This volatile mix of rival sukus f o r c e d into close proximity ( r a t h e r t h a n conflict between I n d o n e s i a n a n d P a p u a n residents) has, to date, b e e n the cause of t h e greatest tension a n d violence in t h e area. 2 8 Despite having lived n e a r a n d , in s o m e instances, w o r k e d with t h e P a p u a n s , most F r e e p o r t p e r s o n n e l h a d , until t h e nineties, a p p a r e n t l y m a d e little e f f o r t to b e c o m e familiar with t h e i r traditions a n d belief systems. As G e o r g e A. Mealey, a f o r m e r p r e s i d e n t of Freeport-McMoRan n o t e d , t h e c o m p a n y m a d e m a n y decisions in i g n o r a n c e : You have to understand that we were working on the basis of very little information about the Amungme/Damal culture, which nobody has ever studied in depth What motivates them? What is valuable to them? What do they consider as incentives? How do they relate to their peers and the outside world? We just don't know very many of the answers.29 However, if t h e c o m p a n y h a d b e e n interested, missionaries w h o h a d lived with the A m u n g m e could have i n f o r m e d it of t h e local culture. But a c c o r d i n g to R o b e r t Mitton, a geologist w h o worked f o r F r e e p o r t I n d o n e s i a , t h e c o m p a n y was n o t interested in t h e traditional culture o r p e o p l e : " F r e e p o r t d i s r e g a r d e d t h e morality of t h e g o v e r n m e n t actions, which they r e g a r d e d as a carte b l a n c h e f o r d e v e l o p m e n t . R e m o t e f r o m criticism, they were able to p r o c e e d w i t h o u t . . . t h e necessity f o r develo p i n g a social conscience." 3 0

Concept of Equivalence or Reciprocity D u t c h a n d A m e r i c a n missionaries tried to p e n e t r a t e the highlands, b u t only a few successfully m a d e c o n t a c t with t h e isolated A m u n g m e , so that in t h e r u g g e d terrain w h e r e it can take a few days to walk f r o m o n e village to t h e next, customary values essentially r e m a i n e d intact. T h e cust o m a r y l a n d o w n e r s ' mistrust of t h e c o m p a n y arose f r o m what they saw as a failure to h o n o r t h e Melanesian cultural c o n c e p t of "equivalence" o r reciprocity." It is important that the exchange of goods and services be equivalent. . . . Where there was no exchange of goods and services there

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could be no sense of friendship, mutual obligation and value, but only suspicion, hostility, and the risk of warfare. Nor could they conceive of a friendship that did not result in approximate economic equality.31 Within customary Melanesian law the belief in equivalence defines the m o v e m e n t of material goods between individuals and groups so that if o n e person has m o r e than another he will give away his extra possessions, thereby "sooth [ i n g ] jealousies." 3 2 A t the same time, such action effectively shames the recipient so that the giver is owed. W h e n Freeport m o v e d into the area, the local p e o p l e expected the company to share its amazing riches in the same manner that they would, especially considering that Freeport was the "big m a n " on their land. T h e indigenous tribal chiefs could not understand why they had to work so hard when their lives would have been easier if they could just have used the Freeport helicopter, bus, or bulldozer. T h e y could not understand why Freeport would not simply give, free f r o m conditions. With e x t e n d e d contact and the gradual realization that Freeport's wealth came f r o m exploiting their land, indigenous p e o p l e came to d e m a n d much m o r e f r o m the company. Today's demands on the company are often expected to be m e t immediately, while d e v e l o p m e n t programs are viewed as mere consolation prizes, a pittance c o m p a r e d to the riches Freeport takes f r o m the land. Employees of Freeport's Community Affairs Department say that they could have accommodated such early requests to use the company's equipment, but in the long term this would have been a destructive policy, causing the local population to lose their incentive to work and instead to live o f f company handouts. T h e company believes that to d o the best f o r the people, it must remain continually vigilant against creating a welfare society or a cargo culture. 33 In this regard, it believes that the best interests o f the community and company are served by Freeport's taking the " m i d d l e road, which both meets the needs o f the public relations image o f a large mining company and is adaptable to the local people." 3 4

FREEPORT'S COMMITMENT TO COMMUNITY RELATIONS AND DEVELOPMENT T h e history of Freeport's commitment to community relations and socioeconomic development can be divided into three periods: f r o m 1967 to approximately 1991; f r o m 1991 to 1995; and f r o m 1996 to the present.

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First Period of Development, 1967—1991 During the first period of company operations from 1967 (first contract) to the discovery of Grasberg in 1988, the company's only opposition came from the indigenous tribes that resided in its area of operation. Although the traditional groups regularly protested the company's use of their land, they could do little to influence company policies because they lacked outside alignments, political power, and the skills needed to deal effectively with such powerful adversaries. The area was protected politically by its shareholder, the government in Jakarta, and physically by the military. At the same time, while the company during this period made profits, its income bore scant resemblance to that of the mining giant operating today. In the belief that its time in West Papua was limited to the exploitation of the original Ertsberg site and believing that the relatively small scale of its operation had litde effect on the traditional landowners, Freeport, with meager resources, felt no compulsion to allocate funding or devise a long-term social plan that would address the concerns of the original inhabitants of its concession area. Moreover, the company was not required to do so under the terms of its contract. In total, Freeport spent $16 million on area development in the nineteen years between 1972 and 1991.35 During this period it had little knowledge of or interest in the local culture, dealing with local grievances in a reactive fashion and generally "putting out little skirmishes as they arose." 36 The impression of Dr. Carolyn Cook, who first came to the company town of Tembagapura in 1977 as a "company wife," was that, as was the situation globally, the mining company tried to keep its distance from the traditional landowners, whom they generally regarded as nuisances. 37

Second Period of Development, 1991—1995 It was not until the early nineties that the company seriously turned its attention to the people most affected by the mine and began its second phase of community development, which lasted until 1995. With the discovery of Grasberg and the new contract, Freeport, barring unforeseen circumstances, was relatively sure of three things: the company was going to remain in West Papua for a very long time; the new find had the potential to make the company exceptionally wealthy; and to fully exploit its new discovery it urgently needed to raise enormous amounts of capital to fund exploration and expansion. It also became aware that the issue of indigenous rights around its mine site had the potential to jeopardize this future on a number of fronts.

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Local resentment had closed down the nearby copper mine on Bougainville, while at the Ok Tedi mine the local landowners had launched a highly publicized, damaging, and ultimately successful lawsuit against BHP, the Australian mine operator. 38 At the same time, foreign citizens claiming human rights abuses had launched a number of cases in the United States against American companies. Finally, although Suharto remained highly supportive and indeed protective of the company, the transnational understood that although the president might have had control of opposition forces within his own country, he could not control what was happening outside of it, least of all the unregulated flow of information through the new forms of information technology. The transnational mining community's inability to control the flow and substance of information on the Internet also meant that Freeport's version of its operations could be challenged. Given that local opposition had been a constant factor in community relations at the Freeport mine since the beginning while increasing numbers of people had only exacerbated existing social tensions, addressing community concerns became essential. In response to these concerns, Freeport announced that as a "good corporate citizen" it would instigate environmental programs and community projects. 39 In 1989 the company's Community Affairs Department was officially opened under the direction of the missionary J o h n Cutts. 40 Between 1989 and 1996, Freeport spent $87 million (approximately 1 percent of the company's revenue) on social and development programs within its concession area, with $22 million being spent in 1995 alone. 41 Although money was provided for housing, schools, and medical services, Freeport's focus on building infrastructure and its "quick fix" policy meant that it never discussed these programs with the people who were to be its beneficiaries. With the traditional landowners viewing Freeport's efforts as ineffective, inappropriate, and paternalistic while failing to address their aspirations, which were described as "respect and recognition . . . a voice in managing their affairs and an economic stake in the success of the mining enterprise" together with "assistance to understand and conform to the language and culture of the modern world," 42 the company's development projects only increased tensions in the concession. In its defense Freeport argued at the time that its programs were appropriate, designed to meet the expressed needs of the people and instigated only after consultation with Jakarta and the relevant representatives of the landowners. Toward this end it said it had established a Social and Cultural Advisory Council that included four "distinguished"

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Indonesians, two of whom were West Papuan. When asked who had chosen the West Papuan representatives, the company replied that it had. 43 Also absent in the process were effective channels of communication between the three groups: traditional landowners, a central government with an interest in developing the region, and Freeport. In retrospect Freeport acknowledged its mistakes: Was it [ d e v e l o p m e n t f u n d i n g ] spent wisely a n d did the p e o p l e appreciate it? T h e answer is no. . . . F r e e p o r t c a m e in a n d in a typical American can-do fashion a n d [sic] w o u l d g o into a village a n d look a r o u n d a n d say what you n e e d is a school over h e r e a n d a health clinic over there a n d y o u n e e d a water well over here, b o o m , b o o m s p e n d a lot o f money. C o m e in, build the hospital, drill the well, m o v e o n to the n e x t village. L o o k f o r a p r o b l e m , fix it, move o n without ever setting d o w n a n d e n g a g i n g the local tribal leaders in a dialogue o f what they felt was most important to t h e m a n d m a k i n g t h e m feel a part o f the process. 4 4

Freeport personnel from the Community Affairs Department confided that during this period, pressure from both within and without the company forced it to implement a number of ineffective showcase projects. 45 As the company grew, the indigenous landowners increasingly became aware of the disparities of wealth that existed around them, viewing the imposition of Freeport's development programs as consolation prizes and a pittance compared to the riches Freeport was extracting from their land. Nevertheless, what Freeport was doing in terms of community development even then was far more than Jakarta was doing and was beyond what was legally required, both under Indonesian law and within the Freeport contract. Understandably, Freeport was not without its admirers in Jakarta, but at the same time it was gathering its own coterie of enemies eager to move against it.

Third Period of Development, 1 9 9 5 - 1 9 9 6 , and the I Percent Fund When Freeport had renewed its contract with Jakarta in the early nineties, WALHI had publicly criticized the company's environmental operations and its environmental assessment report, but to little advantage. Suharto's control of the body politic and the media meant that little came of WALHL's concerns. Because the inability to access the Freeport site made proving environmental degradation impossible, NGOs realized they had a better chance of drawing attention to the com-

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pany through publicizing human rights violations. However, Jakarta's control of the press, together with the ever-present threat of intimidation and the militarization of the area, meant that the gathering and publication of evidence of violations was difficult. By late 1994 the emerging NGO community in the provincial capital ofjayapura, with the support of their compatriots in Jakarta, began to formalize their operations and, with difficulty and some degree of danger, succeeded in opening channels of communication and winning the trust of the indigenous groups in the concession area. 46 Eventually, what Freeport had feared came to pass. To the company's horror, in April 1995 it became front-page news and the focus of international attention. A report titled Trouble at Freeport was compiled by the indigenous peoples with the help of the local NGOs in Jayapura, who then smuggled it out of the country to be released to the international media by the Australian umbrella NGO, ACFOA. This report documented systematic and long-term human rights abuses committed by the military within and around the Freeport concession. The report also implicated Freeport security in these abuses. A few months later the report was confirmed by the bishop of Jayapura's own investigation, although with the noted exception that in Bishop Munninghoff's report, Freeport security was not implicated. The accounts of murder, torture, and disappearances in these reports were issues worthy of international attention and upon which an international NGO campaign against the company could be built. With international attention focused on the Freeport concession area, both local and international NGOs took the opportunity to become openly linked to indigenous groups around the mine site. With such links supported by advances in communications, information began to filter out of West Papua. By late 1995 the flow of information had became a veritable avalanche, which, as predicted, the protective government in Jakarta and the company could do nothing to control. J o h n Rumbiak, who was instrumental in writing the 1995 ACFOA report and who is director of the Institute for Human Rights Studies and Advocacy (Lembaga Studi dan Advokasi Hak Asasi Manusia; ELSHAM),47 noted that the publicizing of the atrocities and the international attention it brought opened the floodgates as people desperate to tell their stories of horror and loss flocked to the NGOs in the province. Freeport, always protective of its operation, now found that nearly every aspect—human rights, development, and the environment—was under the microscope and under attack. As the company feared, its immunity, jealously guarded for nearly thirty years, had ended.

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Under pressure from Jakarta, which was not happy with the publicity, the company began internal debate on how to best deflect such criticism. Freeport believed that decentralizing and externalizing community development activities so that the responsibility for development could be shared with sources and agencies outside was the best possible solution. Ironically, although Freeport had hitherto been content for Jakarta to remain the absentee landlord, it now discovered that development was an inappropriate j o b for a mining company. In late 1995, in an attempt to undermine the negative press, Freeport announced that it would voluntarily commission independent social and environmental audits of the company's operations, the results of which would be placed in the public domain. However, little was voluntary about these audits. While it is true that the company was under no legal obligation to commission them, it felt compelled to do so to appease the government and to salvage its reputation by countering the NGO campaign. For the first time the Suharto government was coming under heavy international criticism because of the situation in West Papua, with unflattering and damaging comparisons being drawn between the military's presence in West Papua and its discredited operations in East Timor. At the same time, criticisms of the appalling state of development in the area were personally embarrassing to Suharto, who had built his international reputation on the fallacious claim that his government was raising the standard of living for all Indonesians. The LABAT-Anderson social audit was a genuine attempt to find answers to the continuing social and development problems in the concession area that the company's programs and its $100 million had done little to alleviate. 48 It also had a political purpose. For the first time, Freeport wanted the government to become involved in the area and to assume the central role in the development process. Yet, because of the closed nature of the Suharto regime, it was impossible for the company to make such demands directly. What the company needed and indeed got from the LABAT-Anderson report was just such a recommendation. Between late 1995 and early 1996, while awaiting the report and attempting to find solutions to its social problems by canvassing local communities, the company was under increasing pressure. Riots that broke out in the concession area in March 1996 and lasted for three days saw the deliberate destruction of Freeport property, left three persons dead, and led to the closing of the mine. Under these circumstances, the pressure from Jakarta for the company to find solutions to its community relations problems increased enormously. The rioters demanded

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that a three-way dialogue be arranged between the company (represented by Freeport-McMoRan's CEO, James Moffett), the military, and representatives of the indigenous groups. Highlighting the company's concern with the worsening situation, Moffett flew from the United States to attend the meeting. After hearing the grievances, he professed prior ignorance of the concerns expressed, explaining that his representatives on the ground in West Papua had obviously misinformed him with regard to the state of community relations. Given the international attention afforded the ACFOA and subsequent Munninghoff reports, the years of community protests, and the attacks on the company in the United States with regard to its operations in West Papua, Moffett's statement indicated either a serious breakdown in communication between Indonesia and New Orleans or an amazing ability to shield himself from unpleasant realities. Or perhaps it was an expedient answer to a hostile audience. Because the riots intensified the need to find immediate solutions to the social problems around the mine site, Freeport's own local community study, which had been focusing on village-based development programs, was abruptly brought to a premature conclusion. A few weeks later, on 13 April 1996, the company announced its solution to the local people's concerns and prematurely ushered in Freeport's third attempt at socioeconomic development. The essence of Freeport's plan was two pronged: a Land Rights Trust Fund to officially recognize land rights and provide compensation, and a socioeconomic development fund called the Integrated Timika Development Plan (Pdngembangan Wilayah Timika Terpadu), which has been variously referred to as the PWT2, the Freeport Fund for Irian Jaya Development (FFIJD), the Integrated Timika Developmental Plan (ITD), or more commonly, the 1% Fund. According to Freeport's understanding of this plan, and following a preliminary report from LABAT-Anderson, there was to be a tripartite arrangement between the government, the company, and the people—equal partners taking equal responsibility in development. In Freeport's vision the government would become the central figure with the people becoming intimately involved in the planning and decision-making process. Eventually the company's role would contract to that of principal supplier of funding. To fulfill its side of the agreement, Freeport committed 1 percent of the company's annual gross revenue, or approximately $15 million annually over each of the next ten years, with the funds being deposited quarterly, in advance, into a bank account. 49 Between 1996 to the end of 2000, Freeport had committed $66.1 million to the fund; its partner, Rio Tinto, committed another $8.7 million. 50 This funding was intended principally

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to favor the tribes originally displaced by the company, although it would benefit others living in and around the concession area. T h e 1% Fund was, and remains today, by far the largest such socioeconomic development program in West Papua, and one of the largest in Indonesia. Simultaneously, other development initiatives, including part of the costs of the Freeport Malaria Control and Public Health Department (approximately $4 million annually) and the costs of the Community Affairs Department (which at the time employed approximately 80 full-time staff and had an annual budget exceeding $3 million) would continue to be funded separately by the company rather than out of the 1 % Fund. The Land Rights Trust Fund, which is only for the benefit of the two recognized landowning groups, remains separate and distinct from the 1% Fund. Under this trust-fund agreement, the Amungme and Kamoro were required to agree that fair and reasonable compensation and recognition of land rights had been given under prior agreements. In return they were to receive shares in the company, voting rights, and a dividend stream. Further to the 1% Fund and the Land Rights Trust Fund, Freeport announced that positive discrimination on behalf of the traditional landowners was to become corporate policy with a commitment to raise the number of Melanesians employed at the mine while increasing their prospects for j o b training and promotion. 51 The government announced its intention of supporting the new development programs by playing a greater role in the area. Within the first year of this third attempt to address development issues, a number of problems arose. According to the company, because of the haste with which the 1 percent plan was announced after the riots, its objectives were not clearly defined or understood by all concerned parties. Nor had the appropriate mechanisms and plans for distribution of funds or accountability of the recipients been established.

IMPLEMENTATION Problems of Communication One of the claims of the indigenous groups during this new period was that channels of communication were lacking between themselves, Jakarta, and Freeport. The company countered that any responsibility for an absence of communication lay entirely with the indigenous peoples, as communicating with the sukvs was all but impossible until they found an acceptable leadership and consensus among themselves. The

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condemned this argument as an excuse for Freeport to continue dictating the conditions of its largesse. Nonetheless, problems did exist in negotiating with the sukus. Generally speaking, a continuum of representative leadership is unfamiliar to traditional Papuan culture, where leadership is fluid, often challenged, diffused, and in a state of constant flux. In an attempt to overcome this problem, and perhaps also to undermine NGO influence, Freeport had provided funds to help set up representative foundations for each of the tribes. These company efforts to achieve results by dictating who could or could not represent the Amungme and Kamoro communities resulted in the formation of the unrepresentative LEMASKO, for the Kamoro, and AMUNGKAL, for the Amungme. Under direction from the government, the other local sukus (some with minimal if any connection to the concession area) had been encouraged to form foundations, or yayasavs through which the 1% Funds could be channeled. Under this arrangement, no preference was given to the two principal stakeholders, while the heads of many of the opportunist foundations that were formed lacked credibility and leadership experience. As noted in the final LABAT-Anderson report, NGOS

The institutions that supposedly represent the peoples . . . were formed in response to the money, not from the grassroots of the peoples needs. They are staffed by people who have various allegiances: some were leaders of the riots of March 1996, some [were] Freeport employees, government employees and businessmen, the very contractors who implement infrastructure projects. Many lack[ed] the skills needed to perform their management and representation function effectively. 52

Within this weak institutional framework, with the recipients often lacking local credibility, an Indonesian official from the governmentplanning agency in Jayapura with no previous experience in social development and no recognizable or responsible plan oversaw the distribution of funds. Under this arrangement, development funds were supposedly disbursed to each suku in equal amounts, irrespective of its historical relationship to the area. Moreover, the disbursement of funds was project driven (primarily house building) rather than needs based, so that Indonesian contractors who commenced building projects for groups or lent money on the understanding that when the 1 % Funds became available these funds would be channeled straight to them made a handsome profit. At the same time women, who had always had a voice

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in village decision making, were excluded from, and disenfranchised by, the foundations. Eventually the only strong and truly representative yayasan was the Amungme-based LEMASA, which succeeded because it proved capable of adapting to the Western political model of leadership, was recognized by the suku it claimed to represent, represented its people fairly, and received a flow of moral and financial support and training from the NGOS. The other foundations formed with Freeport's assistance to access the 1% Fund were generally viewed as unrepresentative, with the leaders appearing more intent on accessing funds for their own use than for the welfare of their suku. Because of fighting among, and within the sukus over funding and representation, the company eventually was forced to bypass most of these suku-based yayasans. In 1998 it opened discussions with smaller and presumably more recognizably representative village-based foundations (to be discussed). As a consequence of the riots in March 1996, forty people, including the leaders of the riots, were able to put their demands before the company at a meeting in the Sheraton Hotel in Timika, after which twentytwo of them were escorted by President Suharto's son-in-law, General Prabowo, to Jakarta to speak with Ginandjar Kartasamita, then the state minister of national development planning. LEMASA stated that a couple of hours of meetings and a two-hour public forum (which was controlled by the military) were hardly the appropriate time or place in which the traditional landowners could legitimately present their grievances and aspirations to the company. Moreover, in general, the Melanesians who were allowed to speak at the two-hour meeting and those who went to Jakarta were not representative of the traditional landowners but rather of the more aggressive people from other parts of the province who had recently gravitated to the mine. LEMASA states, and the company agrees, that neither the Amungme nor the Kamoro were involved in the rioting, which was carried out by these others. 53 The Amungme further stated that no representative of the Amungme was present for the Jakarta meeting and that the representatives of the Kamoro tribe were limited in their representation to those who were Freeport employees. In the meeting with members of the government in Jakarta, those who were there presented differing objectives. Hidelis Sungkonao, who identified himself as the chief of the Amungme tribe but is actually a subchief from the Moni tribe and one of the instigators of the riots, demanded that the mine be closed down. 54 A. Mameyao from the Kamoro tribe issued a statement of apology to the government and Freeport for the rioting and stated that his suku supported the continu-

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ation of the mine because the Kamoro benefited from its presence. Mameyao also added that the area was developing rapidly and in an extraordinary statement said he would welcome the stationing of an Indonesian infantry battalion permanently in the area to ensure peace. Mameyao was a Freeport employee. Given the normal behavior of the military and Prabowo, the taking of Papuans to Jakarta was a publicity stunt. With Jakarta in 1996 refusing to recognize the only group that did have clear representation, LEMASA, while simultaneously negotiating with those who clearly did not have legitimate claims, it exploited the social cleavages that already existed, doing little to further communication. At the same time, Freeport's Community Affairs Department, responsible for liaison with the local communities, was poorly informed and needed to improve its engagement and communication at the grassroots level, at least with the highland communities. Within this fractured environment, there was little hope of constructive communications and progress in negotiations. Compensation Discussions about compensation payments and development services heightened existing jealousies and tensions in the indigenous community. Disbursing the 1 % Fund equally between all the stakeholders—as was the decision of an Indonesian civil servant who was the head of the regional planning office in Jayapura—may have been acceptable to those on the outer circles of stakeholders, but it gave little satisfaction to the primary stakeholders, who argued that they had never been appropriately compensated while many of those who received compensation were not entitled to it. As the offer stood LEMASA estimated that they, the traditional owners of land, would receive less than .001 percent of the 1% Fund. 55 On 16 April 1996, as noted previously, LEMASA rejected Freeport's Land Rights Trust Fund and the development programs of the 1 % Fund, stating that it refused to be bullied and that the new agreement failed to fulfill the Amungme people's demands. Dr. Cook, however, who works closely with the Amungme, agreed with Brother Theo, believing that LEMASA rejected the offer because it had not been given time to discuss its concerns with the company or fully appreciate the consequences of such an agreement: what the agreement would mean and what options would be lost by accepting such an agreement. 56 Division and rivalries between the competing indigenous stakeholder groups over compensation, which culminated in intra-suku killings in 1997, were mirrored within the sukrn, and although Freeport

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indicated that it did n o t wish to be involved in deciding how c o m p e n sation was to be dispensed, it soon b e c a m e the central figure. With the LEMASA executive rejecting Freeport's offers, the usually cohesive A m u n g m e suku divided. T h r e e of the directors of LEMASA split f r o m the g r o u p and, with Freeport's assistance, f o r m e d a rival A m u n g m e representative f o u n d a t i o n called AMUNGKAL, t h r o u g h which they could access d e v e l o p m e n t f u n d s f o r the A m u n g m e . 5 7 For signing an a g r e e m e n t with Freeport, AMUNGKAL received a one-time Rp500 million payment. In addition, in the A m u n g m e village of Band a small g r o u p that associated with the military a n d rejected LEMASA also assured itself special favors. 5 8 F r e e p o r t was strongly criticized by the NGOS f o r what they perceived as a deliberate a t t e m p t to divide a n d weaken the normally cohesive A m u n g m e suku. T h e company, however, m a d e n o apologies f o r its actions, saying it would work with any g r o u p that wanted to h e l p b r i n g d e v e l o p m e n t to its p e o p l e while arguing that creating divisions within the sukus was n o t its i n t e n t i o n as it was in its own best interests to deal with unified groups. It was also in its own best interest n o t to have the offers rejected. Like the A m u n g m e , the Kamoro have also been divided by the delivery of Freeport largesse, with r e s e n t m e n t developing between those in the concession area who were direct recipients of development f u n d s and those in Kamoro villages to the east of the concession area, who felt that they were relatively neglected yet claimed a strong relationship with the concession area. Despite LEMASA'S rejection of Freeport development funds, it did benefit f r o m Freeport's project f u n d i n g a n d t h r o u g h Freeport's continuing health a n d education programs.

LAND RIGHTS AGREEMENT OR KECOGNISI While misunderstandings c o n t i n u e d to sour relations between the company a n d the indigenous peoples so too has the sensitive issue of land rights recognition or recognisi, for arguably the greatest loss to these peoples has b e e n spiritual. T h e land is their mother, it is where the souls of their ancestors live, it gives t h e m life. 59 While LEMASA argues that Freeport has never satisfactorily recognized the indigenous peoples' customary land rights, the company counters that it has d o n e m o r e than is required u n d e r Indonesian law to satisfy d e m a n d s for recognition. Moreover, the Suharto government, fearing the creation of legally a n d morally dangerous precedents, actively discouraged Freeport's acknowle d g m e n t of land rights. Nowhere in the relationship between the com-

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pany and the indigenous peoples has the convergence of the three cultures caused so many difficulties. Indonesian law, in theory, recognizes customary land rights under adat or customary law. In practice, customary law and traditional land rights carry no legal weight, as the Indonesian legal system is based on cultural values not sympathetic to the Papuans' spiritual relationship with the land or their hunter-gatherer existence. 60 Thus, within adat, only land that is directly under cultivation is recognized; land left fallow or used for hunting and gathering or land with cultural or spiritual significance is deemed to be vacant land owned by the state. Article 33 of the Constitution effectively overrides adat and all individual rights: "Land and water and the natural riches therein shall be controlled by the state and shall be made use of for the greatest welfare of the people." What this means in practical terms for indigenous groups in Indonesia is that should valuable resources be found on their traditional lands or should the state determine that it requires their land, then such land automatically becomes tanah negara (state-owned land). The expeditious and widespread use of this article was instrumental in building the wealth and sustaining the power of the Suharto regime. Accordingly, when Freeport discovered copper and gold in the Carstensz Range, the indigenous people, who practiced stewardship, or a customary form of land use and ownership that ensured that the land was passed down through the generations, lost all rights to their land and its wealth. No compensation was required, and what wealth was generated did not belong to the customary owners but to the state, which, in theory, would use it for the good of the nation. The forced confiscation of the land by a remote authority in Jakarta was not only in accordance with Indonesian law but was justified by the state philosophy of Pancasila, under which any opposition to, or deviance from, government policy was seen as threatening to the very fabric of the constructed nation. What happened to the Kamoro and Amungme people in West Papua was not an exception to the rule but rather an example of the norm. Thus, the original 1967 contract was signed by Jakarta and the company without consultation with the customary owners. In accordance with the law, no mention was made within the contract of the rights of the traditional owners, in fact, Freeport was allowed to remove these people from their land (although those resettled were to be provided with compensation for any houses and permanent land improvements lost). Under Indonesian law the traditional landowners had no legal grounds for redress against the company or the government.

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Despite the legal impediments, Freeport argues that it has voluntarily attempted to address this issue with three hak ulayat (residual rights) releases of tribal or community rights over undeveloped land in 1974, 1994, and 1997.61 The first agreement, which until 2001 was the only one between the Amungme and the company, was concluded on 8 January 1974. It allowed the company to mine Ertsberg and to restrict all access to its mining area and facilities, including the access road, the airport, and the port of Amamapere. All security matters were to be settled by the police in Tembagapura, and the provincial government was to represent the Amungme in future dealings with Freeport. 62 It would appear, however, that neither signatory came to the agreement voluntarily. Freeport felt compelled to formalize an agreement with the Amungme because of continued resentment and trouble around the mine site. The provincial government, after being called in by the company, forced the Amungme to become signatories to the agreement, in which they also illegally signed away Kamoro land in the lowlands. In return the company committed itself to constructing a school and staff house, a polyclinic and nurse's house, a market building, some housing, government offices, and shops. It also promised unspecified j o b opportunities. Six tribal chiefs affixed their thumbprint to what was probably the first instance of an acknowledgment of traditional land rights in the Indonesian republic. Having had no previous experience of large-scale mining operations, only limited and sporadic contact with individuals from the West in the form of missionaries, and being unable to read or write and devoid of legal representation, the Amungme could not have foreseen the irreversible physical and social changes heralded by the coming of the mining company. Nor could they have realized that eventually their sacred mountain would disappear. Finally, when the Amungme agreed to the terms of compensation in 1974, they could not possibly have envisaged the significance of the mineral wealth they were signing away. What may have seemed like immeasurable wealth to the traditional landowners at the time was a poor gesture of compensation and recognition on the company's behalf. The company points out that, at the time, it was not wealthy itself; the mine had been in operation for only a year and was not yet operating in the black. The 1994 agreement was the first agreement signed between the company and the Kamoro suku in belated recognition of the company's use of the tailings deposition area and portside land at Amamapere, together with the land required to build the new company town of Kuala Kencana in the lowlands. In return for this land, the company provided

Difficulties of Development

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new homes and the Kamoro received a commitment from the company for training and jobs. In 1996 the NGOS challenged the legality of the 1974 document, which had signed away Kamoro land, but a government inquiry ruled in Freeport's favor. Yet this ruling was more for Jakarta's protection than the company's. The government feared that any land rights agreement would set a dangerous precedent for mining companies elsewhere in Indonesia. While the company officially states that the 1974 agreement is a legal release of land and that it did not include the Kamoro because the impact on their land was minimal, in 1998 a company spokesperson acknowledged the illegality of the agreement, arguing that at the time it was unfamiliar with the social dynamics and therefore could not possibly have known that those who signed the agreement were not the traditional owners. 63 In an attempt to put this issue to rest in 1996, it proposed the "additional and voluntary recognition for the Kamoro and Amungme people" in the form of the Land Rights Trust Fund. 64 While this recognisi was indeed voluntary, in the sense that Freeport was under no contractual obligation, it was nevertheless pressured into taking the steps by the continuing problems with the traditional landowners and the NGO campaigns being waged against it. While Jakarta reluctantly agreed to this recognisi, again because of the embarrassment the NGO campaigns were causing, it stipulated that Freeport could only make an agreement that would entail community benefits rather than a cash payment. 65 In 1997 Freeport succeded in signing a hak ulayat with the Nawaripi and Tipuka Kamoro clans for expansion of the tailings deposition area and a number of facilities, including the port site. Within this proposed recognisi, or the Land Rights Trust Fund, the company proposed that shares of PT Freeport Indonesia be put into trust and that the dividend stream (about $500,000 per year), together with the voting rights for those shares, be given to legally constituted entities representing the Kamoro and Amungme sukus. With the dividend stream effectively being indirect, the trust fund was able to circumvent the restriction on cash payments for recognition of land rights. At the same time the trust fund was structured to be highly attractive to the people by satisfying all the traditional landowners' demands, which included equality, a voice within the company, and compensation. In a provision that was similar to existing traditional land ownership rites of the two sukvs, it also contracted to compensate the people for loss of land by providing a means for continued "transgenerational resource stewardship through ownership." 66 In effect, the people were being asked to swap the right to their land in perpetuity for shares in the company in

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perpetuity. According to the agreement, the shares could never be sold. In return for this agreement, the local people were expected to officially agree that "land rights within the project area had been 'fairly' and completely addressed" under the previous agreements. 67 After a number of meetings over several months with local leaders and community representatives, Freeport drafted a final agreement with the Amungme with regard to the trust fund and offered to pay for legal counsel to peruse the document on behalf of the traditional peoples. In a terrible blunder the company once again showed what appeared to be disrespect for the Papuans by prematurely announcing that it had reached an agreement with the traditional landowners. The Amungme response was powerful. Beanal asserted that all the land used by Freeport had been acquired illegally with the assistance of the government. Stating that no possibility existed for redress within the Indonesian legal system, on 29 April 1996 Beanal, on behalf of the Amungme and with the help of NGOS, lodged a $6 billion class action against Freeport in the United States courts. The suit claimed that the mine's operations had led to the violation of human rights, environmental destruction, and cultural genocide. 68 After nearly two years of legal wrangling, the presiding judge ruled against Beanal, stating that he had failed to prove his case against Freeport. A new complaint was then filed by Alomang. In March 2000 this suit was also dismissed with prejudice when the judge ruled that the plaintiff was unable to produce evidence of liability.69 What was most significant, however, for the Amungme, and indeed for Freeport and all other American transnationals, was that the judge supported previous rulings that the U.S. court had jurisdiction to hear a lawsuit brought by a foreign person against a U.S. company for alleged wrongful acts committed outside the United States. Freeport professed frustration and confusion, believing it went far beyond any other company in Indonesia by circumventing the Indonesian legal system to offer an agreement that would satisfy the demands of the indigenous landowners. When asked if the company had recognized traditional land rights, Pressman answered, Yes, we have d o n e t h a t t h r o u g h t h e voluntary recognisi. We have d o n e it t h r o u g h a series of l a n d usage releases with t h e various tribes. Do we have o n e e n c o m p a s s i n g a g r e e m e n t with all parties involved to use t h e land? N o we d o n ' t because it is j u s t impossible to get. A n d f r o m a Weste r n perspective have they b e e n c o m p e n s a t e d in t h e way you would e x p e c t a Western p e r s o n to b e c o m p e n s a t e d f o r l a n d use? T h e answer is n o , n o t yet. We are trying to get t h e r e b u t we c a n n o t c h a n g e t h e laws

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of Indonesia overnight. We are just o n e company. And we have to work with these laws.' 0

Edward Pressman believed that if the company was not constrained by Indonesian law it would willingly, nay eagerly, sit down with the peoples' representatives and negotiate a large financial settlement as one would in the West. In other words, it would simply purchase the land or the use of the land. Freeport believed that this type of agreement would not only satisfy the indigenous peoples' demands but would allow Freeport to move out from under the burden of community development. In Pressman's scenario, the money would be deposited into a trust fund that the indigenous people would manage and from which they would draw directly to fund their own projects. It appears that even LEMASA recognized the company's dilemma over land rights recognisi, with a member stating that while the group believed that there is some goodwill from Freeport, the company's actions were limited by Indonesian laws.71

CONCLUSION After discovering Grasberg and signing its new contract, Freeport pumped money into development within its contract area. The human rights reports in 1995, which shifted focus to the company's development programs, forced Freeport to reassess its policies in an attempt to soothe mounting tensions. However, Freeport's first three stages of development, which lasted from 1967 to 1997, either essentially ignored the traditional landowners or only served to exacerbate development problems and increase tensions as funds were dispersed without clear goals and through unrecognized channels of authority. Moreover, in the view of some Papuans, Freeport's development projects were inappropriate inasmuch as they imposed Western models of development rather than letting the indigenous peoples develop in accordance with their own needs, time frame, and interests. Freeport's largesse has been described as a case of too little, too late because thirty years after the company's arrival, few had experienced the benefits of the twentieth century that the company's presence promised. The satellite cities, airports, four-star hotel, modern technology, and opportunities for jobs and advanced education benefited only a few privileged Melanesians; the majority struggled with the destruction of their culture and alienation from their land and livelihood. Finally, as far as the Amungme were

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concerned, until Freeport satisfactorily recognized their spiritual relationship with, and ownership of, the land, no progress could be made. Most people within Freeport's concession area do not reject development per se. What they want is better development, and because of differing perceptions of what this is, the indigenous groups have argued that development initiatives need to be directed by them, rather than for them. Although this is an accepted model for management of development programs both benefits and problems lie within this approach, as a parochial view of development will often vie with the broader perspective (or overview), which is often missing in locally driven development. Tribal or village groups can have a narrow focus of what is good for the community, and without the benefit of experience it can be impossible for them to understand where a development path will lead. For instance, traditional highland peoples often ask for a road into their village because movement in the highlands is always difficult and time consuming. What they cannot foresee is the negative aspects of this longed-for road. While a road gives them better access to the outside world, this world, in turn, has better access to the village. Once the road is built, it is impossible for the village to control what comes along it and what changes it brings. In West Papua a road will probably bring the military and transmigrants, who tend to take control of what commerce there is in the village. Therefore, along with the positive come the often unforeseen negative aspects of development. Local groups also argue for direct and recognizable benefits to their own village such as a bridge, a new school, or a clinic; few support spending money on infrastructure or health care programs that would benefit the wider community. While a bridge, school, or clinic in commendable, and indeed necessary in the village, these parochial decisions fail to take into account the important wider perspective; this perspective is usually missing when small, selfinterested indigenous groups are the main decision makers. A traveling clinic or a project that will provide clean water to the area, may be more productive and economical. Because both perspectives are needed for successful long-term development, a benevolent government and the indigenous peoples need to cooperate in the decision-making process. Such cooperation would make it possible to avoid the paternalistic pattern of development that had, to this point, dominated the Freeport concession. Since 1998 the company has focused on addressing these concerns.

Chapter 6

Company Development Policy and Its NGO Critics that the greatest impact of its operations is social but argues in its defense that socio-development is not a business mining companies are familiar with, nor is it a clear or easy road. The company continually asks why a mining company should be expected to implement development and social programs, pointing out that it would be more appropriate to blame the government for the development problems around the mine. However, it accepts that in the absence of the central government, it will continue in this role and that it is in its own best interests for development within its contract area to be both appropriate and acceptable. Therefore, whereas much of Freeport's previous development programs could be categorized as trial and error, it has been learning from experience and attempting to formulate programs that meet with some acceptance. T O D A Y F R E E P O R T RECOGNIZES

Some recognition needs to be made of the NGOs' part in this process, for without the support from the NGOs the original inhabitants of Freeport's contract area would never have been able to bring such pressure to bear on the company. Not willing to recognize this positive NGO involvement, Freeport argues that, generally, NGOs have deliberately made the development process more difficult. This argument is applied both to those NGOs that the company sees as being deliberately obstructive and those that, while not actively obstructing the development process, have chosen not to participate. At the same time the Amungme, whose association with the NGOs has been close, have been faced with some difficulties in their own relationship with these groups.

FOURTH DEVELOPMENT ATTEMPT By August 1997 (the end of the first year of the 1 % Fund), Freeport had spent $33 million on development in its concession area. After written 115

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requests f r o m c h u r c h g r o u p s c o n c e r n e d with t h e growing tensions in t h e area a n d a K o m n a s HAM r e p o r t that laid a large p a r t of t h e b l a m e f o r tension o n t h e inadequacies of t h e local g o v e r n m e n t , F r e e p o r t officially took c o n t r o l of t h e f u n d f r o m t h e d e s i g n a t e d g o v e r n m e n t official. At the same time t h e c o m p a n y a n n o u n c e d a t e m p o r a r y suspension of p r o j e c t financing, a l t h o u g h m o n i e s were still available f o r the b r o a d e r developm e n t projects such as h e a l t h , training, a n d e d u c a t i o n . O n c e again F r e e p o r t n e e d e d to reevaluate d e v e l o p m e n t a l p r o g r a m s . This time f u n d i n g n e e d e d to b e t r a n s p a r e n t , with a focus o n sustainable d e v e l o p m e n t . U n d e r an a r r a n g e m e n t with the existing tribal f o u n d a t i o n s , an a g r e e m e n t was r e a c h e d f o r t h e s e c o n d year of t h e 1 % F u n d u n d e r which certain projects were to b e u n d e r t a k e n with f o u n d a t i o n g u i d a n c e , r a t h e r t h a n the i n p u t of t h e b u r e a u c r a t in J a y a p u r a . This a r r a n g e m e n t , however, also quickly disintegrated as leaders of t h e i n d i g e n o u s yayasans yielded to pressure f r o m their constituents a n d h a n d e d o u t m o n e y f o r u n p l a n n e d projects. O n e of t h e p r o b l e m s at this time was that t h e r e was f a r too m u c h c o m p a n y m o n e y floating a r o u n d , a n d those w h o were t h e most vocal got t h e most a t t e n t i o n ( a n d f u n d i n g ) . At t h e same time, t h e e c o n o m i c crisis that was crippling I n d o n e s i a by mid-1998 m a d e it impossible f o r F r e e p o r t to rely o n t h e n o w b a n k r u p t central g o v e r n m e n t f o r h e l p in t h e d e v e l o p m e n t process. To distance itself again f r o m responsibility f o r the d e v e l o p m e n t process, t h e c o m p a n y e m b a r k e d o n a m a j o r r e s t r u c t u r i n g of t h e develo p m e n t p r o g r a m s . It again p u s h e d f o r a m o r e representative a n d d e c e n tralized decision-making m e c h a n i s m a n d i m p l e m e n t a t i o n process with a new transitional decision-making body, called t h e People's Developm e n t F o u n d a t i o n Irian Jaya o r LPM-Iija ( L e m b a g a P e n g e m b a n g a n Masyarakat-Irian Jaya), b e i n g established. F o r m e d a r o u n d the governm e n t , t h e company, a n d local c h u r c h a n d c o m m u n i t y leaders, i n c l u d i n g representatives f r o m LEMASA a n d LEMASKO, its ultimate aim was to establish a n u m b e r of a c c o u n t a b l e a n d responsible representative agencies capable of r u n n i n g t h e 1 % F u n d o n a day-to-day basis. At the same time t h e LPM-Iija c o n t r o l l e d the allocation of certain a g r e e d u p o n a m o u n t s to health, e d u c a t i o n , a n d s o c i o e c o n o m i c d e v e l o p m e n t . T h e local bupati o r r e g e n t , w h o was a K a m o r o , was a p p o i n t e d c h a i r m a n . T o m Beanal was n a m e d vice c h a i r m a n , andYopi Kilangin ( a n o t h e r influential A m u n g m e ) b e c a m e t h e executive d i r e c t o r of LMP-Iija's I m p l e m e n t a t i o n U n i t — t h e agency of t h e LPM-Irja set u p to oversee t h e wider d e v e l o p m e n t policies of the region. Within this new f r a m e w o r k the focus f o r s o c i o e c o n o m i c developm e n t was village based r a t h e r t h a n f o u n d a t i o n based o r p r o j e c t driven.

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Freeport personnel, and those NGOS willing to assist the company, worked within the villages to help set u p and train representative councils, whose j o b it was to decide what was needed in their village, after which they submitted a proposal to LPM-Iija for assessment. 1 Both access to the f u n d s and progress on the project were theoretically monitored by LPM-Iija. If applications were successful, funds were to be supplied to cover the costs of the proposal, but u n d e r this plan the village was required to complete the project itself. In this way not only was the village supposed to learn new skills and become intimately involved in its own development but, theoretically, wealth was be accumulated in the village to be used for future sustainable-development projects. Freeport h o p e d that this style of socioeconomic development would address the problems previously caused when the disbursement of funds was controlled by an individual in Jayapura or driven by contractors. At the same time, it aimed to remove power f r o m the larger competing suku-based foundations in Timika, which exploited the flow of funds and gave little consideration to those left in the village. This structure also aimed to remove the tensions over access to f u n d i n g between the competing ethnic groups. Essentially, this type of village-based development was also intended to narrow the gap between expectation and reality. T h e village, which was supposed to complete the project itself, would presumably not ask for a five-story building or a shopping mall, but rather projects that were important, relevant, and feasible, such as a school, a water system, or a bridge. It was also h o p e d that development in the villages would create a much needed counter to the magnet that Timika had become. T h e focus of this development program was to be sustainable development aimed at fostering i n d e p e n d e n c e rather than short-term projects that would reinforce d e p e n d e n c e . In 1999 LPM-Iija approved a plan for 1999-2000 that was implemented by selecting a n u m b e r of village yayasam to oversee f u n d e d projects. T h e scheme gave some form of assistance to all of the seventy-one villages situated within the area (Mimika district), but focused primarily on the twenty-nine villages LPM-Irja flagged as being most affected by the company's operations. With reports that funds had been stolen or misused within a number of the villages, in mid-2000 the f u n d i n g was suspended so that the project could be reevaluated. 2 Although it could register some successes, its efficacy continued to suffer from the seemingly perennial problems ofjealousy a m o n g recipients and lack of accountability—which LPM-Irja was suppose to put an end to—together with breakdowns in communication between the parties involved. Some village leaders could be seen

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in Timika sporting sunglasses and cash in hand; o n e fellow even reputedly fled to Java with $ 2 0 0 , 0 0 0 in search o f a new woman and a better life. 3 Development in the villages, however, had b e c o m e fixated on house building. 4 Moreover, the problems associated with large amounts o f funds being c h a n n e l e d into the villages saw a rise in the H I V / A I D S rate in these areas and increases in the socially and economically important bride-price. With individuals associated with the original LPM-Irja having left the company by 2001, Freeport formed a new Community Liaison Program; the program required that trained employees work within the villages to better understand the villagers' needs and their concerns about Freeport. T h e company also tried to use NGOs for development programs, with the Indonesian NGO Yayasan Sejati (which had negotiated Freeport's land rights a g r e e m e n t with the K a m o r o ) working on small development projects in the Kamoro villages. In the highlands the strongly religious Village Heartbeat Foundation, formed and run by form e r community relations employee and missionary J o h n Cutts, performs these tasks. 5 While Freeport is closely involved in the village-based development programs and oversees the larger development projects for the region, the government is supposed to work on development projects with the disparate groups that live in the town o f Timika. This demarcation o f responsibility is critical to the company, for although Freeport has been involved in providing water and housing and in late 2 0 0 0 the first hospital in Timika, the company has few answers to the socioeconomic problems o f the boomtown, which did not exist before its arrival. Today the population, comprising people from all parts o f West Papua and the other islands o f Indonesia, has swollen to about a hundred thousand. Timika, says the company, is most definitely the government's responsibility.

BROAD-BASED DEVELOPMENT PROGRAMS While Freeport is now intent on bringing development to the area through the villages, it continues to fund the broad-based development policies. T h e s e programs are now funded jointly out o f the 1 % Fund and directly from the company. From 1990 to 2 0 0 0 the company spent $ 1 5 5 million on development programs. But like all development programs Freeport has been involved in, they have tended to be two-edged swords for the company.

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Employment From the very beginning the traditional landowners felt betrayed by Freeport. When it arrived, they say, it promised them jobs and a share in the wealth. Despite the fact that Forbes Wilson, the first president of Freeport Indonesia, praised the industriousness of the West Papuans, the company made little effort to employ local people. Those that were employed as laborers to build the original supporting infrastructure for Ertsberg were let go by Bechtel at the end of the building contract, because it claimed that they would wander off without notice to conduct "traditional business." 6 For many years Freeport found it cheaper and less time consuming to hire the Indonesian transmigrants and to import skilled workers rather than take the time, effort, and money to train the Papuans living around the mine site. For their part, many of the Papuans found it hard to adapt to a Western work schedule, with the Western mining company making no accommodation for traditional working habits. In 1990 it was reported that the company employed thirty-five hundred mine workers of which only twenty were local West Papuans. Papuans' greatest competition for Freeportjobs has come from the transmigrants in the settlements in the Freeport concession, who make up the bulk of Freeport employees. In fact, spontaneous transmigrants have flocked to the area because of the opportunities offered by the company. While the success of these settlements in West Papua has depended on a mutually beneficial relationship with local industry, Freeport states that it is under no obligation to the government to hire the Indonesian transmigrants. However, according to a Freeport employee in the early years, "Freeport was told it must employ staff from certain other parts of Indonesia. Say, 300 from Menado, 300 from Ujung Pandang, 2,899 from Java." 7 Moreover, it has always been clearly understood that settlements were placed around mining concessions to provide a market for produce while providing employment opportunities for the transmigrants. Freeport employment statistics support the fact that employment policies in the past favored these "outsiders." Within the mutually beneficial relationship between the company and the transmigrants, the latter not only became a cheap, compliant, and ready labor force for the company in an isolated area, but the company became a market for transmigration produce. In Timika, which today has twelve transmigration settlements on its perimeter and within the concession, not all settlers are satisfied with their lot.8 With many failing to find employment and their excess produce failing to find markets, they have ceased working on the

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settlements and have gravitated to the town of Timika, causing tension between themselves and the local Melanesians. In Timika today most industry is run either by the military or police or by the transmigrants— even the shops that sell local traditional crafts. 9 Moreover, the local Kamoro and Amungme women, who now live in Kwamki Lama and Timika and are forced to rely on selling their vegetables in the marketplace to support their families, complain that they lose business to the more aggressive transmigrants. 10 Furthermore, while the company has taught many of the West Papuan women skills such as sewing, the women say that the company wives prefer to employ the Indonesian transmigrant women for these tasks within the home. Tension between the Indonesian transmigrants and the Papuans, while not the main social problem in the area is, nevertheless, not far from the surface. The company denies that it has favored outsiders, arguing that it is not its fault that the Papuans make up such a small percentage of the Freeport workforce, for factors other than company policy are involved. Freeport openly admits that the local people are naturally disadvantaged in the j o b stakes against the more assertive and aggressive newcomers. Because technology for the mine is so complex, argues the company, many of the local people, experienced only in traditional hunter-gatherer societies and with little education or the benefit of previous employment, lack the basic skills needed for jobs in most areas of the company. Therefore, any locals who have been employed have traditionally been relegated to the more menial and dangerous positions. Moreover, despite any goodwill on behalf of the company, the need to undergo training lengthens the employment process for these people. The company says they need to enhance their language skills and become better trained in numeracy, safety, and hygiene. Thus, issues of safety and education, rather than company policy, Freeport says, have defined employment ratios to the detriment of the Papuans. In 1995, Freeport adopted a policy of positive discrimination on behalf of the local West Papuans to overcome these disadvantages, help fulfill the indigenous groups' employment aspirations, and stave off criticism. The company states that employment preference is today given first to the Amungme and Kamoro, then to other West Papuans in the contract area, lastly, to other Indonesians. To aid the positive discrimination policy in the village of Band, Freeport is today running a popular adult literacy program for local people. Freeport also operatesjob training centers for the Papuans where they can develop the skills necessary for employment. In response to local criticism, the company committed itself in the mid-nineties to doubling the number of West Papuans that

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it employed over the following five years and doubling that number yet again in the next five-year period. In 1992 less than 14 percent of Freeport employees were West Papuans. 11 By 1997 this figure had risen to more than 15 percent and included more than 65 percent of all Amungme and Kamoro heads of households in the concession area. By 2000 Freeport claimed that the policy of positive discrimination on behalf of the West Papuans had succeeded. From 640 Papuans in 1996 the company had lifted its employment figure to 1,523 by 2000, with staff numbers (managerial and professional) in the same period climbing from 48 to 114. The company warns, though, that the increase has been slowing for a number of reasons, including the fact that the company had already employed most of the educated and trained Papuans. However, it should be noted that the Kamoro Baseline Study cautioned that it found a significant number of errors in the company's employment records. 12 With Carolyn Cook noting that the company is desperately looking for qualified Papuans to promote, it is attempting to place Papuans into top supervisory positions and has stated that it will attempt to double the number of Papuans in middle management by approximately 2006. However, to place a considerable number of Papuans in highly skilled areas the company is realistically looking at the next generation—that is, those who are in the school system now. Therefore, although Freeport remains committed to these promises, it will be some time before the benefits can be recognized. As would be expected with discriminatory policies, jealousies have arisen within and between sukus, with the Kamoro claiming that Freeport favors the Amungme. Most certainly, in the employment ratios the Amungme have found employment over the Kamoro in the ratio of 3:1, so that the bulk of the Amungmes' cash income (60 percent) is derived from employment with Freeport compared to the Kamoros' 27 percent. As is often the case within the Freeport concession, company policy and the landowners' perception of it differ. Many Papuans do not see that Freeport practices positive discrimination on their behalf, believing that the company deliberately excludes them from employment. It will take some time for the current negative perception to change, especially considering that each day fifteen to twenty unsuccessful applicants come to the company looking for a job. 1 3 Simply because of the area's demographics and the nature of the mining operation, it is impossible for the company to offer employment to all those who seekjobs, so the company will continue to have a pool of disgruntled people in its concession area; and as more people gravitate to Timika, this problem will only increase.

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T h e migration to the lowlands around Timika has had adverse effects back in the village as well. A 1998 survey showed that 70 percent of the village population is under sixteen years of age. 14 To alleviate what would appear to be a perennial problem, Freeport is hoping that, in addition to its expansion o fj o b opportunities within the concession, its presence in West Papua will have a positive flow-on effect on the growth of industry in the region. As noted, it is also now concentrating development in the village to counteract these adverse demographic changes. In the meantime it is making what it sees as a positive effort to enhance employment opportunities through the support of education and training.

Economic and Business Development Freeport began its development program with an original modest policy of aiding local communities through the purchase o f vegetables. Since the early nineties the company has committed millions to operating business development programs. T h e Business Incubator Program was conceived in 1991 and was originally aimed at encouraging and supporting budding entrepreneurs by providing capital, business, and managerial skills, as well as a cheap work space and a guaranteed market to begin their industry. Apparently it had a waiting list of local people who, understandably, saw Freeport's support and ability to organize low-interest loans as a convenient, painless, and quick means of entrée into the modern economy. With initial assets of between $10,000 and $20,000, all o f the businesses created in this program produced and supplied goods to Freeport, which was, in most cases, the sole purchaser—although the company says it encouraged these new companies to expand their services to the wider community wherever possible. In the early stages o f the program Freeport readily accepted people from all ethnic groups, but today, with the policy of positive discrimination, applicants from the landowning sukus are the most readily accepted. O f twenty-one businesses that completed the program in 1996, six were Amungme, six were Kamoro, seven were run by other West Papuans, and two were from outside the province. 15 Through its Business Incubator Program, Freeport contends that it initially created much-needed employment for the traditional landowners and that this had a ripple effect to the larger community. Freeport explains that this has been a valuable program, for without Freeport's assistance not only did many of the Papuan small businesses originally fail, as they could not compete with the Indonesians, but Papuans needed extensive periods of support before they could implement successful business skills. Although

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Freeport has said that "its philosophy has been to resist demands for cargo and avoid charitable, paternalistic activities that might foster excessive dependence," 16 that is, to some extent, what its Business Incubator Program achieved. Freeport has created and supports a false economy. Moreover, the traditional landowners are increasingly moving from self-reliance within their own village to dependence on a weak cash economy in Timika. In recognition of the mistakes made within the Business Incubator Program, Freeport has modified it to become the Small Business Development Division; its focus is more on teaching business skills and adopting an advisory role to the small indigenous business community rather than being direcdy involved in the setting up of capital enterprises. The company also now supports programs aimed at improving agricultural output and varying produce so that it can purchase more foodstuffs from the locals rather than import most of its food as is currently the case. Support for local growers extends down to the level of someone from the company going to the local market in Timika at the end of each day and buying the produce that remains unsold. One of the showcase projects funded by Freeport (separate from the 1% Fund) and in which employment is keenly sought is run by Dr. Carolyn Cook under contract to Freeport. It is an agronomy project consisting of coffee plantations and a nursery that cultivates the coffee seedlings and is currently experimenting with other cash crops such as mushrooms. The project was originally built on "the technical and cultural knowledge of the Amungme regarding the endemic pandanus nut tree crop" and expanded from there. 17 The main nursery is in the hands of Banti village, with three other locations outside the Freeport concession, at the Amungme villages at Aroanop, Tsinga, and Hoea. This project works to train the local Papuans to cultivate cash crops that they can then sell back to Freeport. In the future, Cook hopes to sell the coffee on the international market; she believes that there is a market for a specialty crop grown in such an exotic location and without the use of chemicals. Eventually, the project will be handed over to the Amungme to fulfill their desire to become part of the cash economy. Although Freeport argues that employment is highly sought in Cook's agronomy project, locals still remain critical and resentful of Freeport, arguing that the company not only does not buy enough food from them but that they are the ones who should be teaching Freeport how to cultivate and live on the land as this is what they have been doing for thousands of years. Although Freeport argues that many of the new businesses would survive on their own, this argument is hard to substantiate in the short term

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as Freeport remains, in many cases, the principal, if not sole, consumer. Yet in Freeport's defense, given that many of the people have become divorced from the environment that traditionally supported them, the only things Freeport could offer them in the short term, apart from cash handouts, were new skills and a guaranteed market. Moreover, given that Freeport intends to continue operating for at least another thirty-five years, the businesses that rely on the company to purchase their goods would appear to have a steady and guaranteed income for some time and, according to the company, over time will be able to diversify and extend their customer base. This is Freeport's long-term vision: the development of business in the area will result in the creation of markets and eventually a dynamic economic community. John Rumbiak, however, calls Freeport's activities simple camouflage designed to ignore the "real needs of the people who have lost traditional land," while Down to Earth calls Freeport's largesse mere "charity" aimed at improving Freeport's supply system rather than addressing the needs of the Melanesians.18 Health In a nation where health standards are generally considered poor, West Papua has the added distinction of having the lowest standards of all the provinces.19 Perhaps the only area of Freeport's operations that is free from acrimony, and for that reason is in itself noteworthy, is its public health program. Freeport provides much needed public health and medical programs for the area affected by the mine's operations through its Public Health and Malaria Control Department (PHMC). Until the early nineties the government was absent; Freeport and the missions provided the only medical care for the highlands. Today the company has taken on what should be the state's responsibility. Although under Suharto the government reputedly allocated annually somewhere between $1 million and $4 million toward the health of 2.8 million people living in the province (or less than 5 percent of the state budget for the province 20 ) the mining company spends approximately $5 million on health programs annually in its local area alone. 21 Freeport has built, and continues to fund, the only two hospitals for hundreds of kilometers in Tembagapura and Timika. Although the thirty-eight-bed hospital in Tembagapura primarily serves the employees of the mine, any Papuan may be referred there by one of Freeport's medical clinics if their condition is considered serious enough. 22 The new seventy-five-bed Rumah Sakit Mitra Masyarakat hospital near Timika,

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which was f u n d e d out of the f f i j d at a cost of $3.5 million and is run by the Catholic organization Yayasan Caritas Timika, serves all inhabitants of the area, with free treatment being given to Papuans. 23 Freeport has also built three medical clinics in the highland valleys of Tsinga, Aroanop, and Banti. The outer clinics suffer from lack of government support, however, while the villagers of Banti still prefer to go to the hospital in Tembagapura. The government apparently spent quite a bit of money building its own health clinics in each of the Kamoro villages in the lowlands (approximately forty), but by 1998 only two of these were staffed (and they had scant medical supplies) so that the company's traveling malaria clinic was forced to step in and provide general medical relief for these areas as did the new hospital in Timika. Sanitation remains a major issue in the lowlands with the river often serving simultaneously as village latrine, washing area, and sole source of drinking water. In response Freeport has become involved in building wells and latrines in villages while also assisting the local government with garbage collection, recycling, and disposal operations. The company boasts that its medical services are free and that its facilities serve more than 6,000 West Papuans monthly while it also sponsors mobile health units and conducts research and educational programs addressing local health concerns, which, with Papuan men cutting themselves to drain out the "bad" blood after visiting a prostitute, includes h i v / a i d s education. It also runs a malaria control program that has reduced the incidence of the disease from approximately 85 percent of the population in 1991 to 68 percent in 1992 and to 2-8 percent in Timika today. At the same time the overall number of deaths attributed to the disease has dropped by 90 percent. A main educational health focus today for Freeport is on women and children through the local clinics and elementary schools. In 1997, when the drought brought malaria to the highlands for the first time, Freeport's malaria control group treated those infected while a company helicopter dropped food to the affected areas. Its helicopters also perform search-and-rescue operations when necessary and bring people from the outlying areas to Tembagapura for medical assistance. Freeport has also funded the construction of public health centers in the lowlands in Timika, Kwamki Lama, and Pomako that it has donated to the government and for which it continues to provide medical training. 24 Freeport's public health and medical programs fill in for the absent government and have clearly led to enormous improvements in the overall health of the local population.

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Education Through its community development education program—which involves building schools, dormitories, and vocational training centers; teaching literacy; supplying uniforms; supporting teachers in local villages and offering scholarships—Freeport has become directly involved in the education of the people around the mine. Moreover, without Freeport's support most of the educational facilities and opportunities would not be available to the local population. 25 West Papua has the lowest levels of education in Indonesia. Without exception, groups working on development in the area concede that the main development priority must be education. If questioned, many of the indigenous people state that what they desire the most is an education, which is seen as a stepping-stone to a Freeportjob and as the magical door through which access can be gained to a seductive world created by Freeport wealth. By mid-2000 the company claimed to have funded approximately five thousand scholarships for Papuans with more than 30 percent of these going to Amungme and Kamoro. It should be noted, however, that sponsorship numbers included items such as uniforms, accommodation, and other resources. While today Freeport states that its educational programs help only Papuans, discrimination in favor of Indonesians was apparent in the past. Moreover, few of the scholarships for advanced education are being awarded to Papuans even today. Any past or current discrimination in the education program, however, may be the result of a flow-on from other problems rather than of overt discrimination within the company itself. The local priest points out that Indonesians are naturally favored for placement in the schools and for scholarships because their language and history give them a natural advantage. "Reading primers are written in Bahasa Indonesia, which 70 percent of the province does not speak. They tell about rice paddies and trains. Who knows anything about paddies and trains here? It's too big a jump. My people drop out, remain illiterate, and Jakarta says, 'See? West Papuans don't want to learn.'" 26 The Papuan critics of the company do not see this discrimination in the education system as a flow-on effect of the content. They believe that it is a deliberate policy by the company, in league with the central government, to keep their people undereducated, divided, and thus disadvantaged not only in respect to the more competitive newcomers but also in any future negotiations they may have with the company. In what could be categorized as a common perception among indigenous groups confronting the power of a transnational, the Amungme believe

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that Freeport would rather deal with the traditional tribal elders, who are uneducated, unworldly, and they believe more easily duped, than with the young, educated, and more worldly Papuans. 27 While Freeport's support for education can be a two-edged sword for the company, so too can it be for the indigenous peoples. As Theys Eluay, the late leader of the Papuan Presidium Council, a Papuan political organization, explained, "Education is the solution, but it's also where the problem starts." 28 For although there is little doubt that Freeport's support of the education system offers opportunities to many of the people living around the mine site, it also dangerously raises expectations and aids in the destruction of the traditional culture. The content of the education system has caused the Papuans to express the concern of many indigenous groups throughout the archipelago that the Indonesian education system is a form of indoctrination that devalues their own traditional cultures. This criticism is well founded, for it was always Jakarta's policy to integrate all ethnic groups into the dominant culture. So important is the indoctrination of the young that in the new company town of Kuala Kencana, Freeport was required to build two schools: an American or international school and an Indonesian school, the latter because the government requires that all Indonesian children receive only a government-sponsored education in Bahasa Indonesian. Thus, while lack of access to education is criticized by the traditional landowners, so too is the system itself. Disillusionment with the education system is not restricted simply to content and access, but also to outcomes. While education may initially raise expectations, the failure to have these expectations met can be quite destructive to the individual and the society as a whole. One of the groups that learned early of the hollow promises of education is the Kamoro. Muller believes that because of the Kamoros' relatively easy lifestyle and their original negative experiences of education in the 1930s—which saw the Kamoro receiving an education that was useless in the village situation and failed to secure them Western employment—it is hard to convince them of the advantages of education, especially past the high school level.29 Certainly this perception is borne out by the statistics, for although access to education is easier for the lowland Kamoro and, in general, they receive a higher level of education than the Amungme, more Amungme than Kamoro continue on to a higher level of achievement. At the same time the Kamoro Baseline Study confirmed earlier research on the suku that noted that the high drop-out rate of the Kamoro was also related to the importance of maintaining social and resource bases in different parts of their territory, a necessity that, in

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turn, meant that they often left their village for extended periods and returned to their seminomadic lifestyle, making continuity in education difficult. 30 One of the reasons that the expectations of education within the Freeport area are so high is that the indigenous people have little appreciation of levels of education and job requirements. Because Papuan illiteracy is nearly double the national average at 30.5 percent, rising to 81.5 percent in the highlands, those with a few years of high school often believe that they have a great advantage in the job stakes. This is especially so in the highlands, where in the most isolated villages children often only receive an education to third grade, or at best sixth grade in the more accessible regions. With their high expectations young men then tend to gravitate to Timika in search of Freeport jobs. Years later they may still be waiting around in the town, unemployed and disillusioned. In this situation both traditions, the old and the new, are seen as false; there is an associated loss of identity and values, a loss that often leads to an increase in lawlessness, alcohol abuse, and the beginnings of the hitherto unknown Western phenomenon of unemployment with all of its associated problems. At the same time, with the exodus of young men, village demographics have been adversely affected: The villages [in the highlands] now have a really strange proportion. If you do a village profile the men from a lot of the villages are gone because they are either hanging around here [Tembagapura] waiting for a j o b or hoping for a job, or they have jobs here, or they are in Timika hanging around and their wives are fretting at home having to take care of all the gardens and the kids. When the young men leave the area by the time they have finished they only have schooling up to third grade in the outlying villages so if anyone wants to go to school they have to go somewhere else. So a lot of young men without parents, maybe as young as ten or twelve years old, are hanging out in Timika. Starting school and maybe stopping school. Maybe because they don't have anybody there that really cares about whether they go to school or not. Not that their parents here [in the highlands] would either. They probably would prefer to have them helping with the gardens than going to school. But a lot of them see the good in going to school. 31

Education is undermining the old cultural traditions through the indoctrination of the young in Indonesian schools and through the breakdown of village life and the disillusionment of those left stranded in places like Timika. However, with the recent focus on development in the village, these problems may lessen.

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Because Freeport's educational program and the teacher-training programs support the Indonesian education system, the company is open to the criticism that, in effect, its good intentions contribute to the cultural genocide of the indigenous people. To counter this, at least in Band village, Freeport has begun a popular adult-education literacy program using Papuan teachers and materials. 32 While Freeport can, and does, address some of the genuine concerns with regard to the opportunities available for education for the Papuans, Freeport cannot be held accountable for the Indonesian education system. Moreover, without Freeport there would be few educational opportunities of any kind. T h e opposing argument is that although without the mining company these people might not have the same opportunities for education and employment, they would still have their land, which for thousands of years has given them status, wealth, and sustenance. Moreover, an education that aids in the destruction of their culture, without offering a future, is an education of dubious value. While education comes with no assurances, it is seen by most Papuans as the key to the future. T h e military also appears to share this perception, for it has refused Papuan students permission to study abroad, believing that education of the local people will threaten its hold on the province. 3 3 As Jacob Youwey from Timika stated to a House committee, "The Papuans are uneducated and primitive because the government has repressed them in order to keep them stupid and living in a stone age culture so that Jakarta can do everything on its own." 34

ACTIVITIES OF THE NGOs T h e problems that have arisen over time and that continue to sour relations today between Freeport and the local landowners are those commonly felt when a mining company moves onto traditional lands: the loss of land and culture and the resultant social dislocation, the issue of land rights recognition, the gap between development expectations and reality, and the cultural divides that pose problems for peaceful relations and positive development. Yet Freeport has flagged another issue that it believes has adversely affected relations between itself and the local people: the presence and activism of NGOs. T h e delivering of development in the Freeport concession area is a highly sensitive political issue, and the company claims the j o b has not been made any easier by the actions of NGOs. For Freeport there have been circles of responsibility that have clearly needed to be defined in the development process, but today

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there are also circles of accountability that have been independently established and cannot be ignored by the company. W h i l e Freeport can legally be held accountable only to its shareholders and its contractual partner—the government in Jakarta—neither of these two entities has demonstrated much interest in the issue of accountability beyond the profit margin. Paradoxically, the two groups that have most d e m a n d e d and received accountability have been those that, under Indonesian law, have n o legal claims over the c o m p a n y — t h e indigenous landowners and the NGOs. T h e latter have identified themselves as the watchdogs of the company and through their campaigns have given an international voice and power to the indigenous groups. By demanding accountability through their activism, they f o r c e d the company to seriously address the development issues within its area of operations. Freeport divides the NGOs into two distinct categories: those that have the best interests of the indigenous peoples at heart and that the company can work with and those that it defines as radical and irrational, driven by ideologues, exploiting the grievances of the indigenous people and operating out of their depth or area of expertise. This second group the company believes is impossible to work with. Freeport argues that because NGOS are solely reliant on d o n o r funding, they are dangerously cause driven. T h a t is, with causes being their raison d'etre, they are m o r e inclined to create a "cause," and the m o r e explosive or dramatic the cause the m o r e financial support the NGO can expect. T h e company simplistically believes that the 1995 human rights reports made human rights an obvious cause f o r the NGOs. A c c o r d i n g to the company, radical NGOs, such as International Rivers, Project U n d e r g r o u n d , and Indonesia's WALHI, worked together to obstruct the d e v e l o p m e n t process and undermine community relations by deliberately d e e p e n i n g the existing divides between itself and the indigenous peoples. Emmy H a f i l d o f WALHI confirms that the national and international NGOS did work together to lobby against the company and makes n o apologies f o r their united campaign. She argues that singly they were n o match f o r the powerful transnational and the Suharto government. T h e NGOs say that they did not obstruct the negotiating process. Rather, they supported LEMASA in an attempt to create an environment m o r e conducive to the free and equal negotiations essential to creating a just settlement. A c c o r d i n g to WALHI, this objective could be realized only through recognizing the basic human rights o f the A m u n g m e and adjusting the power imbalance. T o achieve these goals they strengthened the relationships and communications a m o n g the Timika-Jayapura-

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Jakarta-international network of NGOs and built the necessary institutional framework and human resources within LEMASA. 35 WAHLI believes that the NGOS have been useful to the traditional landowners as consultants, advisers, and experts. Freeport, however, believes that LEMASA was exploited, bullied, and badly advised by the ideologues in these "radical" NGOS. As an example, it cites Beanal's U.S. court case. Freeport argues that that litigation was aimed at destroying the communications and goodwill that it was building between itself and the Amungme. As evidence Freeport notes that the case was filed precisely when the company believed it was about to achieve a breakthrough in land rights negotiations with the Amungme and the day before Freeport-McMoRan's Annual General Meeting. Most significant, argues Freeport, the breakdown in land rights negotiations deprived the Amungme of the dividends from the Land Rights Trust Fund, dividends that would have made LEMASA financially independent of the NGOs. According to the company, the continuation of a confrontational relationship between LEMASA and Freeport was in the NGOS' best interests, for without LEMASA'S opposition to the company, the NGOS would cease to have a vehicle through which they could oppose Freeport. The importance of NGOS maintaining links at this village level to reinforce credibility has been well recognized within the Indonesian NGO community. 36 LEMASA, through Beanal, was brought into the NGO fold in 1992, when he was given a seat on the board of WALHI and an advisory position with Project Underground. Although LEMASA has become a partner of the NGOS it has nevertheless remained an unequal partner in a relationship that WALHI has not hesitated to exploit when LEMASA has attempted to act unilaterally: "We have six months of stall in our working with the Amungme because three of the directors of the tribal council are attracted to Freeport deal because of the money and we have to renegotiate, we threaten them. We tell them that if you are doing this we are not going to support you any more." 3 7 Moreover, while the Amungme suited WALHL's needs, the NGO was emphatic that it wanted little to do with the other traditional landowning suku, the Kamoro, for the divisions and weaknesses within this group precluded it from serving WALHl's purposes. 38 It is argued that at least some NGOs use local issues to advance their wider political agendas to the detriment of local development and selfreliance at the village level and do not always have the best interests of the community at heart. The opposing argument is that without effective political change at the macro level, self-help at the grassroots level is simply a Band-Aid remedy to a hemorrhaging artery. Beanal said his organization

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felt pressure to a d h e r e to NGO strategies b e c a u s e o f the financial a n d logistical s u p p o r t LEMASA received f r o m these organizations. H e expressed frustration and, at times, helplessness at the difficult position h e f o u n d himself in, sandwiched b e t w e e n the c o m p e t i n g forces ofWALHl, NGOs, the company, a n d his own p e o p l e . A c c o r d i n g to Beanal, his p e o p l e w a n t a n d n e e d develo p m e n t , b u t they d o n o t always a g r e e with the NGO a g e n d a . 3 9 A t the same time h e has felt e x p l o i t e d by the c o m p a n y w h e n it has u s e d his n a m e in conj u n c t i o n with its d e v e l o p m e n t initiatives. A l t h o u g h the NGOS h a v e i n f l u e n c e d LEMASA'S decisions, they d o n o t wield a b s o l u t e c o n t r o l o v e r the yayasan. Pragmatically, B e a n a l was able to c i r c u m v e n t NGO restrictions, a n d i n d e e d his o w n r e j e c t i o n o f the L a n d Rights Trust F u n d , to c o n t i n u e to access f u n d s f r o m F r e e p o r t a n d participate in long-term d e v e l o p m e n t projects. 4 0 In j u s t o n e y e a r the strongly pro-LEMASA village o f Banti r e c e i v e d e n o u g h m o n e y f r o m F r e e p o r t to b u i l d a two-story s c h o o l , a water system, a n d n e w h o u s e s a f t e r a landslide. F u r t h e r m o r e , as n o t e d , t h e village is p a r t i c i p a t i n g in an agricultural proj e c t , f u n d e d a n d r u n by F r e e p o r t , that, in the l o n g term, aims at establishing l a n d o w n e r s h i p , s u p p l y i n g p r o t e i n crops, a n d ultimately p r o v i d i n g a cash c r o p that t h e village c a n initially sell b a c k to t h e c o m p a n y . S o m e within the c o m p a n y have grudgingly and unofficially acknowle d g e d that c r e d i t m u s t b e g i v e n to t h e activism o f t h e NGOS b e c a u s e that activism f o r c e d t h e c o m p a n y to a c c e p t social responsibility. Yet it is also a c o m m o n b e l i e f within t h e c o m p a n y that n o w that it is g e n u i n e l y a t t e m p t i n g to d e a l with t h e p r o b l e m s f l a g g e d by t h e NGOS a n d is d o i n g m o r e than any o t h e r t r a n s n a t i o n a l m i n e r in I n d o n e s i a , t h e n n o t o n l y s h o u l d these g r o u p s give c r e d i t w h e r e c r e d i t is d u e , b u t they s h o u l d m o v e o n f r o m their a d v o c a c y r o l e a n d b e c o m e positive participants in the d e v e l o p m e n t

process. D e v e l o p m e n t is best a c h i e v e d ,

Freeport

a r g u e s , w h e n p a r t n e r s h i p s are f o r m e d b e t w e e n a n u m b e r o f i n t e r e s t e d g r o u p s (NGOS, g o v e r n m e n t , i n d i g e n o u s p e o p l e s , local g r o u p s ) with e a c h a b l e to l e n d its e x p e r t i s e to t h e process. B e c a u s e o f t h e w h a t it calls NGO d i s i n f o r m a t i o n c a m p a i g n s t h e c o m p a n y r e p o r t s that it has h a d conside r a b l e difficulty finding NGOS w i l l i n g to b e c o m e p a r t n e r s in c o m m u n i t y d e v e l o p m e n t . 4 1 NGOS, however, w h i l e c o n c e d i n g that s o m e w o u l d n o t wish to w o r k with t h e c o m p a n y , claim that the traditional p e o p l e s a p p e a r n o t to w a n t t h e NGO-sponsored p r o g r a m s . A s J o h n S c o t t - M u r p h y o f CARITAS (Sydney) n o t e d , c h u r c h - b a s e d NGOS t e n d to r u n p r o g r a m s o n a min-

imal b u d g e t a n d with l o n g - t e r m a g e n d a s . In a n a r e a awash with F r e e p o r t d e v e l o p m e n t f u n d i n g , they are o f little interest to t h e local p e o p l e s . 4 2 W i t h i n t h e NGO c o m m u n i t y o p i n i o n is d i v i d e d a b o u t w h a t t h e r o l e o f an NGO s h o u l d b e in t h e f u t u r e . W i t h m a n y m i n i n g c o m p a n i e s today

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addressing the environmental and social concerns of the NGOS, the role of these groups in this process is being questioned: Should NGOS embrace corporate engagement and work with those they have criticized in the past? If they were to do so, would they, or their work, be compromised? Furthermore, NGOs must consider if they have the expertise to work with the corporations, and whether this would be the best way to assist traditional communities. "Does being an effective critic of the mining industry necessarily mean the same NGOs are able to provide pragmatic solutions to problems that companies may have with their community partners?" 43 J o h n Stauber, one of the coauthors of Toxic Sludge Is Good for You and an avid observer of the corporate public relations machine, believes that engaging with corporations is dangerous because corporations use dialogue to undermine and defeat their critics. Stauber notes that because the primary focus for corporations is profit, whatever measure of accountability they take has, in many instances, been brought about by the activism of NGOS. Without NGO oversight, then, corporations cannot be trusted. Alan Young of the Environmental Mining Council of British Columbia goes further and cautions NGOS that by endorsing corporations they run the risk of facing litigation from the victims of mining companies. He believes that the best way to ensure responsible corporate behavior is to attack companies where they are most vulnerable: cash flow. 44 The opposition of some NGOS to the corporate world is remarkable, and in some cases the divide may be so unbridgeable that speaking of corporate engagement is ludicrous. This was evidenced by the reaction of Partizans 45 to the Australia West Papua Association's (AWPA) appeal to Freeport/Rio Tinto to aid in the drought relief: Although Partizans sympathizes with the motive behind AWPA'S appeal to Rio Tinto (RTZ) to f u n d a humanitarian airlift for drought victims in West Papua we cannot endorse any invitation to Rio Tinto, Freeport or other foreign enterprises to do good works which would in any way confirm or legitimize their continued immoral presence in West P a p u a . . . . T h e recent history of West Papua has strikingly demonstrated how such ostensibly humanitarian gestures can be used to intimidate, infiltrate and subvert those opposed to continued mining in the country. 46

The NGO did suggest that instead of directly aiding in relief operations, Freeport/Rio Tinto could donate funds through a third party or undertake "not to finance any further expansion of the current operations or exploration program," although the NGO specifically noted that

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it did not think that the company would do either. From the above statement it would appear that this NGO would prefer the possibility that no relief be delivered to the people suffering from the drought rather than allow Freeport or Rio Tinto to be able, in its own words, to "look good." Like Partizans, WALHI is an NGO that rejects corporate engagement with a company such as Freeport. The mining industry has few defenders, for when the issues that surround mining companies are seen in such absolute terms, then to side with the mining company can be politically risky. Even the governments that support these companies and directly profit from their business can find defending a mining company unprofitable. Mining companies such as Freeport see themselves caught in a public relations lose/lose situation. Not only is there little incentive to defend oneself, except from the most damaging accusations, but for companies like Freeport to draw attention to themselves by advertising their positive actions often leaves them open to the criticism that they are immorally exploiting the hardship of others. The company's reticence in this type of situation was clearly demonstrated during the unprecedented drought that killed hundreds in the mountains of West Papua in late 1997 and to which Partizans was referring. On 29 December 1997 the Australian Financial Review (AFR) carried an article by Lee Rhiannon, then director of the NGO AID/WATCH (Australia) in which Rhiannon drew comparisons between the enormous relief operation that was being launched in Papua New Guinea and the lack of response from Jakarta, which had refused to declare a state of emergency and open the way for outside relief. Rhiannon wrote, Considering this community has opposed Grasberg and that the Government of Indonesia gains considerable income from the mine's operations one has to ask the question if it might suit the Indonesian authorities to allow nature to take its course in this region. For the Amungme it is now virtually impossible for them to continue fighting Freeport as the drought has taken such a toll. . . . With profits from the Grasberg mine now up to $US1 million per day, surely the main owners, Freeport-McMoRan, Rio Tinto and the government of Indonesia, should accept their moral responsibility to assist.47

Freeport had, in fact, been giving considerable aid and had been assisting in relief operations since 24 September 1997, three months before the article was published but had not publicized its participation; neither had the other participants, which included Mission Aviation Fel-

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lowship, the International Committee of the Red Cross (ICRC), the Indonesian Red Cross Society (Palang Merah Indonesia; PMI); Medecins Sans Frontiers, World Vision, and others. Freeport was moved to respond to the damaging article, pointing out that the company had supplied transport and logistical support, medicines, doctors, water, and food while noting that no AID/WATCH personnel had been involved in operations. 48 Freeport did not mention that it had also spent $302,000 in flight time alone, while giving Rpl60 million to the relief organization Pemda. When questioned on Freeport's input into the relief operation, the Jakarta arm of the ICRC noted that Freeport's assistance had been critical to the success of the operation. 4 9 Over the years Freeport has supported, and continues to support, search, rescue, and relief operations together with independent studies of the flora and fauna of the region and social study programs by various independent groups. It has worked extensively with NGOS such as the World Wildlife Fund (which manages the Lorentz Nature Reserve) and Conservation International together with a number of universities. While most organizations fail to credit Freeport, Conservation International did cite Freeport's logistical assistance as being crucial to its mission and stated that the collaboration between the two was so successful that it may serve as a model for future collaborative field survey work between industry and conservation/scientific organizations. 50 Freeport argues that while NGOS are able to hold the mining company accountable, the NGOS have no accountability. Danny Kennedy, while director of Project Underground, an NGO that has been in the forefront of the international campaign against Freeport, conceded that because of their funding structures most NGOS do operate without accountability: Of course we obtain f u n d i n g from those that we know are sympathetic to our cause or, of course, they would not provide us with f u n d i n g to start off with. That being the case, we, like other NGOs, ask for f u n d i n g with n o strings attached. In other words the d o n o r knows u p front what it is we do, what it is we stand for, and if they do not like it, they do not have to contribute. However if they d o like it and do contribute, they do so with no strings attached. So in that regard, Freeport is quite correct. Most NGOS are not accountable to anyone. This is a bad PR point for us, but a situation we feel must be so. If we had to be accountable to a d o n o r group, they could control our agenda and that we cannot have. Fortunately for us, Freeport has not made too much of this publicly since they are accountable to the public, share holders, and the government in both the US and Indonesia. 5 1

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The mining companies feel unable to demand accountability of the NGOs because opposing these groups puts a company in a no-win situation. In the war that is currently raging between NGOS and the mining industry over environmental issues and human and indigenous rights issues, the mining companies believe that the positions of each of the protagonists have become simplistically fixed and polarized. The public perception is that all transnational mining companies are all bad and all NGOS are all good. Freeport reflects the mining industry's perception that, in general, the public accepts NGO accusations unquestioningly while essentially disbelieving mining companies and the evidence they can present in their defense. Moreover, the dramatic accusation of the NGO is remembered long after the sober repudiation by the mining company is long forgotten. Thus, once made, an accusation by an NGO tends to stick. Although claiming that they are often defamed by NGOS, which have no accountability, the mining industry is loath to demand accountability of their opponents by taking the NGOS to court. In the eyes of this sector, such action would simply give further publicity to the NGOs. In mid-1999 Beanal, the favorite of the NGOS and a man who for years had campaigned against Freeport, added another confusing dimension to the already complicated social web. Against the wishes of the military and the NGO and Papuan communities, 52 he, together with Titus O. Potereyauw (a Kamoro and the bupati of Mimika, which post is the senior executive of regional government) and Issak Hindom (former governor of West Papua and a Biak resident) agreed to join Freddy Numberi, who was then West Papuan governor, on the Freeport Board of Commissioners. A year later, in J u n e 2000, he was elected deputy chairman of the newly formed Papuan Presidium Council—a relatively representative political organization advocating Papuan independence. A couple of weeks after this, on 13 July 2000, Beanal, as head of LEMASA, together with a representative of LEMASKO, signed the company's long-sought-after Memorandum of Understanding ( M O U ) . Freeport described the MOU as a preliminary document that allowed the signatories to work on a future agreement that would recognize land rights and "take into account both the greater value and the longer duration of the company's activities" on the Kamoro and Amungme traditional land. 53 Further to this document the signatories announced their intention of cooperating in a number of projects, including the establishment of a Papuan company to do levee maintenance work on the tailings area; organization of an agricultural, aquaculture, and animal husbandry project in the lowlands run by Papuans; and the building of a new office for LEMASA and houses for the elders. But although Freeport

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stated that the MOU was the product of five years of negotiations, local Papuans complained that they were not aware that such a document was to be signed, and protests ensued. On 24 September 2001, Freeport was able to announce that community leaders, including Beanal, had signed a Letter and Mutual Acknowledgment. Although not mentioned in the news release, this agreement replaced the Land Rights Trust Fund originally rejected by Beanal in 1996 because it required the traditional landowners to officially agree that land rights had been addressed and fairly compensated under previous agreements. At the time he said that all the land used by Freeport had been acquired illegally. Like its predecessor, this letter requires the company to pay $500,000 annually into a trust fund for the Kamoro and Amungme landowning villages of Banti, Tsinga, Aroanop, Nayaro, Nawaripi, and Tipuka. Freeport also announced at the time of the signing that it had deposited $2.5 million into the trust to cover payments dating back to 1996. Commenting on the agreement, Beanal is quoted as saying, "We used to be on the outside, but now we stand together. We have a stake in this mining operation and we will work hard so that we can share in its success." 54 Those in charge of the trust intend to use part of the funds to gain equity in the company through the purchase of shares on the open market. With few details being made public regarding this agreement, the question is who will be the beneficiaries— the current residents of these villages and their descendents; the residents of the villages back in 1996 and their descendents; or the residents from 1967 when Freeport first gained entitlement to exploit the resources under the ground? If the latter are the recipients, who defines them? Moreover, other than buying shares in the company, what will the remaining funds and dividend stream be used for? With such extraordinary wealth coming under the control of a few remote and highly traditional villages, one can only foresee escalating problems arising from jealousies, inequity, the inevitable breakdown of village life, and questions of current and future entitlement. At the time of writing it is not known whether the signatories have agreed that traditional land rights have now been fairly recognized and compensated by the company. If they have, then it is a situation the NGOS have long demanded. The ramifications, though, of this long-sought agreement could be disastrous for the villages involved, and in any event the company is damned if it does and damned if it doesn't. Moreover, a clear conflict of interest exists today with Beanal simultaneously holding a position on the Freeport board while negotiating with the company on his people's behalf.

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As a result of Beanal's seeming defection to "the enemy," the N G O s have turned their attention to Alomang, raising her public profile and giving her training in monitoring human rights. Shortly after Beanal's acceptance of the Freeport position, it was announced that Alomang had been awarded the Yap Thiam Hien humanitarian prize by the Indonesian Human Rights Study Center Foundation. Since then she has received assistance in setting up her own human rights foundation, HAMAK (Hak Asisi Manusia Anti Kekerasan; Foundation for Human Rights Anti-Violence), and was promoted by N G O s to receive the Goldman Environmental Prize in April 2001. Freeport announced that it was also awarding Alomong's foundation $248,000. Josepha rejected the offer, saying she would not become a pawn of the company and would continue to speak out against its exploitation of her people. However, at Freeport-McMoRan's annual general meeting, the company reported that HAMAK had already received a portion of this grant.

CONCLUSION Once a mining company begins operations, local communities find it difficult to preserve their traditional lifestyles, even if they so choose. Development also poses problems. Development works, Freeport says, when the people come to them rather than when the company imposes development on an unwilling or uninterested group. Thus, development works best when the people are involved in choosing the program and implementing it themselves. It is only recently in the company's history that it has turned its attention to the problems of development, and it is even more recently that the indigenous peoples have been invited to become partners in the development process. Without recognized representation and clear and agreed-upon goals, little progress could be made in reconciling the presence of the mine and the rights and aspirations of the indigenous people. It was only when Freeport acknowledged traditional rights that it had a starting point for negotiations with the traditional landowners. A number of issues must be resolved if there is to be reconciliation and further successful development. What the people want from the company is equality and respect, but until the mistrust, fear, and sense of betrayal that the traditional landowners feel toward the company is overcome then constructive negotiations and a positive working relationship are impossible. Moreover, the many years of human rights violations that the people of West Papua suffered under the Suharto regime, and most specifically in the

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Freeport area of work, have been a constant reminder to the indigenous people that they must be ever vigilant. At the same time the people, if they want to be equal participants in the development process, need to present a reasonably united front, accept responsibility for the direction of their own growth, and abandon the wish to have Freeport simplistically fulfill their desires. N G O s have played a central role in the community's struggle with the company. While WALHI exploited the grievances of the Amungme in part to further its own agenda and as a vehicle through which it could attack the regime and the company, it and other NGOS have helped to educate and empower LEMASA in its difficult struggle for recognition and transition into modernity and the cash economy. Moreover, without the activism of NGOS and the associated international pressure, Freeport would not have willingly addressed the social problems within its concession to the degree that it has today. While the social situation within the concession remains far from acceptable, the company is working with local and Indonesian NGOS on addressing a number of the problems. To date WALHI has steadfastly rejected corporate engagement, preferring to maintain its powerful adversarial role. Freeport remains central to development in its area of operations, and, in the continuing absence of a responsible government, the company will reluctantly continue in the role of de facto administrator and developer around its concession area. The difficult question that continually arises today from the mining industry in general, and Freeport in particular, is just what is an appropriate role for a mining company. Staff of Freeport's Community Affairs Department believe that every mining company must today recognize that it has two core businesses: mining and community development. According to this argument, mining operations can no longer exist without addressing community development issues. The problem for the department is that some within the company resent having funds go to community development. The combined UNCEN-ANU Baseline Studies Project report, completed in December 1998, noted that Freeport's Community Affairs Department was under resourced and marginalized within the company and that its effectiveness was undermined by the heavy hand of management in remote Jakarta and Louisiana. 55 What senior management in the company need to accept is that community development is a long-term commitment, that results are slow, and that continuity in both staff and programs is essential in increasing the company's awareness and effectiveness and in winning the trust and support of the local community. Many within the higher echelons of the company still believe that any problem can, and must, be fixed quickly.

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To understand why Freeport continues in this costly and thankless role of developer and de facto administrator of the area, one need only understand the vastness of the resource it lays claims to and the power of the forces that oppose it. Should the forces opposing the company make the costs of operating in West Papua greater than the riches it can harvest, then, and only then, will the company leave of its own accord. But this would seem a remote possibility. Today the company spends little more than 2 percent of its revenue on development and community relations. The price of this and other costs would need to rise substantially before Freeport would leave.

The gigantic open pit Grasberg mine is in the midground of the photo, which was taken from the summit of a ridge about six kilometers from the mine at an elevation of 4,500 meters. The equatorial Meren and Carstensz glaciers are directly behind the photographer.

By far the world's largest known deposit of gold, the open pit Grasberg mine is so large (more than 2.5 kilometers wide) and situated at such a high altitude (4,270 meters) that the site is continually shrouded in cloud except in the early morning. The lack of visibility and the size of the operation, which runs 24 hours a day, 365 days of the year, necessitates satellite and computer tracking of the huge mining trucks, with scoops that can hold up to 42 cubic meters of rock, and haulage trucks that can transport more than 300 tons. Grasberg is estimated to contain more than 50 billion pounds of copper and 63 million ounces of gold. Mining is predicted to last another thirty-five years.

a •

l j

•fc ««

Grasberg mill complex covered in cloud. Below Grasberg, at an altitude of just over 3,000 meters, is Freeport's mill complex, which boasts some of the largest milling equipment in the world. About 700,000 tons of rock a day is moved from Grasberg and the smaller surrounding mines, with about 230,000 tons being processed daily at the mill. Giant crushers and grinders reduce the rock to a fine gray powder from which the copper concentrate and gold are removed in floatation tanks and then sent by pipeline to the coastal port of Amamapare, more than a hundred miles away.

Overburden near mill site. Each day Freeport moves approximately 500,000 tons of overburden. Overburden is ore that is not processed but must be moved aside during the extraction process in order to reach the metal-bearing ore. Approximately five tons of rock needs to be moved to extract 1.5 grams of gold. Millions of tons of overburden are dumped in the surrounding alpine valleys of Carstensz Meadow, West Grasberg, and Lake Wanagon. The overburden in this photo has been dumped near the mill.

The Freeport access road, an engineering feat and a terrifying ride, snakes across the rugged highland terrain. The road was the company's first project after signing its contract with the Indonesian government in 1967. Rising nearly 4,500 meters in the space of 120 miles, the road traverses twenty-seven degree gradient and sharp ridges and includes 1,100 meters of tunnel through the Carstensz Range. At the time of its construction, the road accounted for almost one-third of total mine expenditure and took twice as long to build as all other infrastructure combined.

Ertsberg open pit mine. What was to become Freeport's first mine was discovered in 1936: a magnificent 180-meter barren black rock wall covered in green splotches towering above an alpine meadow. The geologist who identified Ertsberg (ore mountain) said at the time that he knew at a glance what it was, but because of its inaccessibility it was "just like a mountain of gold on the moon." Today Ertsberg is dead. In its place stands an open pit, 360 meters deep and two kilometers wide, filled with copper-impregnated water. During its life the mine produced approximately thirty-two million tons of copper, gold, and silver.

Tailings, the discarded residue from the milling process, end up in the Ajkwa River. In the lowlands, near the town of Timika (in background), tailings spill over the banks, destroying nearbyjungle. It is predicted that over the life of the mine, some three billion tons of tailings will be deposited in the area. Freeport has committed to building two levee walls on each side of the river in the hope of containing further damage from spillage. These levee walls—one approximately thirty-five kilometers and the other fifty kilometers—are intended to contain the tailings into an area, now jungle, of approximately 230 square kilometers known as the Ajkwa River Deposition Area (ADA).

Housing complexes in Tembagapura, a company town ten kilometers below the mill, built to accommodate Freeport workers (Indonesians and Westerners). At an elevation of 2,062 meters, it is a self-contained dormitory town on the Utekini river surrounded byjungle. Housing includes fairly rudimentary dormitories for single men (lower-level workers), and nicer one-bedroom units for higher-level employees, both men and women. There are also some family units. The town boasts a sports center, a shopping complex, a restaurant, offices, a mosque, and a church. Entry to the town is controlled by Freeport and military security posts. When the town was first built, Papuans came from other valleys to see the town with its lights on, for they thought this must be what Heaven looked like.

Brimob military barracks and checkpoint on the perimeter of Tembagapura and the road leading down to Banti village. All vehicles and pedestrians are required to stop at the checkpoint before proceeding into Tembagapura. However, since traffic consists solely of either Freeport company cars or military vehicles, they never stop. Pedestrians from Banti attempting to enter Tembagapura are often questioned or stopped. Military checkpoints and barracks are positioned at a number of places along the access road leading to Tembagapura from the lowlands.

Band residents pose for the camera.

A Banti village leader, Janus Natkime, sits with children in front of typical village houses built by Freeport.

Traditional village huts now incorporate plastic from Freeport to waterproof the roofs. The suspension bridge, built by Freeport to connect the two sides of Banti village, crosses the Wanagon River. In May 2000 this area was flooded by an accident at Lake Wanagon, one of Freeport's overburden dump sites. Freeport is moving the village to a higher location to prevent future accidents.

Timika's main street contains the central commercial area of the town, comprised of kiosks, artifact shops, and places to eat.

Lower-grade residential housing in Kuala Kencana in the lowlands provides accommodation for Freeport workers and their families, both Papuans and Indonesians.

Tom Beanal (third from right) seen here at a film launch in Sydney, 1 September 2000.

The ice fields of Puncakjaya, just six kilometers from the Grasberg mine, as seen from the lowlands near Kuala Kencana. It is generally accepted that the Carstensz and Meren glaciers of West Papua, like other equatorial glaciers in Africa and South America, have been in retreat for approximately the last 150 years and will disappear completely within the next century. That is exactly what has happened to the ice field that, until the seventies, existed just twelve kilometers northwest of Puncakjaya on Ngga Pilimsit.

Chapter 7

The Environment

FREEPORT'S

ENVIRONMENTAL

RECORD

in

West

Papua

is

con-

tentious. For much of its history the company essentially remained selfregulating, and until April 1996, when the environmental consultancy firm of Dames and Moore completed an assessment o f the mining proj e c t , there had never been an environmental assessment available to the public. This situation arose for a number o f reasons: the Suharto government's flawed commitment to environmental protection, the president's unwillingness to restrict capital producers by enforcing the nation's environmental regulations, the refusal o f companies and the government to make environmental assessments public, and the difficulty of carrying out an independent assessment of the Freeport operation when access was denied to the company's concession by both TNI and Freeport security forces. 1 In its defense Freeport continually stated and the Suharto government confirmed that Freeport always operated in compliance with its contract and Indonesian environmental regulations. Compliance, however, was not necessarily an onerous task in Suharto's corporatist Indonesia. Although the nation's environmental protection system appeared comprehensive, in practice it remained weak and ineffectual, encouraging environmental degradation and resource depletion. 2 In relation to Freeport, WALHI always believed that Jakarta was not capable o f regulating the company. This perception was not entirely correct, however, for while the close relationship between the company and the president meant that the bureaucracy was not able to regulate Freeport, Suharto, if he chose to do so, was. But BAPEDAL and the AMDAL assessment process, having been belatedly and somewhat reluctantly established by the government in reaction to pressure from international organizations and Indonesian NGOs, were deliberately undermined, and, by association, so was the legislation they were purported to uphold.

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INDONESIA AND THE ENVIRONMENT The nation's environmental record was poor under Suharto for structural, economic, and political reasons. The Constitutional basis for protection of the environment is Article 33 of the 1945 Constitution, which states, "The state shall administer the national resources yielded in the land, water and air and shall utilize them for the people's welfare." While a national interest in the environment was recognized in the early seventies, Indonesia had no environmental policy of note until 1982. Before then any general activity relating to the environment came under the 1926 Dutch colonial Nuisance Ordinance. 3 With regard to the mining industry specifically, the nation's first mining law, the Basic Mining Act of 1967, paid scant regard to the environment. Under Professor Emil Salim, who became the country's first environment minister in 1978, Indonesia in 1982 passed its first environmental regulation, Basic Provisions for the Management of the Living Environment, which established broad principles for environmental management. 4 However, with the bureaucracy lacking the regulations and definitions necessary to make it enforceable, this act was little more than a statement of intent. It was not until 1986 and 1990 respectively that provisions were made to implement environmental law. In 1986 the government established a procedure for environmental impact assessment by companies under Government Regulation 29 (Análisis Mengenai Dampak Lingkungan; AMDAI.); and in 1990 the nation's first environmental protection or enforcement agency, the Environmental Impact Management Agency (Badan Pengendalian Dampak Lingkungan; BAPEDAL), was established by Presidential Decree 23. 5 Having been belatedly and somewhat reluctantly established by the government in reaction to pressure from international organizations and Indonesian NGOS, BAPEDAL and the AMDAI. assessment process, together with the legislation they were was purported to uphold, were deliberately undermined. Not only was BAPEDAL required to report directly to Suharto—essentially a self-censoring process—but the government had then, as it does today, a sectoral rather than holistic approach to the environment. The compartmentalization of environmental management meant that there were confusing and often contradictory environmental regulations arising from multiple sources with no comprehensive index or point of reference for environmental regulations and laws. At the same time, the administrative structures that BAPEDAL dealt with were complex, competing, uninformed, and often hostile to its agenda. As an agency rather

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than a department (there was no Department for the Environment, only the Environment Ministry, whose function was to formulate laws, not to actively protect the environment), BAPEDAL remained structurally weak in dealings with departments and ministries that were, in many cases, protective of their own authority and uncooperative when environmental issues presented impediments to government-imposed developmental goals. In a truly breathtaking piece of irony, BAPEDAL, the nation's environmental protection agency, was not given the power to inspect pollution sources that generally came under the jurisdiction of regional authorities or, in the case of new industries, the Capital Investment Coordination Board. With regard to the mining industry specifically, under Indonesian law companies were self-regulating and self-monitoring— although BAPEDAI. did have the right to carry out surprise checks for compliance. While BAPEDAI. was able to carry out inspections and attempted to set standards, its funding difficulties forced it to rely heavily on other agencies such as NGOS to report any breaches of permits. Finally, BAPEDAL was not given the power to prosecute and was disadvantaged by its lack of qualified personnel in the assessment area who could prepare legislation and standards and monitor compliance. 6 T h e AMDAL assessment procedure, which is basically a four-part selfassessment performed by the company, was also deliberately flawed from the outset. 7 AMDAL commissions, comprising BAPEDAL representatives together with representatives from the relevant government authorities or departments at both the national and provincial level, were set up to review each company's AMDAL. T h e commission then presented a report and recommendations to the final decision maker, which was either the relevant minister or the provincial governor, depending on the project. 8 A commission could reject a report only if the AMDAL concluded that negative impacts could not be mitigated based on the state of science and technology at the time or that "mitigation costs were higher than the positive impacts." 9 Commissioners, who worked only part-time as commissioners, found it difficult to keep up with the workload, and commissions suffered from turnover in personnel. Moreover, like BAPEDAL, AMDAL commissions suffered from underfunding, operated with a shortage of qualified personnel, and were limited by weak enforcement powers. 10 Finally, AMDAL commissions remained vulnerable to the criticism of conflict of interest because commission members were often the same people charged with fulfilling Jakarta's demanding development targets. Consequently, AMDAL environmental impact studies were criticized as "little more than score cards in which positive economic outcomes

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inevitably counterbalanced negative environmental impacts." 11 Thus, while the formation of BAPEDAL and an environment assessment process comprising AMDAI.S and AMDAL commissions appeared to be positive steps taken in direct response to societal pressures and international criticism of Indonesia's environmental record, they were flawed from the outset. They were little more than corporatist entities used to undermine criticism while the companies continued to obstruct and control demands for societal participation in policy making. The legal system also failed to protect the environment. Getting the laws enforced and obtaining a legal conviction were all but impossible in a system that lacked independence and remained notoriously weak in the face of ongoing political and commercial pressure. The judiciary, in general, found it difficult to grasp the complexities of many of the environmental arguments that confronted it; in addition, there were innumerable instances of special dispensation cases. In this environment simply getting a case to court was regarded as a measure of success. Even if there was a conviction (a rare event), sanctions were often so light that they failed to deter polluters or there was little or no follow-up monitoring of known polluters. Mediation was rarely successful and held little currency. And while the law stipulated that polluters had to pay to have their pollution cleared, there were no mechanisms to calculate what the cleanup costs would be. BAPEDAL or government employees were expected to perform the cleanup operation and later bill the polluter for the costs. 12 As a measure of the problems facing environmentalists in Indonesia, it was estimated in 1994 that no fewer than ten substantive and thirteen procedural laws needed to be enacted before BAPEDAL could even begin to have the enforcement powers expected of an effective agency. 13 Although concern for the environment was increasing within sectors of Indonesian society in the nineties, the public in general viewed the environment in parochial terms, tending to focus more on the highly visible environmental problems directly affecting them, such as local pollution, than on the macro question of resource depletion and large-scale environmental degradation. Furthermore, while the AMDAL process had provision for public participation, the public's input into environmental protection was limited by its absence of resources, both political and economic, and its inability to gain access to information regarding the operations of business and the AMDAL process. Finally, for a number of obvious reasons including an absence of capital, lack of understanding of the legal process, little hope of winning litigation, and an absence of opportunities under the Suharto regime for free and open debate on the environment,

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most people were understandably reluctant to become participants in legal action against the most powerful sectors of Indonesian society.14 In the end little could be done to prevent degradation of the environment by companies with close ties to the palace. Moreover, it was only after environmental damage was patently obvious that opponents of such projects could bring a case to court with some hope of justice, by that time the damage was usually so extensive as to be all but irreversible. Thus, despite a theoretical commitment to environmental protection from Jakarta, the New Order regime's record with regard to this issue was appalling. In both Jakarta and global economic circles other concerns held sway. From the mid-eighties the government's actions were at least in part dictated by the pressures of foreign debt, which, by 1992, stood at $80 billion, making the debt-servicing ratio (a measurement of debtservicing payments against exports) 32 percent. 15 Even more alarming was the estimate of foreign debt to GNP, which stood at 25 percent in 1982 but had risen to 72 percent by 1991. In the rush to participate in the Asian "economic miracle," international banks and lending agencies, together with the Indonesian banking system, which had essentially become the personal fiefdom of the president and his cronies, failed to demand accountability from the Indonesian business community so that throughout the eighties and nineties unrestricted government and private debt accumulated. Ironically, however, the regime's bankers and the international lending agencies, while failing to restrict debt accumulation, considered it a pressing problem. In response they encouraged the exploitation of the archipelago's natural resources to service this debt. Economic growth and the resultant pressure on debt servicing led to exploitation of the environment. It also led to private wealth accumulation. Because of the dictatorship's need to continue the patronage system and because resource depletion became an essential source of lubrication, Jakarta refused to limit industry profits by what were considered to be costly and restrictive environmental controls. 16 Indonesian NGOs Although in 1994 Colin MacAndrews voiced a common Western claim that the Suharto government was consistent in its support of the environment, 1 7 this support was inconsequential, inadequate, and always tempered by other contingencies. In short, it was essentially rhetorical, so that any discordant voices, together with the impetus for environmental protection, came not from the government but from within the emerging radical NGO community.

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Nc.os or organisasi massa (mass organizations) were a function of the early postindependence political landscape. To begin with they were formed to promote political or military objectives, but a decade or two later they had generally became associated with political parties. During the seventies, seeing NGOs as political threats to the Suharto state, the regime actively worked to destroy them along with their political affiliations, at times fusing them into government-controlled corporatist structures. However, because of growing dissatisfaction with the authoritarian nature of the state, in the eighties these organizations began to reemerge from within the middle class. With distinct political agendas, the more radical NGOs became convenient vehicles for antigovernment activists from within the media, the intelligentsia, and the law fraternity, who saw them as a unique and potentially effective means of pressuring the government toward democratic reform and a more pluralist policy-making environment. 1 8 In response to what Jakarta perceived as threats to the state from these groups, in 1987 it passed the Law on Social Organisations, which established compulsory registration, attempted to place limitations on funds such groups received from overseas, and gave Jakarta the "right to 'guide' their activities."19 Despite being given precious little room to maneuver, these NGOs, which aimed to empower, educate, and support civil society, continued to proliferate. Often supported financially, morally, or both by international NGOs, they either operated clandestinely or were routinely closed down by harassment and intimidation. Eventually, it was the more radical organizations, which survived, that came to be viewed by society as legitimate expressions of opposition. 20 By the end of the century, Indonesian NGOs differed from their predecessors (or for that matter, from NGOs in most other nations), for Suharto's attempts to control them helped lead to their empowerment. The shadowy, dispersed, and proliferating nature of these opposition forces—a direct result of the government's coercive policies—made them more difficult to control. Laws against mass organizations meant that NGOs were unable to keep membership lists from which funds could be raised. Officially existing as foundations "for which people work and with which they are associated but to which no one belong[ed], in a formal sense," 21 they succeeded in avoiding the same degree of government interference experienced by political associations. With fund-raising abilities within Indonesia being severely limited by the government, one important ramification of this was their close association with, and support from, better resourced and powerful overseas NGOs and associations. 22 At the same time, many smaller NGOS sought to gain a measure

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of protection by amalgamating into larger associations of NGOs. This tendency raised the profile of NGO issues while ensuring continued support at the grassroots level of society. The highest profile Indonesian environmental NGO today is WAI.HI. Formed in the early eighties, it is a loose coalition of about three hundred organizations without a formal constitution. It maintains close links at the village level while accessing substantial aid from within Indonesian and overseas, including from the Ford Foundation, USAID (U.S. Agency for International Development), the Canadian International Development Association, and the Asia Foundation. 2 3 By the early nineties it was exhibiting an increasingly radical agenda and began to publicly confront and embarrass the government on a number of occasions. In 1991 it produced a report titled Who Owns Our Forests'? wherein it attacked the government's highly controversial forestry policy. Confronted with the finding that only 17 percent of the revenue from the industry went to the state while the balance filled the coffers of Suharto's cronies and the military, the government was forced to increase timber royalties. 24 At its 1992 annual conference, the groups that comprise WALHI officially decided to pursue this more aggressive approach further. By exploiting a weakness in Suharto's environmental laws, it moved focus from awareness campaigns and lobbying to judicial activism. In this regard Indonesian NGO'S have a distinct advantage over their Western brethren for in the West only groups that have "standing" can instigate litigation, and the laws pertaining to "standing" are highly restrictive. In Indonesia, in theory, anyone can bring an environmental case to court. Despite this activism, WALHI failed to win even one of the cases it presented during the Suharto years. Public awareness of environmental problems increased in Indonesia in the nineties through the participation of the press and the outspokenness of NGOs such as WALHI, the Foundation of Legal Aid Institutions (Yayasan Lembaga Bantuan Hukum Indonesia; YLBHI) , and the Indonesian Centre for Environmental Law (Lembaga Pengembangan Hukum Lingkungan Indonesia; ICEL) . NGOS linked environmental degradation to the ever-sensitive issue of development. At the same time WALHI and other large NGOS attacked the government on the international front by utilizing their international contacts. Not only was WALHI able to lobby transnationals in their home states to adopt more sustainable resource development in Indonesia, but it pressured international lending agencies to demand accountability from their clients—be they state or corporation—and embarrassed Jakarta through information campaigns aimed at highlighting the extent of environmental degradation in the archipelago.

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Although in the last few years of the Suharto regime the nation's NGOs had achieved a hard-won degree of independence, environmental activism remained a path fraught with danger. Those who opposed certain aspects of development, including resource depletion, were derided by the government as "new traitors" (penghianat baru) and described as a threat to national security—a label that had the potential to attract the full force of the feared Anti-Subversion Law, which carried a maximum penalty of death. By 1996, believing that it was losing control of the NGO phenomenon and confronted by the worst antigovernment violence in years, Jakarta decided to move against opposition forces, including the eight thousand NGOS it claimed existed at the time, but especially those it believed had become problematic, WALHI, which had taken the government to court over environmental degradation, and the Legal Aid Institute, which challenged the government over human rights violations, were both singled out for attention. Although Emmy Hafild from WALHI was threatened and called in to police headquarters for questioning numerous times, the police eventually chose not to take legal action against either of these groups. It is clear that their high international and domestic profiles afforded them some measure of protection. 25 Some of the most prominent political activists, however, including Mukhtar Pakpahan of the independent labor organization Serikat Buruh Sejahtera Indonesia, and Budiman Sujatmiko of the People's Democratic Party (Partai Rakyat Democratik; PRD) were jailed under the Anti-Subversion Law, while the offices of Megawati Sukarnoputri were closed down and she was replaced. The attack on Megawati's headquarters was particularly interesting because of what it said about the regime. The Indonesian Democratic Party (Partai Demokras Indonesia; PDL) was attacked not because at that time it was a salient political threat to the regime, but because of what it represented: an emerging opposition within civil society. By attacking Megawati, Suharto succeeded in creating a powerful opposition figure, which had previously not existed, and, arguably, a mantle that was not deserved. 26 Intimidation prevailed as those opposing government oppression were continually harassed and called into police headquarters for questioning. In August 1997 Suharto attempted to have the parliament reinstate a 1988 decree that officially granting him unlimited powers. While failing to win approval in parliament for harsher measures, he did, however, succeed in promoting Prabowo into command of the elite Kopassus troops and Prabowo's friend, Brigadier General Syafri Syamsuddin, into the Jakarta strategic command. After that a number of the less prominent activists began to disappear in Jakarta, sending a dire warning to those who remained active.

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FREEPORT AND THE ENVIRONMENT West Papua is believed to be the most diverse and pristine ecosystem in the Pacific and one of the most biologically significant regions on Earth. Accounting for approximately 50 percent of Indonesia's biodiversity, West Papua makes Indonesia possibly the most biodiverse region on the globe, surpassing both Brazil and Columbia. 27 Within this the Freeport mining concession is an area of unique biodiversity, encompassing five clearly defined zones within which fourteen separate and diverse ecosystems or habitats exist. Originally ranging from pristine equatorial glaciers rising more than 4,500 meters above sea level in the alpine zones, the Freeport concession passes through rain forests and down to coastal mangrove forests and the sea in the space ofjust over a hundred miles. The company's operations principally affect three areas: the alpine zone around the mine site; the tailings deposition area in the lowlands, which includes four ecosystems (tidal swamps, peat swamps, meander belt, and alluvial fans), and the coastal region. Much of this area possesses flora and fauna unique to the region, with many species and their secrets yet to be discovered. 28 Freeport's original 1967 contract failed to impose any environmental restrictions on the company's operations. Ertsberg, at the height of its operations, was discharging 25,000 tpd of tailings into the local river system and dumping twice that amount of overburden into the alpine valleys. At the time little, if any, consideration was given to the environment; the company conceded, in retrospect, that in the early years it was guilty of focusing too much attention on engineering and financial concerns. However, Paul Murphy noted that the insignificance of the tailings and overburden at the time warranted little attention. 2 9 With the discovery of Grasberg, Freeport became concerned that adverse attention from environmental NGOS such as WALHI, which had been attempting to monitor the company, could cause difficulties with the new contract and undermine international fundraising efforts. Thus, in 1989 it publicly expressed a commitment to environmentally sustainable development. In late 1990 Freeport hired Bruce Marsh to set up and head Freeport's first environmental department. Reflecting the company's halfhearted commitment to responsible environmental management, when Marsh arrived at the beginning o f j a n u a r y 1991 he was given little assistance: Gaining staff and resources from management [had] required constant pressure and considerable patience. Marsh recalled that when he

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As noted, the company's ambivalent attitude to Marsh and his efforts changed in response to the NGO'S criticism. By 1994 Freeport had formulated its first waste-management and recycling program although recycling was not technically encouraged by the government, which, hungry for revenue, penalized companies that give away recycled material. At the same time Freeport had built a $3 million environmental laboratory, with the newly formed Environmental Department boasting approximately ninety employees. By 1995 the department had an annual operating budget of more than $17 million and a genuine commitment to protect the unique flora and fauna of the area followed.

Biodiversity of the Concession and Lorentz National Park Originally, 45 percent of Freeport's Ertsberg concession was in Lorentz National Park; however, the company eventually relinquished it for an area of equal size to the west of its concession. 31 As part of the company's AMDAL requirements, in 1997 Freeport commissioned the area's first biodiversity study; a second study was completed by Conservation International in 1998. 32 These studies found numerous species of flora and fauna unknown to science, with the diversity and unique quality of fauna being matched, if not surpassed, by the flora of the region. Like the Freeport concession, the park, which forms Freeport's eastern

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boundary, is an area of immense biological significance, WWF describes the park as the most important storehouse of the biological diversity in the Pacific Basin. From the equatorial glaciers in the Carstenez [sic] Range surrounding Mountjaya, to the southern coastline on the Arafura Sea, the reserve contains the most complete range of undisturbed habitats in Irian Jaya, probably in all of Indonesia and possibly in all of the Pacific Basin. . . . Its biodiversity is without equal in the whole of Indonesia, and includes some 81% of Irian Jaya's mammal species and 65% of its bird species. Endemism is the highest of any reserve in Asia. 33

It is also one of only three equatorial regions in the world possessing ice fields, with Puncak Jaya, just six kilometers from the Grasberg mine, home to the Carstensz and Meren glaciers. 34 Because black spots are visible in the glaciers, Freeport's mining operation has been blamed for damage to the ice fields. These black spots, however, are algae, and indicate a healthy glacier. It is generally accepted in the scientific community that all equatorial glaciers, including the Carstensz and Meren glaciers, have been in retreat for approximately the last 150 years and should disappear totally within 100 years, as have the ice field that until the seventies existed just twelve kilometers northwest of Puncak Jaya on Ngga Pilimsit and the glacier visited by H. A. Lorentz in 1907. 35 Although aero magnetic surveys completed by Freeport indicated what are believed to be significant mining targets in Lorentz (one of which Freeport refers to as the "Son of Grasberg"), the company, which still retains exploration permits in the park and has bought up the mining rights, says it has chosen not to pursue these targets. However, in 1998 the urgency of the international gazetting of the park was heightened when two Indonesian mining companies were observed undertaking survey work, which, under existing Indonesian law, allows national parks to be mined because mining is considered to be a higher form of land use than a park. Inconsistencies in the borders of the park have also meant that, among other problems, the southern boundary has been threatened by logging concessions. Under pressure from numerous groups in late 1998, President Habibie agreed to support World Heritage listing of the site—albeit with borders marking a somewhat smaller site than the current listing. At the same time the two mining companies' survey activities were halted. Today Freeport is making efforts to conserve the native flora and fauna in its concession. It has also been contributing significantly to the

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protection of Lorentz (both logistically and financially) and has been instrumental in facilitating invaluable scientific research. The WWF and other institutions, which have worked on the biological categorization and conservation of the park and the Freeport concession, have praised the assistance received from the company, noting that without its financial and logistical support, such programs would have been far more difficult, if not impossible. At the same time they also praise the company's own conservation efforts, with Conservation International noting that Freeport's mining operations have had minimal impact on the park. However, two reports have noted both impacts and potential impacts on the park from tailings disposal while flagging "unspecified" management problems of the park as a result of the company's activities.36 Ignoring the obvious adverse effect of the influx of extraordinary numbers of people attracted by the company's presence, together with the introduced species they bring with them, Freeport recognizes that it is facing two major environmental problems of its own making: tailings and overburden.

TAILINGS Tailings are the residue of the finely ground ore from which precious metals have been extracted. At the Grasberg mill 95 percent to 97 percent of the ore processed ends up as tailings. 37 When Freeport first began operations it was discharging 7,000 tpd into the local river system. However, by mid-1999 the company was disposing of approximately 230,000 tpd into the local river system, or more than 70 million tonnes annually. It also received the personal approval of the president to increase output to a maximum of 300,000 tpd without consultation with the relevant ministries and government utilities, or before any environmental assessment had even begun. 3 8 For a useful comparison, the Ok Tedi mine in neighboring Papua New Guinea (which Australia's BHP said it wants to abandon because it cannot manage the environmental damage from the tailings) has been depositing about 80,000 tpd, or 30 million tonnes, annually into the Fly River and Bougainville, which was closed down by the traditional landowners because of environmental damage, was depositing 140,000 tpd into the Kawerong River. Freeport denies that its tailings are toxic or damaging to the river system. Yet they are the company's greatest environmental problem, for they are highly visible, have caused widespread destruction in the lowlands, and continue to be a focal point for critics. The main issues regarding tailings are the physi-

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cal destruction to the land and flora and fauna of the area, the disputed quality of the river water, and the proposed reclamation and rehabilitation of the tailings deposition area. Because the majority of the world's copper mines use cyanide in a chemical process to extract precious metals, tailings dams are considered essential to contain the cyanide-contaminated water and ore. Freeport's extraction process, however, is not a chemical process but rather a physical one in which the ore is ground and then the metals "floated o f f ' without the use of chemicals such as cyanide. 39 Because of this, and because of the instability of the alpine region resulting from rainfall and seismic activity, the company does not have a traditional tailings dam. Instead, tailings go directly into the Aghawagon River from the mill site at an elevation of approximately 3,000 meters, after which the Aghawagon joins the Otomona River (still in the highlands), and finally meets the Ajkwa River in the lowlands. The relatively flat topography at this point (elevation of only 100 meters) slows the river's flow, and the bulk of the waste ore empties into what essentially has become an enormous tailings dam in the lowlands called the tailings deposition area. The residue of the tailings then moves into the estuary system or flows down to the Arafura Sea. Freeport argues that after extensive studies it found that the disposal of the tailings in such a manner was the safest and best possible alternative given their nature and the difficulties of the site. 40 With regard to the physical problems, as distinct from the chemical ones associated with the discharge, Freeport argued in the early nineties that the tailings represent little more than an acceleration of the natural erosion process for, with the area registering one of the highest rainfalls in the world (approximately eleven meters annually), the flow-through capacity of the river system was powerful enough to cope with anything the company dumped into it. In other words, Freeport was simply speeding up geological time. This argument, however, is misleading. With the natural sediment capacity of the Ajkwa River estimated at 15,000-20,000 tpd, 41 the deposition of more than 200,000 tpd of waste ore, or over ten times the river's natural carrying capacity, has dramatically changed the nature of the river system and cannot realistically be considered part of a natural process. Over time this waste has caused significant siltation on the three river beds, siltation that led to massive flooding in the lowlands in June 1990. This flooding saw the Ajkwa River "sheeting" into the neighboring Minajerwi River and damaging kilometers of land in between. 42 In response Freeport began consolidating a levee system to divert the water toward

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the Minajerwi to prevent the flooding o f its access road and the town o f Timika. By 1995, however, the company's failure to complete this levee system had resulted in the destruction o f at least 33 square kilometers o f forests. With the high-profile court case over O k Tedi mine tailings receiving wide media coverage, and the ACFOA report turning international attention to the neighboring Freeport mine, in 1995 the company reaffirmed its c o m m i t m e n t to the levee plan. 4 3 To this end it allocated $ 2 3 . 4 million to construct two levees through which the lowlands Ajkwa River could meander. More than 35 kilometers (East Levee) and 50 kilometers (West Levee) in length and ranging from 3.5 kilometers to 10 kilometers wide, the levees run either side o f the river. Originally this plan (Tailings and River Management Plan) envisaged the deposition o f sediment over a total area o f about 130 square kilometers, with the levee walls reaching a maximum height o f ten to twelve meters, but averaging only two to five meters. As the ability to increase throughput has grown, so too has the need to update and reformulate this plan. By D e c e m b e r 1997 the original plan had been revised to manage an increase in tailings o f up to 300,000 tpd and a cumulative deposition o f up to 3 billion tonnes. Named the Modified Ajkwa Deposition Area (ADA) Plan, it calls for the containm e n t o f the tailings within an expanded area o f 230 square kilometers, with revised estimates showing the levee walls averaging ten meters but rising as high as twenty-five meters in some areas. Presently F r e e p o r t claims that o f the fine-grained tailings only 5 - 1 0 p e r c e n t escape the ADA into the downstream estuary and coastal marine environment, although over time this p e r c e n t a g e is e x p e c t e d to increase to approximately 33 percent. During April-May 2 0 0 0 a ship f r o m the Indonesian Institute o f Sciences ( L e m b a g a Ilmu P e n g e t a h u a n Indonesia; LIPI) studying the seabed reported that a natural depression was full o f sediment for a distance o f approximately sixty miles out f r o m the shore. It also n o t e d that this sediment "appeared to contain heavy metals." 4 4 W h a t percentage o f this sedimentation is part o f a natural p h e n o m e n o n and what caused by the m i n e was not noted. In April 2 0 0 1 WALHI a n n o u n c e d that data produced by a National Space and Aviation Institute using T h e m a t i c Mapper Landsat 7 T M indicated that F r e e p o r t tailings had already polluted 8 4 , 1 5 8 hectares ( 3 3 6 . 6 square miles) offshore and 3 5 , 8 2 0 hectares ( 1 4 3 . 3 square miles) o n s h o r e with such pollution spreading to the Lorentz National Park. 4 5 Given company predictions that downstream sediment deposits from the tailings will rise substantially over the c o m i n g years, the potential for an ecological disaster within the marine and estuary environment must b e o f grave concern.

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The question of disposal is not the only contentious issue regarding the tailings. Although it is accepted today that no cyanide is used in the extraction process, critics do not accept the company's claim that the tailings are inert sand. Because the mine is so rich in copper, about two hundred tonnes of this metal are lost to the tailings each year.46 Freeport argues that the mixing of the tailings with limestone at the source, together with the limestone in the riverbed, neutralizes this copper. However, this claim continues to be challenged. The issue of elevated copper levels in the tailings was flagged in 1996 by Freeport's own independent audit performed by Dames and Moore. While the report confirmed that registered copper levels met required standards, it noted that it had concerns with Freeport's monitoring process and that therefore copper levels may have been much greater than Freeport's studies showed. 47 Both Dames and Moore and a second environmental audit by Montgomery Watson Indonesia in 1999 reported higher copper levels in the lower river around the port site although, unaccountably, neither audit made any attempt to explain this anomaly. Moreover, both companies, while questioning Freeport's data, failed to take their own samples. In 1997 the PT Hatfindo Prima biodiversity study for Freeport's found that mine tailings had an adverse effect on aquatic insects, although it failed to specify whether this was because of the chemical composition of the river or because of the physical changes to the river resulting from deposition of tailings.48 At the same time, according to Project Underground, PT Sucofindo, Freeport's own Indonesian environmental audit firm, found mercury levels in the river far exceeding levels safe for aquatic life or human consumption. 49 While the company today claims that its biological sampling indicates that a "comparable numbers of species and aquatic organisms" can be found downstream of the tailings as can be found in the rivers free of tailings, it does not indicate whether or not the composition of the species differs, or the state of health of each species. 50 Finally, there is concern that future weathering of the ADA could lead to acid mine drainage (AMD), thereby contaminating the water table around the area.51

AMDAL

To prove to its critics that the tailings were nontoxic, testing them became a priority for the company. In August 1992 it commenced trials to grow crops and revegetate tailings on a 180-acre plot; the results allowed it to claim that, when deposited in the lowlands, tailings, though lacking in nutrients, are nontoxic. Once planted with grasses, the waste ore quickly gathers nutrients, oxygen, and organic matter and, without the use of chemicals, is able to support all naturally occurring local flora together with a huge variety of exotic species. 52 To further support the

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validity of its own findings, the company offers its $3 million environmental laboratory, which in 1996 was awarded the highest classification for such facilities by BAPEDAL and in 1999 was granted the internationally recognized iso Guide 25 Certificate of the International Organization for Standardization for environmental standards and procedures. 53 Every month Freeport states that thousands of samples of water, soil, and plant and aquatic life are taken from within the concession area and analyzed at the laboratory, allowing Freeport to claim that neither the river nor the tailings it carries are toxic. 54 In 2000 the company also undertook what it describes as possibly "the most extensive privately funded ecological risk assessment ever conducted" of its tailings management plan, attempting to flag risks and potential risks arising from the deposition of tailings.55 Although at the time of writing Freeport had stated that it had identified certain risks it had not as yet made these public. Often the validity of Freeport's data is questioned because tests results are stored in the company's private database and not accessible to the public. 56 One hopes that this will not be the case with this latest ecological risk assessment. To gain a greater understanding of the effect of the tailings on aquatic life, the Montgomery Watson External Environmental Audit recommended, Freeport should analyze the copper concentrates in the less mobile mollusk and shrimp communities rather than the highly mobile species less likely to be affected. 57 By early 2001 Freeport confirmed that its own tests indicated that some mollusks showed signs of elevated copper levels, forcing the company to begin an aquaculture project to provide mollusks suitable for local consumption. 58 Moreover, it would appear that Freeport had been aware of toxicity problems back in 1993, when an internal company memo confirmed that there were "some indications that dissolved copper concentrations exceed [ing] fish toxicity levels from time to time especially in the Minajerwi River." The same memo also noted that "other potential problems at higher production levels or if pH drops could be Arsenic and Aluminium."59 Stuart Miller, managing director of Environmental Geochemistry International (EGI) of Australia, has worked with Freeport since 1992 to monitor and devise management plans for the mine's tailings and overburden. According to Miller the Grasberg mine waste is relatively free of problematic metals such as arsenic, lead, and mercury, although he confirms that the high copper and high sulfide content of the ore make copper leaching and acid mine drainage the main environmental concerns of the company. To offset this problem, limestone and other carbonates associated naturally with ore from the underground mines are blended

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with the Grasberg ore during the milling process, a procedure that, together with the natural limestone qualities of the riverbed, Miller believes, has successfully controlled acid generation and copper leaching in the tailings. 60 Miller also believes that under tailings manager Russell Dodt, the company had a strong commitment to environmentally responsible tailings management and confirmed in 1999 that his own company's studies show that the tailings were not toxic, nor acid generating. However, Miller asserts that future results will depend on the ore types mined and the blends. The local population care little for scientific data or for the company's protestations of innocence and offer as evidence their own experiences and the visual and practical impact of the tailings on themselves and their environment. Toxicity is not the only concern of these people. The extraordinary physical destruction of the landscape has destroyed their rivers; consumed their gardens, fishing, and hunting areas; and separated them from their resources and livelihood, forcing uncomfortable relocation on another's land. Although tailings have continually occupied the environmental spotlight, one of the greatest threats to the environment today is overburden storage.

OVERBURDEN Overburden is rock that is not processed but must be moved aside during the extraction process so that the mining company can reach the metal-bearing ore. With five tonnes of rock needing to be moved to extract 1.5 grams of gold, in 2001 the company was moving more than 750,000 tpd, of which approximately 230,000 tpd was processed into tailings and the remainder d u m p e d as overburden. At currently expected throughput rates, the company predicts that the Grasberg mine will produce more than four billion tonnes of overburden, which will be d u m p e d in the surrounding valleys and lakes of Carstensz Meadow, West Grasberg, and the Wanagon Valley. As with tailings, the two major areas of concern regarding overburden are storage and toxicity. The current mine plan indicates that limestone will become the dominant overburden waste type after 2004, therein providing a natural buffer to the waste. In the interim the company is relying on collecting the AMD and treating it with limestone. Like the tailings, the overburden currently being produced at Grasberg is naturally high in sulfide and copper and low in the buffering agent limestone so that copper leaching and AMD at the overburden sites are constant issues. While noting

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these concerns, both Dames and Moore and Montgomery Watson concluded that the company was practicing the "best management practice for overburden disposal in the circumstances." 61 However, almost all overburden mined to date has been acid generating, with a high capacity to leach copper. As a result, the drainage and seepage from the overburden stockpiles currently contain high concentrations of copper, acid, and associated metals such as aluminum and iron. With regard to the Lake Wanagon dump site, Freeport has been treating the drainage entering the lake from the above dump site for a number of years to maintain a near neutral pH and to precipitate copper, aluminum, and iron from the seepage. Nevertheless, these precipitates have been accumulating in the lake. At the same time there is a great deal of uncertainty about the actual fate of seepage within the karst system underlying the overburden dumps. 6 2 To address these concerns the sulfides in the rock need to be effectively isolated from atmospheric oxygen or the rock blended with sufficient limestone to neutralize the potential acidity. The problem Freeport continually faces is to develop and effectively implement operational procedures that will achieve the level of blending and cover-layer thickness required. While Miller believes that the company is officially committed to responsible overburden management and AMD control, there remain significant operational and overburden scheduling issues that must be resolved before long-term AMD control can be achieved. Despite the statement by Montgomery Watson that Freeport does not intend to allow leaching for later copper recovery, ore that exhibits higher AMD potential is reported to have been stored separately, in anticipation of milling at a later stage. 63 Moreover, at mid-2000, overburden storage practices had failed to establish an appropriate blend of ore and neutralizing agents, a failure that seems to indicate a general ambivalence with regard to this issue: should the company prevent copper leaching at the dump sites or encourage it so that the copper can be recovered at some later date? The absence of such a commitment has long-term negative ramifications for the environment. Many of the problems associated with overburden storage may have arisen when Bruce Marsh left Freeport's Environmental Department in 1998, leaving no clear chain of command or decision-making authority; the responsibility for mixing overburden to avoid copper leaching was left to the individual managers of the various mine sites. The apparent practice of placing these managers on a bonus system linked to productivity tended to act as a deterrent to responsible overburden management. A year later Marsh was enticed back to West Papua to complete

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what he described as "unfinished business." To examine operation procedures for limestone blending, the company has had full-scale trial dumps constructed on site. Results from these trials form the basis of future operational procedures for blending and ongoing overburden management for AMD control. The company has opted to eventually construct a fluid-bed reactor iron cementation plant at the mill site to collect and treat AMD by removing the copper, which can then be sold on Freeport's markets. In the long term, Freeport says, it has a plan to eventually cover the overburden with about a hundred meters of non-acidproducing rock; the plan calls for an initial layer of clay on top of which is placed up to twenty meters of inert rock. With overburden being dumped up to 450 meters deep at some sites in the highlands, the physical changes to the landscape, together with the extraordinary level of precipitation, make slippage and landslides perennial concerns. In 1999 the Montgomery Watson Executive Summary released by Freeport noted that there was "a degree of risk associated with the construction and operation of the Wanagon" overburden site, although details were not given. 64 Six months later four hundred tonnes of waste rock slipped into Lake Wanagon from the overburden dump site above the lake. As a result a fifty-foot wave moved across the surface of the water, blowing away the lip and the dam wall Freeport had built to contain the copper-impregnated treatment sludge. Spilling into the Wanagon River, this massive wall of water; copper, aluminum, and iron sludge; and waste rock passed down by Banti village, sixteen kilometers below the lake, and into the tailings deposition area in the lowlands. Pigs from Banti village, housed beside the river, were washed away, and four subcontractors who had been working below the lake have never been found. Although Freeport claimed that the early warning system it had installed in the village worked, the villagers state that it did not. A catastrophe was prevented only by the thundering sound and the shaking of the earth that preceded the approaching wall of water and sludge. Freeport blamed high levels of precipitation for the slip, but this argument is questionable. The area has one of the highest rainfalls in the world; moreover, it rains nearly every day. Precipitation can hardly be claimed to have caused the accident. The dumping of massive amounts of fine-grained overburden, which readily absorbed precipitation, can. Freeport agreed to move Banti village to a higher and safer location chosen by the villagers. With this being the third such incident in two years (20 June 1998, 20-21 March 2000, and 4 May 2000), although the first loss of life, the government called on Freeport to close the Wanagon dump site pending

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further investigation into its safety and future use. The company lowered throughput rates to 185,000 tpd while devising a stabilization plan at the lake that entailed the "placement of eight million metric tons of overburden on the Wanagon overburden stockpile." 65 At the same time the Department of Mines demanded that the company reach an MOU with the residents of Banti village before the lake could be used again for such purposes. However, Freeport does not mention this demand, claiming in a vague fashion that the MOU was signed at the request of some of the villagers. 66 With a Freeport director stating that "the process of discussions had to be moved forward more quickly than was anticipated" (because the company needed the Wanagon site opened quickly to lift production again), the Amungme came under intense pressure from the company to sign the document. 6 7 A formal lunch was organized for the landowners' representatives in Tembagapura just before Christmas, but they refused to sign, for once again they were feeling railroaded. On 27 December the company obtained the signatures it required by persuading the Amungme representatives to sign individually. On 8January 2001 the director general of mining announced that an independent inquiry had concluded that Freeport had the permission of the local people and that it was safe to continue dumping at Wanagon. Three months after the signing a director of the company admitted that, although Freeport had told the government it had an agreement, the consultation with the traditional owners was "not yet complete." 68 In concluding its assessment, Montgomery Watson stated that "subject to a thorough understanding of the groundwater regime in the process area, including the Wanagon Overburden Stockpile, the current ARD (acid rock or mine drainage) management program is adequate." 69 However, this statement is difficult to substantiate. How can something be judged "adequate" when it is not fully understood? As the report noted at the time, "Neither a hydraulic model nor monitoring wells have been developed to demonstrate that groundwater contamination outside the process area is not occurring." 70 The extent of the long-term damage to the environment from the mine is still unknown, for the company does not fully understand the dynamics of the water table in the alpine region. The mountains are essentially limestone with myriad underground connections comprising a vast honeycomb network. Little springs in the alpine region have been contaminated even though they have no surface connection to the mine and its overburden. In 2000 a spring in Tsinga village (which is many kilometers from the overburden dump sites) turned blue, indicating the existence of copper sulphate. A Freeport hydro-geologist believes that groundwater from the overburden dump sites naturally runs toward this village.

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The connection between the surface and deep underground is so great that a natural underground tube existing six hundred to seven hundred meters below the surface runs dry after three days without rain. While it is accepted that in a short time Lake Wanagon will no longer exist, what is not commonly known is that a series of beautiful pink, orange, and red lakes in the highlands have all disappeared since Grasberg commenced, as might the unique Fairy Lakes to the northwest of Grasberg disappear if the overburden sites rise too high. 7 1 How all those little lakes and sinkholes in the alpine region are interconnected or, indeed, how they were formed, is not fully understood. However, with such a strong interconnection between the surface and underground water, any change to groundwater will obviously have ramifications deep within the mountain range. Until Freeport has a complete understanding of the interrelationship between the surface and underground, it cannot fully understand the impact its overburden disposal is having in the alpine region, either now or long into the future.

MINE CLOSURE Neither Freeport's 1967 contract nor its 1991 contract detailed a mine closure plan. It was not until 1996, as part of its deal with the U.S. Overseas Private Investment Corporation (OPIC; to be discussed), that Freeport committed itself to providing a $100 million mine closure fund for the eventual rehabilitation of the mine site. 72 The company estimates that by the end of the current mine's life (approximately 2041), there will be at least 20 square miles at the mine site and at least 230 square miles in the tailings deposition area in the lowlands to be reclaimed and revegetated. Should the company expand its operations, these areas will also expand. While the company confirms claims that such an amount may not fully cover the costs of the total reclamation, it nevertheless reaffirms its commitment to the process, stating that the rehabilitation fund has grown to $150 million. 7 3 Given the experience of other mines, such as Bunker Hill in the United States, where mine closure costs and ongoing monitoring are predicted to run into the billions, the $150 million allocated in depreciated dollars would have little impact in forty years' time. The minister for the environment under President Wahid, Sonny Keraf, informed Freeport that it must produce a comprehensive closure plan for the mine. Despite all professed good intentions, what cannot be reversed are the physical and visual changes to the alpine landscape resulting from

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Freeport's activities. Ertsberg has become, and Grasberg will become, a huge hole in the earth filled with copper-impregnated water. And when Freeport departs, the landscape above and below the surface will be altered irreversibly, with the effects being felt for at least another hundred years. Not only is it predicted that copper leaching will continue from the overburden sites for that length of time but, as noted, the longterm and short-term effects underground are still unknown.

OPIC INSURANCE CANCELLATION After operating for more than twenty years without adverse international attention, Freeport's operation in West Papua became world headlines in late 1995. The attention resulted in the close and unwelcome scrutiny of its operations and culminated in the cancellation in October of the company's $100 million political risk insurance policy with OPIC, which is a federal government agency. 74 Officially, OPIC'S cancellation was for environmental reasons, according to U.S. federal law, the agency must take human rights and environmental and health and safety issues into consideration when issuing insurance. It accused Freeport of breaching its insurance contract by "vastly misrepresenting its activities" when it increased the amount of ore processed from 52,000 tpd (the maximum stated in the insurance contract) to more than 100,000 tpd. It also stated that the increase in tailings "posed an unreasonable or major environmental, health, or safety hazard in Irian Jaya." 75 Although these were the official reasons for the cancellation, the timing of events led to speculation that human rights considerations were the real catalyst.76 Just one month after the Munninghoff report was made public, O P i c privately warned Freeport-McMoRan that it intended to cancel the policy for environmental reasons and requested that it simply withdraw the policy to avoid any adverse publicity associated with an official cancellation. Freeport refused to comply with the request, for a cancellation of the insurance policy just when it was defending itself against allegations of serious human rights violations would have been politically damaging. Moreover, it probably believed that it would be able to use its influence in Washington to have the threatened cancellation overturned. On 10 October 1995 Freeport-McMoRan received a letter from OPIC advising that the cancellation of the insurance policy would be effective as of 31 October 1995.77 The company immediately took action to defuse the situation before it became public, calling in debts with groups, individuals, government institutions, and associations that had received financial

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support from Freeport-McMoRan rallied to its defense. 7 8 While those with little influence made public their support of the company, others made larger contributions. Henry Kissinger lobbied his contacts in the State Department while Freeport-McMoRan's CEO called on his numerous political allies in the U.S. Congress. Finally, just days before the official cancellation date, it was reported that Suharto personally lobbied Clinton. 7 9 Although Freeport was not without powerful connections, its efforts failed. 8 0 On October 31 1995 OPIC did the unthinkable and officially and publicly cancelled the American company's insurance policy. This cancellation was damning not only for Freeport but also for Jakarta, which had been under domestic pressure for its refusal to oversee Freeport's operations. Upon the announcement of the cancellation, Sarwono Kusumaatmadja, the Indonesian minister for the environment, reputedly blamed Freeport for the embarrassing fiasco, claiming it had never satisfactorily completed its 1990 AMDAL. In Sarwono's words, "I told Freeport a long time ago to do its environmental auditing. If they had done it then, the result would not have been this bad." 8 1 Sarwono's statement is interesting not so much for what he says, but for what it demonstrates about the relationship between the government and Freeport. It is clear from the statement that although the minister was unhappy with Freeport's performance, the company did not feel compelled to comply with the law with regard to its EIA. Freeport's approach bears out previous reports of the lack of enforcement provisions within the bureaucracy and is testimony to the influence of the giant mining company with close links to Suharto. Freeport immediately attempted to play down the significance of the cancellation by stating that the decision was essentially a reaction by OPIC to pressure from environmental groups rather than a result of any wrongdoing by the company. It also argued that the insurance was not financially significant. Given that the investment in West Papua was about $4 billion, it was true that the cancellation of a $100 million insurance policy was of little financial significance. What was significant, however, was the political effect. This was the first time in its twenty-five-year history that the federal insurance agency had ever cancelled a policy. Freeport feared that the negative publicity, coming on top of allegations of human rights violations, would adversely affect the share price and its ability to raise money to build the smelter in Gresik and possibly jeopardize the enormous tax breaks it received from Washington. At the same time the action embarrassed Suharto. In response to rumors that the Multilateral Investment Guarantee Agency (MIGA) was also considering canceling its political risk policy, Freeport, aware that it may have

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been able to weather one high-profile cancellation but that a second would be a public relations disaster, preempted any action by MIGA by canceling its policy first.82 Having failed to influence events from behind the scenes, Freeport moved into the public arena. It hired James Woolsey, former director of the U.S. Central Intelligence Agency (CIA), to represent the company in legal proceedings challenging the OPIC decision. As part of an extensive nationwide campaign it aired a half-hour documentary in New Orleans, flew twenty-three investment consultants by private jet to the mine, and placed a two-page advertisement in the New York Times in which it defended its environmental and human rights record. It also threatened litigation against its critics, a move that earned it the New York Times 'Academic Freedom Award. Finally, Freeport once again called on its Washington connections and used its influence in the U.S. Senate to block the presidential nomination of Jeffrey Schafer, who, at the time of the OPIC insurance cancellation, had been on the board of the agency. Louisiana's senator, John Breaux, demanded that Schafer supply "information on what role environmental groups and other outside organizations played in the investment agency's decision to cancel Freeport's political risk insurance."83 In response the Treasury Department supplied the relevant information to Breaux, who allegedly passed it on to Freeport. In April 1996, the same day that the results of an environmental report on the company performed by Dames and Moore was announced, Freeport and OPIC issued ajoint statement advising that they had reconciled their differences, OPIC agreed to reinstate the policy, but only until 31 December 1996, under the conditions that OPIC would be allowed to monitor the implementation of recommended changes to the company's operations and that Freeport would agree to create a $100 million mine closure fund. In return Freeport dropped its action against the federal agency. Freeport critics then sought access to the OPIC documents under the Freedom of Information Act. Freeport instigated a lawsuit to counter this move. In August 1999 the court ruled in the claimants' favor. T h e documents obtained apparently revealed that with arbitration ready to rule in OPIC'S favor, Ruth Harkin, OPIC president, sent a handwritten note to Moffett requesting a meeting to "find some alternate solution" to litigation. 84 Eleven days later OPIC and Freeport made their joint announcement, after which Harkin is reported to have bragged that she secured Moffett's consent to "contribute $100,000 to the Democratic National Committee [DNC]."85 Federal Election Commission documents confirm that in August and December of that year

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the company and its executives and their wives contributed a total of $77,500 to the DNC.86 Freeport's slant on these events is that the reclamation fund, which supposedlyjustified the reinstatement of the policy, was simply a gesture from the company to allow OPIC, and in particular Ruth Harkin, to save face, as the Dames and Moore audit effectively disproved their claims of environmental mismanagement. In return the company says that Harkin agreed to publicly clear the company of any wrongdoing. Harkin has never made such a statement. Why Freeport would possibly wish to assist Harkin to save face remains a mystery.

INDEPENDENT ENVIRONMENTAL ASSESSMENTS As part of the attempt to clear its name, in September 1995 Freeport commissioned two international consultancy firms to perform what were promoted as voluntary and independent social and environmental audits, which were to be released to the public. Although emphatically stating that the decision to commission reports was not a response to public criticism, but rather a voluntary response to comments made by the minister, the findings were of the utmost importance to both Freeport and Jakarta. For Jakarta, a favorable report was crucial to dispel embarrassing international and domestic criticism. At the same time it would allay any fears the international mining community might have with regard to Indonesian environmental policy. And while Freeport chose to base its reputation upon the two reports, it also needed them to end the spate of highly damaging criticisms of its operations and to smooth over relations with Jakarta. Finally, it was also looking for favorable reports to assist in its legal action against OPIC. Freeport claims it chose Dames and Moore (environment) and LABAT-Anderson (social) because they were the best companies for the jobs. Freeport's critics question these choices, stating that Dames and Moore already had extensive and well-established links with Freeport dating back many years. 87 The criteria used for the Dames and Moore assessment were the environmental laws of Indonesia within a conceptual framework called "best industry practices." 88 That is, Dames and Moore's evaluation was to make allowances for the difficulties of the site location or "site specific" considerations. While eventually finding that the mine's operations complied with all aspects of Indonesian environmental law and were within the framework of best industry practice, it noted that Freeport's operations had a significant impact on the environment and that "mitigating and minimizing those impacts pose formidable challenges." In

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conclusion, it noted that once the recommendations it had made within the report were fully implemented, Freeport's environmental managem e n t performance would "meet world class standards." 8 9 This assessment was c o n d e m n e d by the company's critics, with the Indonesian Center for Environmental Law (icel) claiming that it not only "fail[ed] to fully analyze Freeport's compliance with existing environmental legislation" but "some of Dames and Moore report's recommendations suggest possible severe breaches of that law."90 Dames and Moore's aforementioned claim that Freeport's testing procedures may have been faulty indicates that this "independent" audit relied on Freeport results rather than on newly collected data, walhi unsuccessfully called on Freeport to release all figures used for i n d e p e n d e n t assessment, believing the final product to have been heavily censored. 9 1 Given that Paul Murphy spent a week with Ros Kelly (head of the Dames and Moore team) discussing the study before the final report was written, the i n d e p e n d e n c e of the report must be questioned. 9 2 In January 2000 Freeport publicized a second external environmental report, completed by Montgomery Watson in December 1999, which confirmed the company's claim that it had addressed all Dames and Moore recommendations and concluded that "Freeport [had] a proven track record of operating the mine and a p p u r t e n a n t facilities at a level that meets or exceeds the standard of practice demonstrated in large, world-scale mining operations." 9 3 However, serious flaws have also been flagged in this report. As noted, one of the most damaging aspects of the report was that Montgomery Watson, like Dames and Moore, did not take its own samples despite the fact that sampling was flagged as "a key c o m p o n e n t of the scope of work." 94 T h e most comprehensive critique of the Montgomery report was by the Seattle Mennonite Church, a Freeport-McMoRan shareholder. In its submission to the company, the church d o c u m e n t e d more than 150 areas of concern, noting that the report suffered f r o m a propensity to describe rather than analyze and that conclusions lacked the necessary supporting evidence or were vague, contradictory, or simply incorrect. Moreover, there appeared to be evidence within the report that when Freeport failed to comply with contractual requirements, Jakarta simply adjusted the level of commitment. This also seems to be a criticism that could be leveled at Dames and Moore. U n d e r the recommendation of Dames and Moore, Freeport, in late 1999, successfully applied to Jakarta to have the tailings exempt f r o m the current hazardous waste, or B3, classification, with the river system being classified as a mining and tailings transport and disposal system. 95 Finally, and most challenging to the Montgomery report's

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claim of independence, was Montgomery Watson's attempt to lobby the government on behalf of the company. 96 The Mennonite Church critique that the audit resembled a promotional brochure could also be leveled at Dames and Moore's report.

FREEPORT AND ITS CRITICS Freeport and a number of NGOS have for years been locked in a power struggle, so that Freeport was quite correct when it claimed in 1996 that certain NGOS were waging a campaign within OPIC and MIGA. In fact, the campaign had a far broader focus than just the two insurance agencies. In response to what the Indonesian NGOS saw as complicity between their government and the transnational, they took their campaign against the company to where human rights and environmental campaigns would have the greatest impact: the company's home state. Thus, as part of an international campaign to bring pressure to bear on Freeport to address environmental and social issues in West Papua, WALHI and a group of international NGOS lobbied not only OPIC and MIGA, but also the company's bankers and shareholders. Simultaneously they encouraged and supported the traditional landowners' litigation in the U.S. courts. The NGOS ran a highly organized and successful campaign and actually succeeded where the Jakarta bureaucracy had failed in forcing Freeport to address the issues the local landowners and the NGOS were flagging. Freeport had good reason to feel that it was being attacked from all quarters, including the Indonesian national front. In the early nineties a number of NGOS, including WALHI, had tried but failed to gain access to the Freeport concession or to get adequate responses from the government regarding their suspicions of environmental damage. Before its 1991 contract was signed, the company was required to undertake an AMDAL. In an attempt to control the outspoken NGO, Jakarta gave WALHI a nonpermanent seat on the AMDAL Commission with unwritten conditions of membership that barred it from collecting or independently analyzing samples, speaking directly to the press without first gaining permission from Freeport, or sharing information with others. 97 After reviewing the long-awaited AMDAL (the contract was signed in 1991, although the AMDAL was not completed until 22 December 1994), the commission rejected the report, requesting that the company make changes and resubmit, taking into account the fourfold increase in tailings from when it began the AMDAL (1991) and when it was completed (1994). Much to Jakarta and Freeport's dismay, it

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appeared that, rather than their controlling WALHI, the NGO was exerting its influence within the commission. In response Freeport and the Department of Mines and Energy held a joint press conference aimed at downplaying the AMDAL rejection. Despite WALHI'S belief that Freeport's quickly revised assessment also failed to fulfill AMDAL specifications or fully take into account the increase in tailings (a fact later confirmed by the minister for the environment), it was approved by the Department of Mines on 17 February 1995. To counter WALHL's influence, Freeport began a campaign to undermine the organization in the United States from where it received substantial funding. It was reported that "a top official" in Washington formally requested that government funding through USAID to WALHI be severed. 98 Paul Murphy also wrote personally to USAID and the American embassy in Jakarta suggesting that they reconsider support for WALHI and made a number of accusations, including the statement that WALHI was a radical NGO by way of its association with other "radical international 99 NGOS such as Earth First, Friends of the Earth and Greenpeace." While stating that WALHI was harassing Freeport, he insinuated that such harassment could well happen to other U.S. companies operating in Indonesia. Finally, he informed the embassy that it would find its support for 100 WALHI difficult to justify to "US taxpayers and the Congress." USAID responded by increasing funding to the NGO by $250,000. Six months before Suharto fell, the minister for the environment was quoted as saying that Freeport's own environmental assessment for its AMDAL was the most comprehensive that BAPEDAL had ever seen. However, in the absence of the company's powerful protector, Freeport came under renewed attack from both the NGO community and the new environment ministry. The new minister, Sonny Keraf, announced in February 2000 that the Montgomery Watson audit, selected parts of which Freeport had made public the previous month, was incomplete. He added that, for the first time in the company's history, BAPEDAL (of which he was chairman) would conduct its own environmental audit of the operation, and should Freeport be found guilty of unacceptable environmental damage, its contract would be reviewed. However, in a clear indication of the hurdles facing even Indonesian government environmental agencies, BAPEDAL stated that it would "seek financial assistance from independent parties to finance the study."101 Resorting to familiar behavior, Freeport called for high-profile support. As noted previously, Henry Kissinger visited President Wahid to defend Freeport's interests with the dire warning that Indonesia risked future investment should it not honor its existing contracts. In response

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the president confirmed that Freeport's contract was assured and offered Dr. Kissinger the position of personal adviser to the president. Moffett, in turn, requested a meeting with Sonny. Claiming he did not consider himself knowledgeable enough about Freeport at the time, the minister rejected the request as premature. Not used to rejection, Moffett enlisted the services of another minister, Laksamana Sukardi, to apply pressure on his behalf. Acceding to his friend and fellow minister's request, Sonny officially met with Moffett, but, according to Sonny, when he refused Moffett's request for a private two-minute tête-à-tête after the official meeting, the Freeport CEO complained to the United States ambassador, Robert Gelbard. 102 Gelbard, accompanied by senior state department official Thomas Pickering, complained to Sonny and announced that the government was unfairly victimizing American companies. The resultant BAPEDAL report in September 2000 flagged serious concerns with the company's operation, including the charge that the company was not meeting national and international mining standards and had caused the greatest "environmental destruction in the eastern part of Indonesia." 103 As a result the minister claimed that Freeport's highly selective and premature publication of the Montgomery Watson report the previous January had deliberately misled the public. Moreover, launching another salvo at Freeport, the minister stated that critical "reports prepared by a number of non-government organizations on the negative impacts of tailing disposal [by Freeport] . . . all [had] scientific grounds." 104 With the handing over of greater authority to provincial governments, local authorities are beginning to pressure Freeport. In August 2001 the West Papuan head of the regency adjoining the Freeport operation announced that the company had been unofficially conducting underground mining in his area of jurisdiction and therefore the regency should receive a higher share of provincial royalty payments from the company. A week later the province's office of mining and energy announced that it would conduct environmental and technical inspections of the mining operation. With the demise of Suharto, a more assertive environmental minister, and Freeport out of favor, WAI.HI took the opportunity of directly challenging Freeport in the Indonesian courts for the first time. It argued that Freeport was not only causing gross environmental damage, but had deliberately misled the public, the House of Representatives commission, and its shareholders over the Lake Wanagon accident the previous May. According to WALHI, Freeport claimed incorrectly that the accident had resulted from natural causes, did not pose a risk to human health, and had no impact on the environment, and that and the early warning system

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had worked perfectly in Banti village. Given the NGO's frustration with the Indonesian courts, it also suggested that the environmental laws should be amended to a reverse burden of proof. These moves, however, were simply part of a larger, well-publicized campaign against the company to pressure Indonesian officials to agree to an independent environmental audit and a review of the contract. 105 With Freeport and Gelbard believing that the ministry's attack on Freeport was a direct response to WALHI'S campaign, Gelbard became the second American ambassador to Indonesia to pressure USAID to cut funding to WALHI. 1 0 6 On 28 August 2001 the South Jakarta court ruled in WALHI'S favor, stating that "the defendant did not reveal what actually occurred during the incident. In parliament they gave information that was contradictory. . . . It was manipulative and misleading." 107 According to the judge, Freeport violated Law No. 23/1997 pertaining to the provision of accurate information on environmental management. He also ordered the company to minimize the production of waste containing dangerous and poisonous substances going into Wanagon. For the first time WALHI had won an environmental case. On its Web site the company proclaims, "It is our goal—by taking a strong position at the forefront of the international mining industry— to also be a leader in working toward sustainability. We regard this as a key responsibility." Moreover, as a member of the ICME, Freeport professes to commit itself to home-state environmental standards. 108 The environmental movement, however, believes that ICME and its members green-wash their activities—that is, they cover up environmental destruction through the creation of a proenvironmental media image. When asked how Freeport's environmental standards compare with those in the United States, a company spokesperson stated that "our environmental programs are the same, if not better, than those in the US," although qualifying his reply with the statement that the site in West Papua is unique and, therefore, outside conventional operational standards. 109 With the 2000 BAPEDAL audit finding that suspended solids in the tailings not only exceeded industry standards but were ten times above what is allowed in the United States, the company's statements of environmental compliance, commitment, and conscientiousness are hard to defend. 1 1 0 Furthermore, it is illegal under the U.S. Clean Water Act to deposit tailings into any river system, regardless of toxicity levels or the difficulties of site location. Nor would the company be allowed to destroy hundreds of square kilometers of pristine and significantly biodiverse land or d u m p sewerage directly into the local river system in its home state. 111 The concepts of "best industry practice" or "site specific"

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are contentious issues for those interested in protecting the environment, as they relate solely to specific sites and can lead to irresponsible environmental practices, especially in the developing world. Moreover, laws in nations such as Suharto's Indonesia were easily undermined by lax monitoring procedures, friends in high places, or both. In the United States, where Freeport-McMoRan is in the business of fertilizer production and real estate development, its environmental record is also contentious, with the company being accused of using its political influence and its position on lobby groups to actively undermine environmental regulations. Not only did Freeport-McMoRan have the dubious distinction of being cited as the world's sixth-largest toxicwater discharger, 112 but, according to the federal Environmental Protection Agency (EPA), Freeport's discharge of millions of tonnes of radioactive gypsum into the Mississippi River earned it the distinction, in both 1988 and 1993, of being "the biggest corporate polluter of land, air and water in North America" in both volume and toxicity. 113

CONCLUSION Under Suharto the vast natural riches of the archipelago were exploited to fuel the patronage system and to fund development and economic growth. Patronage and development allowed Suharto to stay in power and hold the constructed nation together. And while those within the nation most affected by the destruction of the natural environment had little power or ability to protect their interests, there was no pressure from within Indonesia's elite to place environmental concerns at the forefront of government policy. Thus, Freeport's commitment to environmental protection in its concession area is a case study of the conflicting pressures of profit maximization, advantageous relations with government, and NGO criticism. With regard to the relationship between the company and Jakarta, a distinction needs to be drawn between the bureaucracy and Suharto. Although elements within the bureaucracy under Suharto may have desired more accountability from the company, its close ties to the president prevented such a possibility: Suharto simply had no interest in demanding anything that would limit the profits of his favorite transnational. It was the pressure from the NGO community, both nationally and internationally, that forced Freeport to change is operations. Today the company states that it is spending more than $40 million annually on environmental programs, and it estimates that environmental management

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and monitoring costs for the mine's life will be approximately $1.6 billion. At the same time scientists have applauded the efforts the company is making toward protection of the biodiversity of the region, arguing that without the company, the job of studying and cataloguing the area would be much harder. However, they also recognize that without the company, the j o b of protecting the environment would also be a lot easier. Having belatedly embraced environmental awareness, Freeport argues that it is today operating responsibly. Its critics, however, continue to complain that what is embraced by Freeport, and considered by the mining industry to be "best industry practice," is simply not good enough. At the same time the traditional landowners point out the obvious: their land is being destroyed. Given the unique environment and the philosophy of NGOs, Freeport recognizes that it will probably never be able to satisfy all of its detractors, for it will always be viewed by some as unacceptably destructive. The best the company hopes to achieve is a minimization of the opportunities available to its critics. In this regard, until the company allows a genuinely independent environmental audit of its operations—one where it does not pay the auditors, where it has no control over the final report, where free access is given, and where independent samples are taken and analyzed—the company will continue to be damned. And until Freeport more fully understands the dynamics of the karst system of the alpine region and addresses the potentially disastrous ramifications to the marine environment of its tailings, it cannot suppose to predict the extent of the long-term damage its operations will have on these unique and important ecosystems. While he was minister, Sonny Keraf continually stated that it was not his intention to close Freeport down and that he was not discriminating against certain companies, such as Freeport. Rather, he claimed that he was focusing on enforcing environmental compliance and believed that he had made some ground. However, before the ruling on the Freeport case, he saw little room for optimism: "Evidently, after these two years, not a single company has been brought before the courts for environmental offences. . . . In this matter, you can say that I have failed because none of the offenders have been punished. The courts have no guts to make a legal breakthrough. In the meantime, we are encouraging firms to improve." 114 Freeport correctly believes that the NGO community today is well resourced, well organized, well connected, and politically savvy, and that in spite of Freeport's efforts to counter the NGO campaigns, they will continue. For obvious reasons Freeport presents a perfect target in the global environmental battle. The loss in court may be only the beginning.

Chapter 8

Human Rights

1 9 4 5 I N D O N E S I A N C O N S T I T U T I O N guaranteed its people certain rights and freedoms, 1 with the introduction, or Mukadimah, committing the state to the realization of social justice for all of the people. For the thirty-two years of the New Order regime, the apparatus of the state maintained the cohesion of the archipelago by violating the tenets of the Constitution. Coercion, repression, and the systematic violation of human rights were instrumental in amassing phenomenal private wealth and power at the center. The ability of one man to remain at the apex of power rested not only on the dispensing of largesse to the newly emerging middle classes in Indonesia but also on his control of the judiciary and the forces of coercion. Through this control Suharto was able to distort the Constitution, delude the public with rhetoric, depoliticize the masses, and suppress working-class opposition while periodically jolting the collective amnesia of the nation by threatening a return to the chaos of 1965 in order to legitimize his authoritarian rule. 2 At the same time, the opening of the country to foreign investment made Suharto, in the words of Edward Herman, the West's "good genocidist." 3 That is, by supporting a trade-off between authoritarian rule and the systematic violation of human rights with supposed economic growth, democratic Western governments were able to continue economic, political, and military support of the dictatorship. T H E

Suharto imposed his vision of the nation upon the population using empty symbols, rhetoric, and slogans to create his own "reality" of the embryonic nation and state. Pramoedya Ananta Toer, the influential Indonesian dissident author, described this constructed reality in Indonesia as an intellectual crisis of the mind permeating society.4 In the last years of Suharto's rule, institutions created by an emerging international civil society challenged Suharto's definitions of the Indonesian nation-state and the New Order's concept of human rights. While Suharto faced these challenges from within civil society, so too did Freeport. 187

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THE CONSTRUCTED NATION-STATE The "Holy Grail" of the Suharto regime, the nationally defining ideology of Pancasila (belief in God, nationalism, humanity, sovereignty of the people, and socialjustice) is enshrined in the Preamble to the 1945 Constitution and was formulated by Sukarno to guarantee tolerance within a diverse nation. Under Suharto it became the artificial glue that held together myriad groups of people with little in common. Promoted as a governing ideology without which anarchy would return, Pancasila was distorted by Suharto into a form of social control aimed at subjugating individual rights and democratic freedoms for the greater good of a constructed nation. 5 Eventually all areas of society traditionally providing checks and balances, or contending for political power, were brought under the control of the state through Pancasila. As Jamie Mackie and Andrew Maclntyre noted, the five principles of Pancasila "were more frequently defined by the New Order government negatively, in terms of what they rule[d] out, rather than in positive terms about the kind of society they ideally foreshadow[ed] ." 6 With acceptance of this state ideology rarely ever being challenged, Pramoedya believed that the onedimensional "Pancasiaist human beings" were created with "one thought, one language, [and] obedient to but one commander." 7 The violation of human rights became the natural product of such as state. In Suharto's Indonesia the rule of law had little currency. With no effective separation of powers between the executive and the judiciary, the Indonesian legal system lacked independence and was susceptible to intimidation from both the executive and the military to the extent that, at one point, Indonesian jails held more than a million political prisoners. The nation's Code of Criminal Procedure was undermined both through presidential decrees and through laws passed by the parliament on behalf of the president. Although the coercive nature of the state eroded the independence and integrity ofjudges, inadequate remuneration also made the profession susceptible to the lure of corruption, with the attorney general's office, the Supreme Court, and the judiciary becoming little more than political instruments. Finally, although the military had its own courts to deal with internal matters, in 1969 Suharto formalize an extra-judicial military court (Mahmillub) which tried "any person, civil or military, referred to it by the president." 8 Used extensively by Suharto, the Mahmillub imposed the death penalty on those who threatened the president's power and, by association, his vision of the state. So pervasive was this corruption and so lacking in credibility was the judiciary that well-respected human rights lawyer Todung Mulya

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Lubis stated "the area of law enforcement in Indonesia is where most human rights violations occur." 9 Originally used by the Dutch under the Hate-Sowing Articles, one much abused law was the unconstitutional 1963 Anti-Subversion Law, which carried as its maximum penalty death. According to Amnesty International, the greatest value to the state of this law lay in its vagueness and ambiguities, for its "sweeping language . . . [made] it possible for virtually any act, word or even intention to be construed by the prosecutor and the court as subversive." 10 Or as Komnas HAM noted, this law gave Suharto's prosecutors and judges the extraordinary power "to act as if they [could] read the accused's mind." 11 The liberal use of this law maintained a climate of intimidation and fear. A continuing dilemma for Jakarta, and one that remained critical to its repressive nature, was its desire to hold together the constructed nation. The diversity of the young nation made it difficult to balance the needs of myriad strong minority groups with those of the Javanese majority. From the beginning Javanese-dominated governments opted to satisfy the needs of the main island at the expense of the minorities within the archipelago. To justify this repression the New Order government expounded the virtues of the national ideology of Unity in Diversity, wherein unity was violently constructed with precious little room for diversity. Unity in Diversity was indeed a delusion. The regime continued to defend its legitimacy with the argument that there was no opposition to its central rule while concurrently justifying the need to deny fundamental freedoms because of the destructive nature of opposition or centrifugal forces within the archipelago. In Suharto's Indonesia, which lauded Unity in Diversity, suppression was promoted as integration, and stability was achieved through the heavy hand of the security apparatus. In turn, both concepts of integration and stability were used to afford legitimacy.

HUMAN RIGHTS ON THE AGENDA IN JAKARTA In an endeavor to explain what, over the years, came to be considered an Indonesian predilection for authoritarianism and an inability to embrace human rights, Mackie and Maclntyre wrote that there was little in the Indonesian culture that allowed the citizen to relate to individual human rights or oppose those in authority.12 In one respect they mirror the oftheard criticism that it was not in the Indonesian culture to say no to authority—a propensity Pramoedya Toer referred to as "colonial paternalism." 13

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By this argument the people had only a vague notion of their rights as individuals and limited experience of opposing the state, leaving it free to subjugate human rights. Yet it can be argued that submission to the state is particular to the Javanese culture, rather than to the construct called the Indonesian culture. 14 In any case, such behavior can be explained throughout the archipelago as an understandable response to history, rather than to culture. The New Order government offered—albeit at a price—political stability after the more than two decades of chaos that began with the 1942 Japanese invasion. At the same time the horrors that the slaughter of 1965-1966 left on the national psyche—memories that the New Order regime always found expedient to recall—supported a degree of political pacifism. While this "national trait" was a response to history, it was also the product of the successful promotion of the Suharto constructs: the Pancasila individual and Unity in Diversity. Yet this appeal to history is also oversimplified. Since the very first days of the Republic, a number of the outer provinces have maintained low-intensity conflicts against Jakarta's military domination. Therefore, a definition that not only denies the pluralist nature of the nation but ignores its recent history could hardly be said to be a reflection of a predetermined cultural disposition. Rather, the political pacifism said to be natural to the Indonesian citizen can best be understood as reflective of the Javanese cultural tradition, a reaction to history, and the product of a coercive state. An oft-heard defense of Suharto's Indonesia was that the state's critics placed far too much emphasis on the shortcomings of civil and political rights in Indonesia while failing to adequately give the state its due on economic, social, and cultural rights, where the nation had made great gains. 15 However, only a few months before Suharto was forced from power, a U.S. Department of State report on human rights noted that state-based discrimination existed for a majority of the nation. 16 Despite government rhetoric to the contrary and the fact that Indonesia was a signatory to the Universal Declaration of Human Rights, the violation of human rights under Suharto was endemic, with the state failing to meet even its most basic obligations to its citizens under these conventions. As late as 1996 the New Order regime would only concede to the setting up of a United Nations human rights office in the capital on the condition that it limit its activities to seminars. Jakarta also continued to hamper the Indonesian Red Cross's ability to monitor and address human rights issues, especially in the outer provinces, where many areas were forbidden to outside journalists and aid workers. Although always sensitive to international criticism over human rights

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issues, the New Order government ratified only seven of approximately twenty-two United Nations conventions. Justifying state-based human rights violations, Suharto offered the argument that "cultural particularism" needed to be sacrificed for the sake of stability and unity during the development process. 17 Moreover, he claimed that the universality of human rights was an inappropriate Western concept not readily translated into the Asian experience; Indonesia claimed its own indigenous interpretation. 1 8 Yetjakarta failed to clearly define this Indonesian concept other than to state that it was addressed within the state's interpretation of Pancasila. Moreover, Indonesia's economic development, used as a justification of human rights violations, was shown to have been selective and unbalanced, while figures pertaining to the eradication of poverty were absurd. By opening his economy to international capital, promoting his regime and its policies as the engines of Indonesian development, and calling up the specter of chaos in the form of communism and Islamic fundamentalism, Suharto had been able to keep international, state-tostate, human rights criticisms to a minimum. At the same time he impressed upon states that any criticism of Indonesia's human rights record, or any linkage of aid to human rights, was unwelcome and detrimental to the development process and thereby a threat to stability. He also considered it to be unacceptable interference in the nation's internal affairs. Suharto's allies were always ready to accept this rationale even after the public outrage surrounding the Dili massacre in 1991. In 1992 Indonesia's primary lending agency, the Inter-Governmental Group on Indonesia (IGGI), was under pressure from the Dutch, which had led the group since its inception in 1966, to suspend aid to the Republic because of the Dili massacre. Indicative of the West's unwillingness to oppose the dictator, Suharto succeeded in having the group disbanded and a new aid group, the Consultative Group on Indonesia (CGI) , formed, with the World Bank at the helm and minus the troublesome Dutch. In July of the same year the new CGI allocated Indonesia "US$4.94 billion in new grants and low-interest loans" a 4 percent increase from the previous year. 19 Thus, despite knowledge of widespread human rights abuses in the archipelago, the West eliminated both Suharto's adversary and human rights from the CGI agenda. 20 However, Suharto could not so easily appease international civil society. The Dili massacre mobilized overseas opposition to the obvious excesses of Jakarta and became one of the catalysts for change within the nation. As international criticism over human rights in the Republic mounted after 1991, Suharto attempted to play his usual juggling act at

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home and chose to appease external critics with a pretense of responsiveness, though he made little genuine effort to address human rights concerns. Although Western democracies and their international agencies had been content to turn a blind eye to the regime's excesses, their constituents did not allow them to continue to do so. By 1991 a number of variables had shifted: the international media brought the bloody pictures directly into the homes of the generally complacent voters in the West, and therefore it was impossible to deny the incident; the specter of communism could no longer legitimately be conjured up to justify such state-sponsored carnage; the East Timorese had, by this time, strong international groups lobbying on their behalf; and finally, human rights had become a potent political issue internationally. Pressure was also mounting within Indonesia. The economic marginalization of many and the political marginalization of the growing middle class led to intraelite conflict and the eventual emergence of alternative opposition forces competing to define the national reality. Slowly and tentatively, organizations intent on participating in policy making began to emerge from within both the Indonesian NGO community and Suharto's exclusionary corporatist organizations. As his circle of advisers shrank during this time, so too did his political feedback mechanisms and, by association, his understanding of the nation. Ignorant and disdainful of civil society—its rights, its needs, and its power— in the early nineties Suharto completely underestimated this new foe. With NGOS becoming powerful political actors making their presence felt not only within the governments of the West but also within Indonesian civil society, Suharto struggled to control the mounting internal pressures. While opening a United Nations workshop on human rights in the AsiaPacific in January 1993, he took the opportunity tojustify his regime's stance by attacking the indivisibility of the Universal Declaration of Human Rights and promoting his vision of a culturally defined concept. In response the Indonesian Legal Aid Institute boldly declared the government a gross violator of human rights, while a group of Indonesian NGOS took the opportunity of issuing their own Indonesian Joint Declaration on Human Rights.

Komnas HAM To combat rising criticism of Indonesia's human rights record and to counter pressure within the U.S. Congress, Suharto's supporters in America, including Freeport, formed the U.S.-Indonesia Society. At home the regime responded by appearing to open up the democratic process while simultaneously increasing the forces for coercion.

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On 7 J u n e 1993, in an overt political maneuver, Suharto took the unprecedented step of setting up the Indonesian Human Rights Commission (Komnas HAM) under Presidential Decree No. 50/1993just one week before the convening of the UN World Conference on Human Rights where Indonesia was to be publicly called to account again over its record in East Timor. Formed to be another of Suharto's exclusionary corporatist entities, Komnas HAM was expressly designed to give the appearance of openness and political participation while simultaneously denying both. Like BAPEDAL it was deliberately undermined from its inception. With Suharto officially appointing the organization's first twenty-five board members, many of those within Indonesian society with credibility on the issue of human rights were either not asked tojoin or, suspicious of the president's motives, refused tojoin. 2 1 In the end its original board members consisted of Ali Said (chairperson), an army lawyer and formerly attorney general and minister of justice; Miriam Budiardjo (first vice chairperson), wife of PT Freeport Indonesia's president, Ali Budiardjo; Marzuki Darusman (second vice chairperson), head of Golkar; an East Timorese legislator; the religious affairs minister; an Islamic intellectual; a female police general; and Asmara Nababan, a well-known activist and executive secretary of the International Non-Government Forum on Indonesian Development (INFID).22 The commission's funding, which came directly from the government, failed to comply with UN funding principles on human rights institutions; the commission was also in the ignoble position of lacking the authority to bring charges against those it found guilty. Finally, in a country where the military was the main perpetrator of human rights violations, the commission had no authority to force military personnel to cooperate with its investigations or to obtain access to relevant documentation. Essentially, it was charged with monitoring human rights in the archipelago and making recommendations directly to the president. The nation expected little of Komnas HAM. These cosmetic attempts to appease international criticism gave Suharto's Western allies the rationale they needed to ease pressure. Nevertheless, these small concessions eventually caused Suharto to lose control of the issue at home. Despite the fact that Komnas HAM was a creation of the corporatist state, 23 it nevertheless began to respond to the rising demands within civil society and the NGO community and by 1996 was tenaciously pushing at the constraints imposed upon it by Jakarta. So concerned was the government by the unwelcome independence the commission was beginning to exhibit that before Komnas HAM began its inquiry into the 27 July 1996 riots in which the security forces manipulated the ousting

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of Megawati Sukarnoputri from the PDI, two former generals were elected to the board. At the same time, commission members were advised of the government's version of events and in accordance with Pancasila were warned to take the nation's interests into account. 24 Despite these warnings, Komnas HAM'S final report surprised everyone by blaming the government for the violence; contradicting its official tally of those killed, injured, and missing; and implicating the military. 25 By defying Jakarta the commission increased its credibility, independence, and popularity within society. Although its effectiveness continued to be hampered during the nineties by the constraints placed upon it by the executive, its ability to keep the issue of human rights permanently within the public arena, and by association on the public agenda, saw it challenging Suharto's definition of the nation-state and undermining the hegemonic nature of the regime. Thus, while Komnas HAM did not directly demand a political voice, its actions effectively gave it one. Unable to bring perpetrators of human rights abuses to justice, its staff came to see their organization as providing a valuable community service by actively working to undermine the New Order's warped interpretation of Pancasila and by promoting and legitimizing the human rights issue within Indonesia. In the end, Asmara believed that because of the limitations placed on Komnas HAM, and the absence of checks and balances on the executive, it was civil society's responsibility to pressure the government to follow up on the commission's findings. Expectations of the organization increased during the later years of the Suharto regime, and by 1997 it had acquired such a high international profile and respectability that the government could do little to control its own creation, other than to rely on the confines already placed upon it by its constitution. With growing legitimacy and the overthrow of Suharto, Komnas HAM'S workload has increased substantially, with its offices crowded daily with those eager to pass on or seek information. In response to societal pressure and in reflection of the standing the commission now generally holds within society, in April 1999 Justice Minister Muladi, a former member of Komnas HAM, presented a bill before parliament that aimed to increase the powers of the organization by giving it the authority to legally resolve disputes. The bill, which was passed in 2000, had been rejected by human rights groups, which believed that it continued to maintain unacceptable limits on the commission's investigations. Even though the commission no longer needs to report directly to the president under this new law, it must report to the attorney general, who then decides whether or not to proceed with prosecution. According to J o h n

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Rumbiak, this means that whoever holds the attorney general position must be credible. The current attorney general under Megawati, he says, is not. 26 Law 39 also has a clause that places a statutory limit of five years on investigations of reported abuses even though the country's criminal code clearly stipulates a twenty-yearjurisdiction. Komnas HAM'S activities continue today to be hampered by the state. What was unique about 1991 and the Dili massacre was that the NGOS, with the assistance of their international associates and the media, were able to keep this issue in the international spotlight. The same thing happened around the Freeport concession in West Papua in 1995. However, the company, unlike Suharto, had a somewhat clearer understanding of political realities and attempted to respond to the warnings. Human Rights in the Freeport Concession The traditional owners of the highland area where the copper and gold Freeport mines are situated have never exhibited the supposed predilection for authoritarianism and from the beginning have protested the company's and the military's presence. In the sixties they used traditional em-sinongsticks, which the company dismissed as hex sticks strategically placed to bring evil down upon the company but which were in fact a traditional sign used to warn trespassers off one's land. In the seventies they generally made small and random efforts at sabotage together with petitions to the company. Today they are able to use the Internet and the law courts, and, with assistance from the international networks of NGOS, exploit the publicity that comes with international humanitarian awards. Since the arrival of the company and the military there has been a marked absence of respect for law and order, with human rights violations and illegal activity not only common practice, but generally expected behavior. With an approving central government, and an ineffectual and all but nonexistent local government, the only group holding authority in the region, TNI was involved in criminal activity and exhibited a marked tolerance toward violence and disregard for the law. With the law enforcers lacking both accountability and credibility and perpetrating violence upon the traditional landowners and the inability of independent groups to gain access to the mine site, it was not until the release of the two reports in 1995 that the customary owners of the land felt safe enough to voice their grievances. When the reports were first made public, the feelings ofjubilation and liberation within the local community were, according to human rights activist

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J o h n Rumbiak, hard to contain and unrealistic, with many o f the traditional peoples believing that international attention would translate into immediate protection, accountability, and change. 2 7 As Rumbiak noted, their expectations were unrealistic. It soon became clear that the Suharto government had no interest in protecting the traditional landowners' rights, nor Western governments in raising the issue with Suharto.

1 9 9 5 Human Rights Reports Despite years of confrontation and mistreatment of the traditional peoples, the first well-documented and well-publicized report of human rights abuses in West Papua to be taken up by the international media was from around and within the Freeport concession. In early 1995 detailed eyewitness accounts of year-long human rights abuses were smuggled out of the province by indigenous NGOs in Jayapura and released to the world in the ACFOA report Trouble at Freeport: Eyewitness Accounts of West Papuan Resistance to the Freeport-McMoRan Mine in Irian Jay a, Indonesia and Indonesian Military Repression, June 1994-February 1995. In this report the military, together with Freeport security, were accused of being involved in human rights abuses, including murder. In August 1995 Monsignor H. F. M. Munninghoff, the bishop of Jayapura, undertook his own investigation and confirmed the ACFOA allegations, minus the reference to the involvement of Freeport security. While eliciting international outrage and condemnation of the Indonesian military and the company, these reports detailed what were, at the time, only the most recent examples in a long line of systematic abuse in the province and around the mine perpetrated by TNI. From mid-1994 until the end o f that year, in response to the OPM'S concerns regarding the granting of a further 2.6 million hectares of exploration leases to Freeport under its 1994 contract, there had been heightened resistance around the concession including the illegal raising of the West Papua flag, peaceful protests, and, at times, violence. On 8 November 1994 a Papuan flagman working for Freeport, Gordon Rumaropen, was shot dead while driving along the Freeport access road in the isolated highlands. T h e shooting, which the military and the company blamed on the OPM, saw Freeport requesting a greater military presence in the area and resulted in expanded military operations against the indigenous peoples living around and within the concession area. 2 8 It is now well documented that in response the Indonesian military sealed off the Freeport concession and its surrounds from mid-1994 until about mid-1995, set up new security posts, and systematically terrorized

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the local population with summary executions, murder, arbitrary arrest, detention, torture, intimidating surveillance, destruction of property, and unexplained disappearances. Many of its victims were innocent men, women, and children. 2 9 The army operation destroyed gardens and houses and caused hundreds of people to flee into the jungle for extended periods; more than thirty-seven people (two of whom were children aged five and six years old) were killed or disappeared. ACFOA'S report was an edited and translated version of an original report written, at the time anonymously, by local people with the assistance o f j o h n Rumbiak. While confining itself to the incidents within the Freeport concession at Christmas 1994, it detailed specific incidents of human rights abuses including the intimidation and torture of thirteen people, the disappearance of five, and the death of three (when the military opened fire on innocent people). 3 0 According to the report, a Freeport bus with a Freeport driver picked up six Dani men in Tembagapura who were leaving on Christmas Day to return to Timika. After military personnel joined the bus, these people were never seen again. On 26 and 27 December the military rounded up thirteen people from the local villages, holding and torturing them in the military post on Tembagapura's perimeter. The following day four Papuans met with Freeport officials and the military commander in an attempt to obtain the release of the thirteen being held. All were released a few days later after being forced to confess involvement in OPM activities. As noted, in response to the ACFOA report, Bishop Munninghoff made several visits to the region and compiled his own report, which was an expansion and verification of much of the ACFOA report. The principal, and most striking, difference was that while it detailed the use of Freeport facilities (security posts, containers, workshop, security vehicles, and buses) in the detention, movement, and torture of detainees, it did not mention the shooting of the three people, an event in which the ACFOA report directly implicated Freeport security personnel. 31 At Freeport's request Munninghoff later confirmed that his report did not accuse Freeport of any wrongdoing, that it was not about the company, and that at no time did the bishop officially claim that the actions of TNI were part of its j o b to safeguard Freeport. The government, as it had in Dili and as was its usual response, initially denied even the possibility of human rights violations. The military information center made the fallacious claim that the report was "a distortion of facts because ABRI [TNI] does not conduct combat operations in Irian Jaya. The ABRI is sympathetically conducting territorial operations by developing and promoting the prosperity of the local community." 32

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Yet the battalions that were stationed in West Papua at the time were Kopassus and Kostrad, both combat troops. This blatant contradiction of what were obvious facts was another oft-used device of the Suharto regime. For who within Indonesian civil society would be so reckless as to brand the military as liars? And who would be so brave as to contradict the fallacy that TNI was the protector of the nation? Believing in its superiority, the military saw no reason to suspect that this absurdity would not be accepted. Besides, unlike Dili, there were no pictures. Denial, the military and Jakarta believed, was plausible. Under sustained pressure from the international community, in late August 1995 Jakarta directed Komnas HAM to investigate the allegations of abuses. The first commission investigators stayed for only three days and claimed to find no evidence corroborating the allegations of human rights abuses by TNI or the company. While agreeing that there had been deaths, the investigating team leader supported the army's explanation of "procedural errors" as a possible cause explaining that "poor logistic supplies to troops stationed in the field [were] likely to hamper their operational quality." 33 The common perception at the time that the commission was a paper tiger appeared well justified with the tabling of its findings. Yet the international outcry continued, and Jakarta ordered Komnas HAM to make a second trip to West Papua in September 1995. This investigation found that the military had committed human rights violations as part of its operations aimed at extinguishing the OPM. It also stated that the human rights violations were committed to protect the vital asset of Freeport. Like Munninghoff's report, the commission's report did not implicate Freeport personnel directly in any wrongdoing, and the military ordered an end to any further investigations. The Amungme people and WALHI thanked the commission for taking the unprecedented step of investigating human rights violations in the area; however, the Amungme listed fifteen areas of continuing concern and criticism of the report. According to the Amungme, because the commission had been informed of Freeport's involvement in the abuses by those it interviewed, its decision not to report these findings, together with the fact that it did not examine the root cause of the abuse—the relationship between Freeport and TNI or the neglect by the local authorities that allowed such abuses to happen—meant the report was a failure. Most specifically, LEMASA stated that the commission had erred by deliberately limiting its investigations to exclude the company's involvement in those and other human rights violations that had occurred in the area. In the Amungme's estimation, thousands of people had been victims of the company since it first arrived on their land

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and no investigation could be complete without an investigation into Freeport's relationship with the local community and TNI. T h e small Jakarta- and Jayapura-based NGOs, emboldened by the support of the international NGOS and the international attention this issue was bringing, took the dangerous step of defying the military. When the voices of outrage would not be silenced and the NGOs would not let the issue die, Jakarta resorted to the response of "procedural error," stating that what had happened was not part of military policy. Eventually, when "procedural error" failed to appease, the military argued that because the indigenous people supported the OPM and because "bullets have no eyes, the death of ordinary people is unavoidable." 34 Continuing international attention, however, meant that the military could no longer avoid taking disciplinary action, and eight officers were questioned. Inevitably, lower-ranking soldiers were held accountable, with one second lieutenant and three privates being sent to trial. In what became known as the "wrong procedure trial," the four soldiers were accused of causing the death of only three villagers, one of whom was supposedly an OPM member and whose death was therefore considered justifiable. T h e four were found guilty of violating army procedure and were dismissed from duty, with the three privates being given sentences that ranged from one to three years and the second lieutenant a sentence of four years. No senior officers were held accountable for their juniors' actions. 35 Eventually the military conceded that eleven people had been killed—all from outside the concession. Komnas HAM put the number at sixteen, while the Australian ambassador to Indonesia, Alan Taylor, who concluded his own report, believed that twenty-two people were killed by the military. 36 T h e local people claim all these figures to be gross underestimations. LEMASA, WALHI, and Amnesty International were critical of the trial, both in procedural terms and with regard to the legitimacy of the witnesses. LEMASA claimed that the thirteen witnesses transported to the trial by TNI were not eyewitnesses to the incidents but rather individuals with close links to the military. Amnesty wrote an extensive report condemning the trial, LEMASA asked why the real witnesses had not been called and why none of the other incidents of human rights violations mentioned in the reports, including Freeport's involvment, had been investigated. Amnesty's report called attention to the fact that the trial was not conducted according to UN principles for such trials and questioned the competence and impartiality of the investigation. It also noted that the trial related to the deaths of only three people and expressed serious concerns about the justice afforded both the victims and the accused

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during the trial. 37 As international attention waned, these claims and queries could be ignored. However, at the time the reports from West Papua were extraordinary in that they reached the international domain, raised international concern, focused attention on the long-forgotten province, and were one o f the first well-documented accounts of human rights violations in West Papua under the Suharto government to be given extensive media coverage. Freeport's reaction to the reports was swift and thorough. T h e company denied any involvement in the abuses mentioned in the two reports and damned the ACFOA report as being filled with lies and exaggerations. It stated that its security personnel never carried guns as it was against Indonesian law and therefore none could have been involved in the killings. While acknowledging that a tragedy had occurred, the company defended its call for extra troops, the call that initiated the closing off o f the area and the subsequent human rights violations. It was unwilling to accept responsibility for the violations that occurred in its contract area, its town, its bus, its containers, its workshop, and its command post. T h e company claimed that TNL's actions were beyond its control and argued that the bus had been commandeered and the containers were no longer Freeport property as they had been given to TNI twelve years previously. By 1998 Freeport claimed that there had been at least five investigations o f the violations—by Komnas HAM, Munninghoff, the American and Australian embassies, and the International Red Cross—all of which cleared the company of wrongdoing. 3 8 This claim, however, is incorrect. Munninghoff confirmed that his report was not about Freeport because, in fact, it did not address the incident in which Freeport was allegedly involved. By way of explanation Brother T h e o van den Broek stated that only the incidents that the investigators found had "strong enough material" were included in the Munninghoff report, although Freeport was indirectly involved because o f the use o f its facilities. 39 When questioned on its report, which also supposedly absolved Freeport, the ICRC categorically denied having made any investigation into the accusation inasmuch as such an action is not within its mandate. 4 0 Nor had Komnas HAM "cleared" Freeport. T h e commission admitted that its terms of reference were limited to exclude any investigation into Freeport's involvement so that only the eleven deaths outside the facilities were investigated. Given that the killing o f a number of people took place within the Freeport concession with the use o f Freeport facilities and that the ACFOA report cited eyewitness accounts of Freeport personnel being involved in the crimes, the commission agreed that without investigating Freeport, its task was only half completed. 4 1 (In light of this concession it is perplex-

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ing to note that when questioned, Asmara Nababan admitted that the commission defined its own terms of reference. 4 2 Why then did Komnas HAM limit its own investigation in 1996 so that, in its own words, its work was only half completed? Was it pressure from Jakarta? the military? both? Even though Miriam Budiardjo was not involved in the investigation did her husband's position with Freeport determine the decision? Did the close association between the president and the company affect the decision? Or was it some combination of these factors?) Clearly, at this juncture it was incorrect for Freeport to state that the Komnas HAM, Munninghoff, and ICRC reports cleared it of involvement. The overworked commission has agreed that a new inquiry, one that would include the alleged role of Freeport in the killings, needs to be made. 4 3 Brother Theo, with the assistance of international backers, has made a couple of attempts to reopen the investigations but has, to date, been thwarted by the military. 44 With regard to the Australian ambassador's report, it noted difficulties in ascertaining a clear understanding of what happened because of the difficulties with witnesses, which included fear of reprisals. 45 With regard to the incident in Tembagapura, all the report could confirm was that "one person was shot dead by ABRI [TNI] and another wounded." 46 Freeport personnel's involvement, or otherwise, was not mentioned; however, the report concluded that general dissatisfaction with the company, intercommunal tensions, and the presence of political activists in the area caused the military, in its efforts to protect the Freeport installation, to act irresponsibly. 47 While a copy of the American embassy's report into the accusations was unavailable to me, a fax from the United States Information Service in Jakarta tojournalist Ralph Haurwitz stated that the embassy could not find "credible evidence substantiating charges of human rights abuses by Freeport personnel." 48 By 2000 Freeport had amended the claim that it had been cleared by five investigations and now states "there have been numerous investigations of human rights violations in Irian Jaya [Papua], and none found that any PT Freeport Indonesia employee participated in any violation. 49 Thus, only ACFOA officially made direct allegations of Freeport personnel's involvement in human rights violations; most others failed to fully investigate Freeport's involvement. Given the above, a number of questions remain unanswered and deserve addressing. If the containers the Papuans were held in were military property, why were they at the company's workshop and the Freeport security post in Tembagapura? Moreover, the Munninghoff report indicates that the company was aware of what was happening inasmuch as detainees were

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transported in Freeport buses and security vehicles (presumably with Freeport drivers) and held in Freeport security posts. When questioned directly, Paul Murphy denied any knowledge of long-term human rights abuses but, with regard to the specific incident in Tembagapura, stated that by the time Freeport personnel had heard the gunshots and investigated the source, TNI had left with their prisoners—apparently absolving the company from any responsibility.50 But according to Munninghoff's report, there was only one gunshot in Tembagapura, and that was seven to eight hours before the detainees were removed from the town, during which time they were held and beaten in Freeport containers at the army post in Tembagapura. 51 Therefore, according to Paul Murphy's account of events, it took about seven hours for the company to investigate the gunshot in a town you could walk around in half an hour. Moreover, if gunshots were heard, it would have been obvious that the first place to investigate would be the army post. Robert Levin, a Freeport employee, stated that company personnel were aware of incidents occurring on Christmas Day but defended his and others' inaction, arguing that people were afraid to interfere because they really didn't know what was happening and they had their wives and children with them. 5 2 Levin also stated that Freeport personnel had heard of the killings around the area during the year, but in a region that runs on rumor, it was hard to differentiate fact from fiction. It would appear that one Freeport employee did attempt to pass on the information about the violations during 1994 to an interested party outside the country, but, according to this source, the employee was reprimanded by the company. 53 Moreover, a man shot on the same road just a few minutes after Rumaropen reported to Freeport that he saw who shot him, and he believed it to be the military. In his opinion the company was not interested in what he had to say and took no action. Freeport needs to explain why it made no effort to protect Papuans living in and around the concession or prevent the violations. It also needs to explain why it failed to inform anyone about these violations. Edward Pressman admitted that, in retrospect, the company handled the situation incorrectly: it should have reported the rumor of human rights violations. However, the difficulty the company faced was just who would it report such violations to when the perpetrators were themselves the law enforcers. If the same thing happened again, Pressman hoped that the company would handle the situation better to prevent further loss of lives.54 No one, including the company, denies that the violations occurred around and within the Freeport concession in December 1994, with

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Freeport property being used in the torture and killing of people. Freeport has also confirmed that it was responsible for calling in the army after the shooting of Gordon Rumaropen to protect Freeport operations and employees. It would also appear that Freeport personnel were aware of human rights abuses being perpetrated by the military in its area of work during 1994. While Freeport may not have physically been involved in the killings and torture, it cannot expect to operate in West Papua, mine the traditional land of the indigenous peoples, have a contract of work that effectively creates a close working relationship with TNI, rely on TNI to protect its facilities, and have human rights violations perpetrated in its area of work by the group it specifically called in to protect it without accepting some of the responsibility. It cannot, and does not, operate in isolation. While Freeport cannot always control the actions of the military the fact remains that, for as long as the company maintains a close relationship with TNI, it may be argued that it is implicitly involved in all that the military does in protection of its mine, including human rights violations. Moreover, with the U.S. courts recently recognizing the legal ramifications of such associations, the company now has a legal responsibility. In response to the negative publicity of 1995, TNI announced that it was adopting a humane face: it issued its troops a booklet detailing a human rights code of conduct and, ominously, announced that it was increasing its presence in the region. While the government and the military were making "positive" public utterances, the reality in West Papua bore scant resemblance to the rhetoric. With outside interest abating, the promised bureaucrats failed to arrive, and the military expanded its operations. Using the OPM hostage taking that followed a few months later as justification, Jakarta sealed off the highland region; by April 1996, with the reported arrival of three thousand to four thousand new troops and the stationing of an Indonesian warship at the port of Amamapere, the military presence around the mine had increased dramatically. TNI once again launched a campaign of terror against the indigenous peoples of West Papua who lived near the mine. By December 1997 the military announced that the Freeport concession area was to become the most militarized subdistrict in Indonesia, claiming that the economic importance of the area and the associated need to "safeguard security and deal with any unrest" justified such a move. 55 On 26 May 1998 the local churches released a report that claimed that between December 1996 and October 1997, rather than an easing of tensions as the government had promised, there had been an army crackdown led by forces under the command of Lieutenant General

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Prabowo Subianto. The report detailed the military's terrorizing of groups of villagers, the extrajudicial killing or disappearance of some thirteen people, the subsequent deaths of many others from disease and malnutrition caused by their fleeing into the jungle to escape persecution, and the destruction of whole villages, churches, homes, livestock, and gardens. As a result at least another 137 people had died. Years later many of the people who fled still choose a difficult nomadic existence in the interior of the island to avoid further contact with the Indonesian military. The church report claimed that these violations were carried out by the military in retaliation for the kidnapping but also in an attempt to destroy the OPM and "to secure the 'vital project' of PT Freeport Indonesia Inc." 56 This time the world paid scant attention, for the events in Jakarta just six days before eclipsed the news from West Papua.

TRANSMIGRATION While the relationship between Freeport security and TNI implicated the company in human rights abuses, so too does the policy of forced population displacement or transference within the company's concession area, either in the form of transmigrasi (transmigration) or relokasi (relocation), both of which have led to the loss of traditional lands and culture. The indigenous peoples claim that, without the company's presence, population displacement by either of these methods would simply not have happened. One of the essential elements in the "Indonesianization" of West Papua leading to the violation of human rights in the province has been the transmigration program. Transmigration was first introduced by the Dutch in 1905 when they moved impoverished Javanese peasants to the less-populated areas to supposedly allow them to start a new life. In reality they represented a supply of cheap labor to foreign-owned plantations. The Suharto regime's transmigration policy, which systematically moved large numbers of migrants from the more crowded islands such as Java and Sulawesi to the outer resource-rich provinces, was not dissimilar. Throughout the history of the New Order government, transmigration was promoted internationally as a socioeconomic program aimed at relieving the population pressure on the densely populated main islands and received extensive financial support from its main donors, the World Bank and the IGGI/CGI. 57 Yet Jakarta's argument that transmigration was essential to relieve population pressure was absurd, for moving a little more than a million and a half

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families from 1969 to 1994 out of a total population of over two hundred million did little to ease overcrowding. 58 In practice the Indonesian program was an integral part of the central government's policy of "Indonesianization" or the creation of one kind of Indonesian 59 and focused on incorporating areas resistant to Jakarta's rule, such as East Timor, Aceh, and West Papua. At the same time, transmigration has focused on ensuring a supply of cheap and readily accessible labor to foreign enterprises operating in the most remote regions of the archipelago. Thus, transmigration had a political purpose (the control of the indigenous minorities), a cultural purpose (the alienation and destruction of traditional cultures), and an economic purpose (support for FDL). Given the above, the importance of transmigration to the Suharto government could not be overstated: the 1995 fiscal budget allocated $93 million to the program, making it second in terms of funding only to public works. Transmigration in West Papua To secure Indonesian control over West Papua by weakening local resistance and strengthening its border defenses, Jakarta focused on populating strategic regions in the province with transmigrants loyal to the center. Toward this end it encouraged the movement of voluntary transmigrants and financially supported the official government programs of sponsored transmigration (carried out by the government) and assistedspontaneous transmigration (support by both the government and business). Although Jakarta always denied that the program had a political and security agenda, this association is clearly evident in West Papua in the siting of the settlements. Most are situated along the border with Papua New Guinea to create a cordon sanitaire in a region that always posed a dual security dilemma for the central government. Not only is it an indefensible border shared with an unstable and weak government whose people profess close historical and cultural ties with the inhabitants of West Papua, but the area affords shelter and protection to the OPM. Moreover, much to the embarrassment ofJakarta, OPM and Melanesian asylum seekers routinely cross the border into Papua New Guinea for sanctuary from the Indonesian military. While positioning is an indicator of the settlements' political character, so too is the fact that in the more unstable regions a good percentage of the transmigrants are reputed to be former army personnel. Through the policy of relokasi the Papuan landowners have forcibly been moved by the military to designated transmigration setdements where the

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government's integration policy demands that Papuans must comprise 25 percent of the settlement. Officially this policy has been aimed at improving the skills and living standards of the Papuans and integrating them into the Indonesian nation, but the program has proved counterproductive. Not only do many Papuans leave the transmigration settlements, where their culture and agricultural practices are viewed as inferior and where they suffer discrimination, but this policy has tended to strengthen their sense of being Papuan—something that was often missing among the isolated tribespeople. In turn, it has contributed to the increasing opposition to Indonesian control with an associated support for the OPM. Government-sponsored agricultural transmigration has generally had a poor success rate in West Papua because of the infertile and difficult terrain. However, voluntary or spontaneous transmigration— predominantly to the coastal regions around the cities or to the transmigration settlements around the Freeport concession—has countered negative trends for the rest of the archipelago. With 40 percent underemployment in Indonesia (before the 1997 crash) contrasting starkly with the opportunities presented in West Papua (GDP growth reached 20.1 percent in 1994—1995 because of the expansion program at the Freeport mine), West Papua was regarded as a land of opportunity for the poor seeking jobs in the growth industries of tourism and resource exploration. In fact, in 1995 voluntary transmigrants exceeded the official government-sponsored transmigration. With more than 130 transmigration settlements in West Papua, it recently became the largest recipient of migrants so that the province, which is one of the most sparsely populated in the archipelago, has the distinction of having one of the highest population growth rates of any province. In the midnineties it was estimated that 700,000-770,000 Indonesian transmigrants lived in the province among a Papuan population of approximately a million and a half. 60 For that reason, some credence must be given to the fear expressed by the Papuans that transmigration will eventually render them a minority in their own land. While estimates of numbers of sponsored transmigrants moved to West Papua vary greatly, figures from the Department of Transmigration show that as many as 47,565 families, or approximately 250,000 people have been sponsored transmigrants to the province in the last twenty-five years; these figures indicate that the remaining 500,000 transmigrants have been voluntary. However, with the recent unrest in the region and the targeting of transmigrants, these trends can be expected to reverse. Within the Freeport concession, twelve migrant camps housing approximately twenty thousand Indonesians are situated in the lowlands

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around the town of Timika. According to the Amungme and Kamoro peoples, Freeport's presence is not only directly responsible for the presence of these settlements, but also for their economic viability and continuation. Within this argument, Freeport taxes indirectly supported the government transmigration policy while the company's interaction with these settlers, through employment, infrastructure development, and the purchasing of produce, supports their continued presence. In this regard the indigenous people believe that the company must accept responsibility for the violation of the Amungme's and Kamoro's basic human rights, violations that flow from the presence of the settlers.61 The indigenous people also believe that Freeport is responsible for the enormous social problems of Timika. Originally representing only a few Kamoro hamlets before the arrival of Freeport, today Timika has become a magnet for spontaneous immigration from within the province and the rest of the archipelago and a focal point of government-sponsored transmigration. The usual problems associated with large population movements have arisen in the concession. In theory the transmigrants settle in agricultural settlements in the surrounding cleared jungle. In practice they gravitate to Timika in search of Freeport jobs or the business opportunities that have arisen with the mine's presence. Inevitably the Papuans feel that they have little ability to compete with these newcomers who, along with the military and police, own and run virtually all the businesses in town, including the restaurants, the shops, and the taxi services. Others have found employment with the company to the disadvantage of their Papuan neighbors. For those without a j o b there is little to do in Timika, and as the population increases so too have social problems. Dislocation and unemployment have given rise to a growth in the crime rate and have exacerbated ethnic tensions, while social and health problems associated with diseases such as AIDS and resulting from addiction to alcohol and tobacco are now seen among the Papuans.62 In the words of Freeport executive Paul Murphy, the social issues in Timika "are borderline and out of control." 63 The Papuans blame Freeport for the problems associated with the town, the presence of the transmigration settlements, and the destruction of their land, their culture, and their future. While not wanting to accept responsibility, Murphy has acknowledged that the company and its infrastructure have been essential to the success of the transmigration program in the area. 64

Relocation The company categorically denies that it has ever been involved in the forced relocation of traditional peoples from their homelands. Despite

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the company's claims, the contentious issue of forced relocation of the traditional owners f r o m their land is a h u m a n rights issue in which the company is involved. Article 4(b) (ii) of the original 1967 Freeport contract with Jakarta gave the company "the exclusive right to enter u p o n a n d to take possession of and to occupy the Project Area." Article 2(d) gave it the "right to arrange for the resettlement of any indigenous inhabitants who may be f o u n d permanently residing on any part of the Project Areas" and required it to "pay reasonable compensation for any dwellings or o t h e r p e r m a n e n t improvements on any such part which are taken or d a m a g e d by fi [Freeport Indonesia]." Moreover, "at the request of FI, the Ministry of Mines . . . will otherwise cooperate with FI in arranging for occupancy by FI a n d resettlement of such inhabitants." 6 5 In accordance with Indonesian law, n o m e n t i o n was m a d e of spiritual loss, n o r was the company required to pay financial compensation. When Freeport first arrived in the Wa Valley, the A m u n g m e lived in scattered hamlets of four to six houses each and moved around the valley, living in one area for fifteen to twenty years and then rotating to a n o t h e r (former) housing site. By the mid-seventies the company had built a fence a r o u n d Tembagapura to keep the traditional peoples out, for in the early years the town and the people in it were a novelty that attracted unwanted visitors. Undeterred by the fence, the villagers would sit outside Tembagapura, talking and looping their net bags (nokem) while they watched what h a p p e n e d in this strange place. 66 Tembagapura also became a novelty for the villagers f r o m f u r t h e r afield. U p o n returning to his village a few valleys away, one man's description of the lights of Tembagapura resulted in his whole village trekking to Tembagapura to see this amazing sight. Apparently they believed that this was what Heaven must look like. Today these "outsiders," or people f r o m other villages and tribes, continue to trek to the A m u n g m e land in the Wa Valley, only now they are looking for a Freeport j o b while often scavenging for food in Freeport garbage— which they find easier than competing for scarce resources in the often overcrowded valley.67 Of about two thousand original A m u n g m e and their descendants who inhabited the three highland valleys a r o u n d the mine, approximately two-thirds (2,682) remain in the highlands today. Approximately one-third (1,538) are now living in the lowlands uncomfortably on other people's land. 6 8 According to J o h n Rumbiak, few settlements remain in the highlands; instead, shanty towns and illegal squats regularly spring u p around the company town. Because of the presence of the company, many of the ancestral owners of Freeport's concession n o longer live on their traditional lands. T h e

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Amungme claim that hundreds of people have been repeatedly and forcibly relocated by the company in league with the military. The history of relocation is long. The company's critics state that in 1972, even before production began at the mine, many of the Amungme from the highlands had been forcibly resettled by the company without consultation or compensation. The original Amungme village of Wa, where Tembagapura was built, was moved to make way for the company town; the Amungme graveyard was moved to build the company's helipad. 69 Five years later, after rebel attacks blew up part of the slurry line, the military fired mortar shells from within Tembagapura to destroy the new village of Wa. In the opinion of a witness to this event, at no time did the company appear to make any attempt to prevent the military from using the town to destroy the village, nor did it assist the displaced people by offering alternative accommodation. 7 0 Moreover, in the opinion of this witness, as there had not been any OPM activity from Wa, it was difficult to understand why it was destroyed unless the company, which generally considered the people living near Tembagapura as nuisances, had requested the military action. In this instance the villagers fled into the surrounding jungle for more than eighteen months, only to return to the same area to once again rebuild their village. In the same year many Kamoro in the lowlands were moved from their tribal land by Freeport to be relocated in the area that became Koperapoka Baru (now a suburb of Timika). In May 1980, after highland villagers had addressed grievances concerning the mine to the governor, it was reported that the military ordered the residents of Tsinga Valley to relocate and subsequently bombed the village, forcing many to flee to the Wa Valley, whereupon Freeport assisted in their relocation to the lowlands. 71 In 1986 Freeport was also accused of relocating the nonoriginal residents from the Wa Valley village of Kampung Lumpur (Mud Village) near Tembagapura, after which the company is reported to have destroyed the houses with bulldozers. 72 In this instance Freeport is said to have transported the people down to Timika and Kwamki Lama. Those who wished to return to their homes in other highland valleys, however, were left stranded in the lowlands. 73 In 1995, after the year-long trouble detailed in the ACFOA report, many inhabitants of what the military categorized as "trouble spots" (or areas of OPM activity in the highland valleys around the Freeport mine) were also removed to lowland locations. While in the company's view any relocations that it may have been involved in were not forced, it has, at times, exploited the relationship between the indigenous peoples and the missionaries, whereby the latter

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have i n t e r c e d e d o n t h e c o m p a n y ' s behalf to e n c o u r a g e relocation. Or, alternatively, the c o m p a n y has o f f e r e d i n d u c e m e n t s to move. At the same time it has s u p p o r t e d relocation by creating the necessary infrastructure. In 1975 it b e g a n construction of the lowland village of Kwamki L a m a so that the p e o p l e living in t h e h i g h l a n d concession area could b e relocated. 7 4 Yet even as t h e c o m p a n y was building this village a n d e n c o u r a g ing t h e reluctant h i g h l a n d villagers to move to "improve" their lifestyle, it was aware that such a relocation would in all probability b e resisted. Both the c o m p a n y a n d the A m u n g m e were aware that in the sixties the D u t c h h a d a t t e m p t e d j u s t such a relocation to t h e coastal Akimuga site, with the result that several h u n d r e d h i g h l a n d p e o p l e p e r i s h e d f r o m diseases (mainly malaria) to which they h a d n o resistance. 7 5 U n d e r s t a n d ably, n o n e of t h e h i g h l a n d p e o p l e voluntarily a g r e e d to move. In m a n y instances those w h o were relocated have slowly gravitated back to their original village locations. Until recently F r e e p o r t p r e f e r r e d that all p e o p l e b e r e m o v e d f r o m a r o u n d T e m b a g a p u r a a n d c o m p a n y facilities in t h e highlands. Today, while c o m i n g to t e r m s with t h e p r e s e n c e of the i n d i g e n o u s c o m m u n i t i e s that were in the valley l o n g b e f o r e the company, it r e m a i n s u n h a p p y with the unsightly a n d u n h e a l t h y shanty towns filled with "outsiders" that continually spring u p a r o u n d t h e town's p e r i m e t e r . Moreover, t h e A m u n g m e also r e s e n t the p r e s e n c e of these squatter c o m m u n i t i e s o n t h e i r land. Such r e s e n t m e n t led to d a n g e r o u s inter-suku tensions, which in F e b r u a r y 1997 resulted in war b e t w e e n t h e A m u n g m e of Banti village a n d the D a m a l of t h e Utekini squatter settlement. T e m b a g a p u r a will r e m a i n a m a g n e t f o r t h e h i g h l a n d villages whose p e o p l e c o m e in t h e h o p e of exploiting what the c o m p a n y offers: t h e largesse of t h e F r e e p o r t d e v e l o p m e n t f u n d s ; b e t t e r living conditions a n d services in t h e valley, F r e e p o r t e m p l o y m e n t o p p o r t u n i t i e s , a n d b e t t e r access to markets f o r their p r o d u c e . 7 6 Because the A m u n g m e h o l d t h e c o m p a n y responsible f o r t h e squatters' p r e s e n c e , they u r g e F r e e p o r t to remove t h e m . T h e c o m p a n y states that r a t h e r t h a n forcibly relocating t h e squatters it now e n c o u r a g e s t h e m to move away e i t h e r by assisting t h e m to r e t u r n to t h e i r villages, w h e r e t h e c o m p a n y builds t h e m new houses, o r by m o v i n g t h e m to the transm i g r a t i o n settlements in t h e lowlands. F r e e p o r t also c o n c e d e s that at times it has r e q u e s t e d the military to move these n o n r e s i d e n t s , b u t only at t h e b e h e s t of t h e traditional landowners. Even w h e n acting with t h e best i n t e n t i o n s a n d at t h e r e q u e s t of t h e traditional landowners, F r e e p o r t has f o u n d this issue difficult. After having r e q u e s t e d that t h e

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company move squatters, the Amungme then sometimes express sorrow and regret, blaming the company for the disruption. Freeport argues that, far from working against the traditional landowners, it has acted only in the best interests of the indigenous people by improving conditions within the highland villages, including making improvements in the construction of the traditional houses (honai), providing medical supplies, and building clinics, schools, and churches. Although the company has indeed funded various and much-needed village improvements throughout its years of operations, these efforts have not always been compared favorably by the indigenous peoples with what the company supplies to its own employees. Moreover, the focus on the village as the principal model for development by the company is a recent response to the negative publicity associated with the relocation issue and the 1 % Fund. Historically, the company's preferred development focus in the highlands had been to relocate the Amungme to the lowlands, moving aside the Kamoro to accommodate the Amungme. According to Forbes Wilson, in 1981 Freeport justified its relocation policy with the not irrelevant but convenient claim that in the highlands it was impossible for the indigenous peoples to adjust to the new global marketplace, which the company's presence heralded. It also claimed that the traditional life of the Amungme in the highlands was, in the company's opinion, just too difficult—the premise being that, by supporting relocation the company was looking to protect the indigenous peoples' well-being and future prospects: 77 "Freeport officials have gradually concluded that life in the highlands is inherentlyjust too formidable. According to Wyn Coates, assistant to the President of Freeport Indonesia, . . . 'The best that is possible is marginal subsistence living. If they stay in the mountains, nothing can change.'" 7 8 While paternalistic in tenor, this statement is a critical reflection of the economic and social problems the indigenous people face as they confront development and points to the very real health problems associated with traditional highland life: high infant and maternal mortality, limited life span, malnutrition, and death resulting from preventable disease. In the lowlands, the Kamoro have also been repeatedly relocated from their traditional lands and hunting grounds to make way for the port of Amamapere; the town of Kuala Kencana, the expansion of Timika, the transmigration settlements, people relocated from the highlands, and the expansion of the tailings area. Resettlement of the Kamoro has also met with only limited success.

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To encourage the movement of the villagers f r o m their traditional lands, Freeport has been involved in building homes in the adjacent lowland areas of Koperapoka Baru and Nawaripi Baru, near the town of Timika. According to one Freeport employee, three years after the Kamoro were moved in 1977 they were finally settled in miserable "refugee" camps near Timika while they waited for their Koperapoka houses to be finished. But according to a n o t h e r employee, the Kamoro continually left the new settlements to return to their ancestral land and resource base. In their absence an influential and enterprising Kamoro apparently sold their houses to Indonesians. 7 9 T h e loss of, or dissatisfaction with, their new accommodations, together with the n e e d to be near their traditional resource base, saw the Kali Kopi-Nawaripi people, who have traditionally resided along the Minajerwi River near Timika, living in an unstable area next to the East Levee of the tailings. T h e company and the government moved them a n u m b e r of times (supposedly for their own welfare because it was dangerous living near the levee), only to see t h e m continually return to their resource base. Freeport says it eventually persuaded the government to allow these people to live permanently in their own territory in a safer settlement. Between 1990 a n d 1993 the company moved Kamoro f r o m other parts of the concession into the village of Paumako, where it provided houses. It also provided "some outboard motors and a freezer (now broken) for a small fishing enterprise" (which has subsequently collapsed) a n d a school, a health clinic, and three shops; all of these concerns are r u n by Indonesians. 8 0 In the highlands, many of the people drift back to their villages, but in the lowlands their land has been destroyed by the tailings or is unavailable because of the presence of outsiders. T h e relocation programs in the lowlands see many of the Kamoro living in "constructed" communities that bear scant resemblance to their traditional kinship groups. At the same time, because these traditional peoples are forced to live on someone else's land, they return regularly to what still exists of their own gardens and hunting grounds. T h e Kamoro Baseline Study noted that "the extent to which the various Kamoro communities have been relocated or moved f r o m their original land appears to be central to their current social and economic situation." 81 T h e study noted that the Kamoro villages least affected by relocation and removal f r o m their traditional land and resource base have the greatest cohesion, with higher levels of education and income. Conversely, villages whose people have suffered most f r o m dislocation and are temporary tenants on another's land exhibit little sense of community, have lower incomes and less education than the suku average, and tend to be p r o n e to social problems such as alcohol abuse.

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Around the Freeport concession TNI has, in most instances, ordered and carried out forced relocations. These forced removals fulfilled two TNI priorities in West Papua: the protection of the lucrative resourceexploitation industry and the security of the province. T h e military, charged with protecting the company's operation, forcibly and repeatedly removed villagers to accommodate the expanding mine infrastructure and tailings deposition and because it viewed the indigenous people as a security threat to the company. At the same time this policy conveniently fulfilled TNI'S national security priorities. By destroying the villages in the mountains, it hoped to destroy the OPM'S support base. 8 2 T h e military has contradicted Freeport's claims of noncomplicity by using Freeport facilities and infrastructure to facilitate forced removals while attributing such removals to the need for company security. Conversely Freeport, which likes to deny that its operation is threatened by the indigenous population, promotes forced removals by the military as a response to a national security concern. Thus, within this company scenario it logically follows that, because the indigenous people are not a security risk, Freeport would have no need to be involved in forced relocations. Yet the only physical threat to the continued profitable operation o f the mine has come from the actions o f the indigenous people. As noted previously, in July 1977 the OPM, with the assistance o f the local landowners who were upset that the first agreement between themselves and the company in 1974 had failed to produce any tangible results, blew up part o f the slurry line to the coast. In March 1996 rioting in the towns o f Tembagapura and Timika, which targeted Freeport property, forced the company to close the mine for three days. 83 In both instances Freeport had no answer to the attacks and relied on TNI to regain order. Given the nature and size of Freeport's project, it is impossible to physically protect all o f its operations. Thus, despite its claims to the contrary, Freeport understands that it is physically vulnerable, and the relocation of the traditional landowners has been a security issue associated with the company. Both explanations for forced removals— mine protection and national security concerns—are valid, and neither negates the other. Forced relocation of the indigenous peoples from their traditional homelands has had disastrous results. Not only have the highland people been exposed to diseases from which they have no natural protection and been removed from the land that has supported them for thousands o f years, but they have, in some instances, lost access to their traditional medicines, the symbols that defined their identity, and the forests and waterways that sustain their livelihood and existence. 8 4 Many

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Amungme and Kamoro have became uncomfortable tenants on land that has traditionally defined and given life to others. These people believe that through relokasi they have become victims of cultural genocide. Exacerbating any loss of identity and culture arising from forced removals has been the imposition of foreign and uncomfortable Western and Indonesian culture and values. Thirty years ago Michael Rockefeller wrote to his parents of the problems the Asmat (adjacent suku) were experiencing when confronted by Western culture. The issues facing the Amungme and Kamoro today are strikingly similar: The Asmat is filled with a kind of tragedy. For many of the villages have reached that point where they are beginning to doubt their own culture and crave things Western. There is everywhere a depressing respect for the white man's shirt and pants, no matter how tattered and dirty, even though these doubtful symbols of another world seem to hide a proud forma. . . . The West thinks in terms of bringing advance and opportunity to such a place. In actuality we bring a cultural bankruptcy that will last for many years Nonetheless, the Asmat like every other corner of the world is being sucked into a world economy and a world culture which insists on economic plenty as a primary ideal. 85

In Grasberg, the book that was written and published by the company in 1996, it was stated that none of the company's installations ever "displaced previously constructed housing or improved land anywhere in our project area" although the company did concede that it belatedly realized the significance of the land for hunting purposes. The problem with this last claim is one of cultural perception and definitions: how one might define a naturally growing pandanus grove that is regularly cleared of weeds, or a semipermanent village that is seasonally abandoned depends on one's culture. Much of what has been taken from the Amungme and the Kamoro was indeed, by Western definition, unimproved and uninhabited land, but by Melanesian cultural definition it was inhabited, improved, and of immense cultural and spiritual significance.

COMPANY HUMAN RIGHTS POLICY TODAY In early 1999 Freeport stated that in an effort to address all human rights issues associated with its presence, it was instituting a number of changes. In accordance with the recommendations of a report commissioned by Freeport, it announced that all employees, especially security personnel,

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would receive human rights training and adopted a Social, Employment, and Human Rights Policy. This policy was distributed to all employees on 1 J u n e 1999. Based on the Universal Declaration of Human Rights, it commits the company's employees to refrain from participating in violations and to report all suspected incidents to the appropriate company authorities. The document essentially places responsibility directly on the employee, who is required to sign the human rights declaration annually. 86 Dr. Daniel Ajamiseba, a Papuan employed by Freeport to monitor human rights violations, complained that by mid-2000 he was unable to cope with the number of reports he was receiving. Moreover, Ajamiseba advised that suspected human rights violations that the company had reported to the newly appointed Indonesian minister for human rights and to Komnas HAM had gone unanswered. 87 It could be argued that the aforementioned changes had more to do with protecting the company against future litigation over human rights abuses than with concern for the people living in its contract area. The Seattle Mennonite Church, a Freeport shareholder, claimed that an examination of the company's Web site found that none of Freeport's press releases had ever been in relation to human rights abuses. 88 Moreover, a year after the company's human rights policy came into being, a journalist spoke to two employees, an apparently illiterate truck driver and a university graduate, both of whom claimed to be unaware of such a policy or their responsibility under it. 89 Moreover, although referring to an incident in which one West Papuan was killed and up to fifty-five injured when the police opened fire on flag-raising demonstrators in Timika in December 1999, a letter sent by the company to Komnas HAM made note only of abuses committed against Freeport employees. 90 Another area of concern noted by human rights activists has been the response to reports of human rights violations by the company's high-profile counsel on human rights. In November 1999 Freeport became the first company to nominate a human rights adviser when it appointed the high-profile judge Gabrielle Kirk McDonald to the position of special counsel to the chairman on human rights. This position, together with her directorship, reputedly earns her $250,000 annually. 91 Brother Theo van den Broek and human rights activist Abigail Abrash have both expressed disappointment regarding Judge McDonald's responses to the human rights issues they have each raised; they believe that, given her history and position on the Freeport board, she should have exhibited more interest and sympathy. Van den Broek believed that the judge's response "might have been written by any high-up employee or director of [Freeport]" rather than from someone with her history. 92

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Abrash's disappointment arose from her perception that Judge McDonald was resigned to such abuses taking place for "if Freeport weren't operating in West Papua some other company would be and the situation would be even worse than it is today." 93 Another board member whose commitment to human rights is highly contentious is Henry Kissinger, who began his association with Freeport in 1989 when he attempted to broker a deal between the company and the SLORC military dictatorship in Myanmar. He was a Freeport director for more than a decade. T h e company announced his retirement on 12 March 2001, two days after it became known that a book that argued for his indictment for crimes against humanity was soon to be released. He was replaced by loyal Freeport supporter J . Stapleton Roy, who, while serving as U.S. ambassador to Indonesia, was accused of releasing confidential information to the company. 94 Because they believe there has never been a satisfactorily comprehensive and independent investigation into human rights violations within the concession, a number of groups attempted to organize just such an investigation in late 1999. After consultations with the company over a period o f two years and with sponsorship from the Indonesian Legal Aid Foundation, the Robert F. Kennedy Center for Human Rights, and the Institute for Human Rights Study and Advocacy in Jayapura, a few investigators entered West Papua to begin the probe. Before they were able to begin their work, they came under heavy surveillance by the police; they were interrogated, deported, and blacklisted to prevent their return to West Papua. When questioned, Abigail Abrash from the Robert F. Kennedy Center, who was a member of the investigative team, states that she was advised by a number of "credible sources," including foreign diplomats and Indonesian officials, "that Freeport was behind [the] deportation." 9 5 Not only was this confirmed to me by a Freeport employee involved in security, but this person advised that it was done following a direct request from Freeport's senior community liaison officer, Tom Green. A year later Freeport was proud to announce that it had endorsed the oil and extractive industry's Voluntary Principles on Human Rights and Security, which it had participated in drafting and which are endorsed by the U.S. State Department and the British Foreign Office. According to former secretary of state Madeleine Albright, the voluntary principles "address many of the hardest challenges facing oil and mining companies as they work to protect the safety and security of their people and operations." 9 6 Harold Koh, U.S. assistant secretary of state for democracy, human rights, and labor also noted that these principles

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establish transparency in reporting and monitoring of human rights in the signatories operations areas "either by NGOS or other sources." 97 O n Freeport's Web site today the company confirms that it "encourage [s] and fully support[s] any legitimate investigation of remaining [emphasis added] allegations of human rights violations." 98 It would appear that, despite being a signatory to the voluntary principles and having its own well-publicized human rights policy overseen by its a high-profile adviser, it does not want past violations in its area of operation revisited.

CONCLUSION Under Suharto the basic human rights of the Republic's citizens were subordinated to the need to hold the constructed nation together and the desire to accumulate wealth at the center. In turn, under Indonesian occupation, death and intimidation have been constants within Papuan life. T h e military, which was charged with protecting the citizenry, is the main perpetrator of such abuses. However, toward the end of the Suharto era the president's tight control over society began to unravel, and, with local and international NGOS responding to rising pressures within society, human rights tentatively found its way into the political arena. Eventually, Freeport became the first high-profile Western casualty of this phenomenon. Human rights abuses continue in Indonesia for a number of reasons: the continuing corruption within the government and the reluctance of the political elite to deal with such issues; the culture of impunity within the military; state concerns over the disintegration of the Republic and its ramifications; and the international silence over human rights violations, which continue to be justified under the rubric of "national sovereignty." While Komnas HAM succeeded in outlasting its creator to become Indonesia's preeminent human rights advocate, at the time of writing, its workload continues to seriously undermine its efficacy, causing it to be heavily criticized in West Papua. At the same time human rights workers have found their j o b just as dangerous now as it was during the Suharto era—if not more so. As they have become more outspoken, they are "disappearing" at a faster rate. John Rumbiak believes that his safety has only been assured to date because of his organization's close links to Komnas HAM and other international human rights agencies. 99 T h e traditional landowners claim that from the very beginning, because of the company's presence on their land, their rights have been violated through relokasi. It is clear that in the early years people were

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moved by the company against their wishes to make way for company infrastructure. The company has also assisted the military in relocation of villagers by providing transportation and building infrastructure at the relocation sites in the lowlands. More recently, however, the company has taken a more benevolent attitude toward the traditional landowners, providing them with housing in their villages, moving unwelcome outsiders from their land, and even supporting them against the military plans for relocation. The government's policy of transmigration has also caused social problems around the Freeport site, souring relations between the company and the customary owners of the land, who hold Freeport responsible for the presence of these settlements. While Freeport has not directly been involved in bringing the transmigrants, either sponsored or spontaneous to the area, its presence is the magnet, and its employment practices, its willingness to purchase the transmigrants' produce, and its ability to provide education and health facilities have ensured the longevity of these settlements. At the same time its surrendering of concession land to the government has enabled the positioning of the camps on Kamoro land close to, or in place of, the traditional villages. According to the Papuans, the transmigration settlements are an integral component ofjakarta's integration policy designed to destroy the Melanesian culture. The presence of the transmigrants undermines the Papuans' traditional values—their spiritual and economic claim to their traditional lands—and destroys the social fabric of the community. The traditional peoples argue that if Freeport were not on Kamoro and Amungme land, the transmigrants would not be there either and their rights would not have been violated in the manner and to the extent that they have been. With company security forces being accused of shooting the local people and allowing the military to use its facilities to commit atrocities against the citizenry in 1995, Freeport was forced to defend its relationships with this institution. Although Freeport steadfastly denied any involvement in human rights violations, an examination of events in this and the following chapter indicates that individual members of Freeport's security department may have been involved. In any event, the company has a case to answer. Even though Freeport personnel were aware of human rights violations for years, it would appear that in the past, the company failed to make any effort to prevent such actions, advise the appropriate authorities, or protect the Papuans whose land it exploited.

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The military is the main perpetrator of human rights violations in West Papua, and Freeport's presence increases the military's presence around its concession area. Moreover, there is a historical association between TNI'S brutal actions against the indigenous peoples and the latter's resistance to the company. While Freeport cannot be blamed directly for the human rights abuses the military commits, neither is it completely free of culpability. Despite what Freeport says, there is an undeniable connection. The military was charged with protecting the company; the company accepted, and indeed required this. The military culture is violent and lacking in accountability, and the company has always known this. Despite the company's recent efforts to monitor and prevent human rights violations in its concession, its history, the manner in which it has responded to human rights concerns, and its continuing relationship with the Indonesian military leave the company vulnerable to accusations of human rights violations in the past, and in the future.

Chapter 9

Freeport and TNI

W

I T H T H E E X C E P T I O N O F the first years, when the disparate groups that initially represented the military fought for independence from the Dutch colonial masters, the institution has never functioned in a conventional sense as defender of the nation against an external threat. Rather, while professing to exist above society, TNI has always operated against what it perceived as threats from within civil society. Under Suharto TNI was seen as different from other armies because

it was never created as an instrument of the state, but was itself involved in the creation o f the state. Thus the military considers itself the e m b o d i m e n t o f Indonesian nationalism. In theory, it remains above the state, and technically does not consider itself answerable to the gove r n m e n t o f the day, although in theory, the president is supreme comm a n d e r of the armed forces, TNI'S decisive role in the defense o f the Republic during the 1 9 4 5 - 9 period, when it c a m e u n d e r Dutch attack, provided the military with the basic justification for wielding political power. 1

According to TNI, the history of the Republic, and the mythology that the retelling of this history has spawned, afforded the institution a special dwifungsi role within the nation aod civil affairs. Its own mythology as cofounder of the state sees it as being charged with the mission of holding the nation together. In this respect, while all armies dwell on their traditions, TNI is ruled by its.2 After the transfer of sovereignty in December 1949, the military turned its attention to putting down insurrections in the Moluccas, West Java, and Sulawesi in order to hold the new state together. In recognition of the importance of this institution within the state, the military was officially given a role in government (for the first time) in 1958. In less than a decade this noncombat role was expanded with the adoption 220

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of t h e policy of "civic mission," w h e r e i n t h e military u n d e r t o o k civic tasks in t h e countryside such as r o a d b u i l d i n g a n d well digging—essentially to u n d e r m i n e t h e i n f l u e n c e of t h e I n d o n e s i a n C o m m u n i s t Party. With the d e s t r u c t i o n of the PKI in 1965, this civic role was d o w n g r a d e d , while t h e military's political role was e x p a n d e d . At t h e s a m e time t h e e x p e r i e n c e of o p p o s i n g t h e PKI t a u g h t t h e military the r u d i m e n t s of Realpolitik a n d t h e necessity of cultivating influential "friends." In 1966 S u h a r t o m o v e d to e n s u r e that his tool of repression was c o m p r e h e n s i v e a n d u n c o n t e s t e d by i n c o r p o r a t i n g t h e police f o r c e within t h e a r m e d forces. By giving t h e military u n p r e c e d e n t e d powers u n d e r a politico-military dwifungsi role, S u h a r t o effectively m a d e martial law t h e law of t h e l a n d f o r m o r e t h a n thirty years a n d e n a b l e d TNI to p e n e t r a t e all levels of I n d o n e s i a n l i f e — f r o m a p r e s e n c e in t h e p a r l i a m e n t , t h e bureaucracy, t h e judiciary, a n d business, down to t h e territorial divisions t h a t h a d political r e p r e s e n t a t i o n in each a n d every village. 3 Within this s t r u c t u r e t h e I n d o n e s i a n military was divided i n t o two groups: t h e territorial t r o o p s ( K o r e m ) , which essentially have a political role in society, a n d t h e c o m b a t troops of the army's Strategic Reserve (Kostrad), the Special Forces C o m m a n d (Kopassus), a n d t h e paramilitary Police Mobile Brigade ( B r i m o b ) . Free f r o m t h e c o n f i n e s of traditional checks a n d balances, the military a c q u i r e d an unassailable position f r o m which it was c h a r g e d with d e f e n d i n g t h e n a t i o n f r o m b o t h i n t e r n a l a n d e x t e r n a l threats. With t h e only perceived t h r e a t to t h e constructed n a t i o n c o m i n g f r o m within, to u p h o l d its mission t h e military's territorial a n d c o m b a t t r o o p divisions have, in their i n t e r n a l security role, always b e e n t u r n e d u p o n those they have b e e n c h a r g e d with prot e c t i n g — t h e I n d o n e s i a n p e o p l e . For in S u h a r t o ' s I n d o n e s i a t h e state did n o t reside as a r e p r e s e n t a t i o n of t h e p e o p l e a n d f o r t h e p e o p l e , b u t r a t h e r as a c o n s t r u c t above t h e p e o p l e , a n d within which t h e p e o p l e must conform. In 1998 l o n g s u p p r e s s e d explosive societal forces rose to the surface to overthrow S u h a r t o a n d c h a l l e n g e central d o m i n a t i o n of t h e constructed n a t i o n . T h e s e forces, t u r n e d as they were against S u h a r t o ' s longf e a r e d tool of repression, initially f o r c e d t h e military to a t t e m p t to r e d e f i n e its role within society. This institution is, however, d e t e r m i n e d to m a i n t a i n its p o w e r f u l political a n d e c o n o m i c position. While t h e military is today divided b e t w e e n pro- a n d a n t i r e f o r m i s t factions, t h e r e a p p e a r s to b e a g e n e r a l reluctance, if n o t inability, to c h a n g e . Above all, the institution believes in its mission to k e e p t h e a r c h i p e l a g o u n i t e d to m a i n t a i n t h e state. Moreover, t h e d i l e m m a f a c i n g t h e military hierarchy today is that to r e f o r m — a s is b e i n g d e m a n d e d by society—is n o t only to

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risk the disintegration of the Republic and, as the military sees it, possible large-scale civil war, but to risk its own disintegration. While even the reform-minded generals caution gradual change, there is little alternative. For how can a force whose culture has existed above the law, which has been encouraged to brutalize the people it is charged with protecting, and which has continually used the threat of civil conflict only its presence prevents be expected to suddenly embrace democratic and humanitarian reform? Changes within this culture will take time to trickle down through the ranks. While its ability to reform quickly has been questioned, so too has its intent. Should the military abandon its business interests, what the generals have to lose financially is extensive: The Indonesian army . . . controls more than 70 firms including plantations, fisheries, banks and other finance firms, construction and transport firms, and companies dealing in pharmaceuticals, wood, metal and even tourism. On top of this, the armed forces have thousands of distribution co-operatives and security and debt-collection firms. Individual soldiers moonlight as guards, Chinese-owned firms pay generals to sit on boards, and ex-generals often run big state-owned enterprises, such as the oil-and-gas leviathan, Pertamina. All told, the military empire is reckoned to be worth at least $8 billion. 4

Why would army generals, used to amassing millions of dollars through interests in business and by participation in the bureaucracy, readily accept a return to an income of less than $1,500 peryear? Given that those charged with reformasi (the generals) are the ones with most to lose financially, how sincere can the commitment to reform the service be? Moreover, the forfeiting of these privileges, both business and political, would not only mean the destruction of the generals' assured future but also the very existence of the institution that has provided for their retirement so well. For many, it is more than just a doctrine at stake. Dwifungsi has helped guarantee income and jobs after retirement. Officers could look towards becoming district or provincial chiefs—and reap material benefits from such office. Others could expect to become MPs or serve in important positions in the bureaucracy under the kekaryaan system— or, translated loosely, "cadre-isation." By the late '70s, half the Cabinet and over two-thirds of regional governors were military appointees. At district level, 56% of officials were ex-TNi members. In the bureaucracy, it was 78% of director-generals and 84% of ministerial secretaries. 5

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As Marzuki Darusman has noted, to expect the military to voluntarily withdraw from its domains is unrealistic because TNI is a political, social, and business interest group. 6 To abandon the military's powerful layers of interest and control would not only deprive the generals of substantial income but would weaken the institution's power and jeopardize its defining objective of national unity. Although less than 2 percent of G D P 7 is currently being allocated to support the 450,000-strong military (army, navy, air force, and police), the population remain unwilling to have the government allocate more of its scant resources to this institution. Thus, with a soldier's wage being below the poverty line and a study showing that 85 percent of police needed to supplement their income, TNI and the police cannot afford to abandon corruption, collusion, and nepotism. 8 Moreover, argues the military, is it wise to do so when the lower ranks are already viewed as undisciplined and when ethnic and religious tensions are intense? Should the lifeline that business and corruption represents to the services be severed, then further disintegration of troop discipline can be expected to be the result. However, the very forces that have held the nation together for more than thirty years are now pulling it apart. Until the structure of TNI is changed so that the territorial layers of military control that reach down all stratas of Indonesian society into the isolated village are disbanded, then the despised and destructive security approach by the military will remain. Moreover, because the center relied on a policy of suppression rather than resolution, it failed to resolve tensions between diverse ethnic, religious, and regional groups. Therefore, although the Dutch had succeeded in laying the foundations of what was to become the Republic of Indonesia, neither they nor any of their successors have been able to create a unified or unifying national consciousness. When the power of the center began to wane under Suharto, these tensions, inflamed by the economic crisis and strongest in the outer provinces, resurfaced as a powerful force.

THE MILITARY IN WEST PAPUA For more than thirty years the violation of basic human rights in West Papua by the Indonesian state continued unabated and uncontested by the international community. According to the Indonesian Legal Aid Institute (Lembaga Bantuan Hukum; LBH), by the middle of the eighties West Papua had the dubious distinction of possessing the worst

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human rights record in Indonesia. 9 Yet unlike the situation in East Timor, the situation in West Papua was ignored by the international community because its occupation was sanctioned by the United Nations and its calls for independence lacked powerful international supporters. Most important, however, little information about the situation in West Papua reached the outside world under Suharto. Because o f the presence o f the Freeport operation (which since 1973 was classified as o n e o f Indonesia's ten national assets) and because o f an active separatist movement that had attacked the mine in the past, West Papua, like the provinces o f Aceh and East Timor, was held under tight military occupation or under DOM (daerah operasi militer, military operations area) classification. In addition, the highlands area, and most specifically the area around the Freeport mine, was considered by the army to be "red"—that is, a region o f dangerous activity. Not only did this classification mean a strong and obvious military presence, but every visitor to the province was required to obtain a surat jalan (pass permit), which ensured that they reported to military posts in any area or village visited. At times even the local inhabitants were required to obtain a surat jalan simply to go to their gardens or to hunt. This situation enabled Jakarta to discourage and even deny outside access to the region while simultaneously controlling the movement o f people within its borders. U n d e r military occupation TNI has intimidated, terrorized, and "pacified" the indigenous population in West Papua through the destruction o f property, murder, rape, torture, abduction, surveillance, detention, harassment, and the control o f movement and association. As noted by the Australian embassy in 1995 in a confidential cable to Canberra, "Respect for individual human rights, particularly in non urban areas, remains low and the general expectation remains that those in authority, especially in the armed forces and the bureaucracy, have a right to organize and direct the lives o f individuals." 10 With regard to human rights violations committed by TNI, Amnesty International concludes that the exemption from p u n i s h m e n t — n o high-ranking officer has ever been held accountable for his men's actions in West Papua—encourages the continuation o f human rights violations. 11 Moreover, because o f deeply rooted structural problems, corruption and a disregard for human rights have b e c o m e endemic to the service. Despite the professed intent o f two successive post-Suharto regimes to address the problems within the military, as yet little has changed within the institution. In an account o f a Korem or territorial soldier's life in West Papua "Krisna" explains that

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most troops are not too happy living in the interior which is cold and isolated, the food is dreadful, there is no recreation, and malaria is rampant in the lowlands. . . . They usually live in 1-2 small buildings occupied by 15-20 troops. The troops often feel stressed; they feel the cold and the loneliness, are over-crowded, and often sick. They do not know what to do and in fact there is not much they can do. It is rare for troops to have reading materials. Maybe this is because on average they have only been to school as far as junior high. As a result their actions are often "very strange." 12

And as noted in the Australian ambassador's report, "The sense of Irian Jaya being on the periphery means there are fewer constraints on the activities of security forces." 13 Until the recent well-publicized troubles in the rest of the archipelago, a tour of duty in West Papua was seen as the most difficult assignment, with troops being paid double the basic rate. For the ambitious officer it was also a potentially quick route to promotion.

THE OPM AND THE INDEPENDENCE MOVEMENT Papuan resistance to Indonesian rule existed prior to the official incorporation of the province in 1969 and largely grew out of the frustration of the Papuan elite, which had been supported and encouraged by the Dutch efforts for West Papuan sovereignty. In the seventies, largely in response to the discredited and misnamed Act of Free Choice, the resistance formalized itself into a ragtag but dedicated group known as the OPM. Resistance has always focused on the presence and misrule of what the Papuans see as the last in a line of illegal colonial invaders. Not only has Indonesian rule created a sense of nationhood and unity within the West Papuan peoples that had hitherto not existed, but resistance was fed by Jakarta's extremely unpopular policy of transmigration, the racist policies and practice of systematic human rights violations by the armed forces, the experience of socioeconomic and political inequality between Jakarta and the province, the exploitation and destruction of Papuan natural resources for the benefit of the Indonesian elite, and what the customary peoples see as the Islamization of their predominantly Christian land. Having all the hallmarks of Third World colonization of a Fourth World nation, Indonesian control has been acceptable to Jakarta's allies

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in the West, which see disintegration of the archipelago as leading to unacceptable instability in the region. At the same time, Indonesian colonization was always dressed up in agreeable and distinctly New Order euphemisms suited for Western consumption. Apartheid, however, is the word used by Papuans such as J o h n Rumbiak to describe Indonesian control of Papuan land and the Papuan nation. 14 Since incorporation Jakarta has done little to engender equality, reciprocity, and respect between the center and the province and little to integrate it socially, politically, or economically into the archipelago. Moreover, as noted previously in the Australian embassy report, there is little respect for the Papuans from the Indonesians in authority. 15 Understandably, many Papuans profess to have gained little and lost much under Jakarta. Although West Papua is the source of enormous natural resource wealth, after decades of Indonesian misrule it is the least developed and its people remain officially the poorest of all the Indonesian provinces. To many Papuans their magnificent resources are a curse: they attract exploitative companies such as Freeport and ensure the continued presence of the Indonesians and their colonizing practices. Continual dissatisfaction with Indonesian control, coupled with the fact that under the New Order political opposition to the center's rule was forbidden, meant that the OPM had little alternative but to express its opposition by waging a solitary and clandestine guerrilla war against the Indonesian military in the jungles of West Papua. Historically, Jakarta regarded the OPM as little more than an unresolved irritant: the group's existence was publicly denied by the Suharto regime for nearly thirty years. Officially there were no resistance movements in the Republic, only security disturbance groups referred to as Gerakan Pengacau Keamanan (GPK) . The January 1996 kidnapping of twenty-four international workers together with the linking of their release to the closure of the Freeport mine and the granting of sovereignty to the West Papuan people meant that the OPM'S existence could no longer be denied. Within the vicinity of the Freeport concession, OPM opposition has been focused firmly on the company, which they perceive as a symbol of the exploitation and destruction of their land and culture closely associated with their colonial oppressors. The expression of dissatisfaction with the benefits afforded the traditional owners of the land and protests over Freeport's presence and expansion have consistently brought reprisals from TNI. In 1977 the Freeport copper slurry line was sabotaged by the OPM as part of a six-week insurgency; the company lost about $11 million and suffered a temporary shutdown. In retaliation the military launched Operasi Tumpas (Operation Annihilation) in the highlands;

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this operation saw the use of American Broncos and helicopter gunships carpet bombing, strafing, and reputedly napalming the surrounding villages. This operation was aimed at punishing the perpetrators and deterring further attacks on the mine. While the operation could be considered successful—inasmuch as Freeport infrastructure was never physically targeted by the OPM again—resistance to the Indonesian military and the company continued. In 1994, because of the expansion of the Freeport concession, OPM activity increased and culminated in illegal Papuan flag-raising protests. In response to these activities, together with the shooting of a Freeport employee, the area was sealed off by the military and the well-documented human rights violations of 1994-1995 were perpetrated. Although most Papuans self-identify with the separatist cause and identify themselves as OPM, many profess to have little stomach for its violent methods. Still fewer have been willing to leave their villages to become active participants in the difficult and seemingly futile armed struggle for independence. Even rumored association with the OPM has historically brought instant and violent reprisals from the military—not only for the individual but for the extended family and often for the entire village or suku. At the same time fighting between the OPM and TNI often meant that whole villages were forced to flee for extended periods into the jungle, from where they were unable to protect their property or tend their gardens. Of the three valleys around the Freeport mine, Tsinga has been the worst affected by TNI and OPM activity; the inhabitants of the valley are periodically forced to abandon their homes and gardens to seek shelter in the forests. As a result many have died from disease and starvation. With military reprisals around the Freeport mine site being both swift and brutal, the villagers are not always pleased to see the OPM who simply wander in from the jungle. At times they have even refused to give shelter to group members. After the fall of Suharto, leadership of the Papuan independence movement was usurped by the Papuan Presidium Council, a political organization. Formed during the Second Papua Congress in Jayapura in June 2000 to represent the Papuan people and their aspirations for independence, in twelve months it succeeded where more than thirty years of activism by the OPM had failed. The reasons for this are simple. The OPM waged a violent, low-level guerrilla war against Indonesia that essentially went unrecognized in the media and unsupported internationally because both its military and political arms remained fractured and competitive. In addition, news of its activities rarely reached the outside world because Suharto controlled the flow of information out of West Papua.

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Conversely, the urban elite and traditional leaders who make up the leadership of the Papuan Council exploited a brief period of political openness to democratically elect representatives of the West Papuan people. This new political organization was generally recognized as the voice of West Papua independence by the international community because the council proved more politically savvy than the OPM, attempted to describe an independent West Papua within a political and economic framework, remained nonviolent, maintained at least an appearance of cohesion and legitimacy, and appointed a designated international spokesperson (Franzalbert Joku) who has been relatively successful in articulating a message of independence within the international community. But most significant is that, unlike the OPM, it has rich, powerful, and apparently generous backers—one of which is Freeport. 16 The two prominent members of the council were Sentani chief Theys Eluay and Amungme leader Tom Beanal. Under the principal leadership of Chief Theys, the Papuan Council allegedly received large contributions from the Suhartos via the chief's associate, Yorris Raweyai—a known New Order thug. 17 Chief Theys himself had a rather checkered past and close ties to the Suharto regime. In 1969 he was one of the Papuans who signed the Act of Free Choice, and during the Suharto years he was a staunch supporter of Indonesian rule, serving as the Golkar representative in the provincial parliament, the Dewan Perwakilan Rakyat Daerah (DPRD). During this time he was believed to have even "identified] OPM supporters to be targeted by the military." 18 In 1998 he had a miraculous and suspiciously quick conversion to the side of Papuan independence and served in the senior position in the council, and as mentioned, was apparently a happy recipient of Suharto funding. Naturally Chief Theys' motives and sincerity were closely scrutinized within the community: many did not trust him. However, his links to sorely needed funding and his forceful personality secured his position of power. With the intent to celebrate an unrecognized and treasonous declaration of independence on 1 December 2000, all of the council's leaders, with the notable exception of Freeport's board member, were thrown into jail and charged with sedition. 19 Effectively Jakarta silenced its leaders. With some in the community expressing concern with Beanal's membership on the Freeport board, complaining that he is rarely seen back in Timika, Beanal has attempted to defend his position: What Freeport has d o n e to me is to present me with a single limited choice, prepared by the company, so that I was not able to choose freely,

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but was always obliged to choose what was desired by Freeport. People see me as working with Freeport now. Perhaps it's true! Nevertheless, in the depths of my heart, I feel that I must do what is best for my people. 20

Certainly J o h n Rumbiak, who has been quite critical of Beanal's accepting a seat on the board, says he does understand why he did it, while Franzalbertjoku says the council is happy with the situation, perhaps because Freeport has become a source of funding for the independence movement: We all welcomed his appointment. It is better to be on the inside and pursue changes from within on behalf of the landowners and also on behalf of the Papuans . . . rather than waving the activist flag and not get anywhere all. I think that it is good that as a representative of the landowning groups he should be on the board. And these arrangements are interim anyway, as far as we are concerned. We will review it when our political situation changes. 21

When asked how Freeport justified its support for the Papuan Presidium Council to Jakarta and the military, Joku replied that the company was able to categorize it as support for a human rights issue; moreover, he went on, "Jakarta's rights are limited. . . . A lot of significant people, both civilian and military in Jakarta are in the pockets of Freeport anyway so why would they want to complain?" 22 Perhaps it is considered more important for Beanal to serve the larger West Papuan cause for independence by acting as a conduit for Freeport funding to the council than to champion the parochial concerns of his suku? Nonetheless, whoever is funding Joku and his message of independence appears quite generous, for when staying in Sydney, the council representative is housed in the exclusive eastern suburbs, at a harbor-side hotel where all his bills appeared to be paid. Reluctant to hand over the mantle of independence within the Papuan community, various sections of the fractured OPM have called for the end of the council because it has failed to deliver the promised independence in less than twelve months since its inception. Most current members of the council would probably have self-identified with the OPM in the past. Today, Joku states clearly that the OPM "existed in the pre1998 period when there was nothing else," but today it comes under the democratic umbrella of the council, for there is no way it can defeat the military; only a political solution will gain independence. 2 3 The OPM, which rails against this subjugation, kidnapped two Belgium filmmakers

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in mid-2001 and in October of that year defeated the Indonesian military to take the town o f Ilago (only about fifty miles from the Freeport concession) for a few days. To highlight their continuing power and position in the struggle for independence and in an attempt to regain control of the independence movement, the OPM have released statements contradicting and criticizing the council. Papuan independence opponents have seized on the opportunities to claim that the council is without credibility and that the Papuan people are too fractured to seriously consider independence. 2 4 On 10 November 2001 Theys Eluay was kidnapped and viciously killed after spending the evening with Kopassus officers in Jayapura. It is clear that his death was at the hands o f his hosts, who wished to send a message to high-ranking Papuans calling for independences. At the same time it is was an attempt to disrupt the implementation of special autonomy for the province, for autonomy would give the Papuans greater control over their own affairs and resources, and only strengthen the calls for independence. As usual the military plan has backfired, and Eluay, once looked upon with suspicion by many Papuans, has become a martyr for the independence cause. Moreover, his death has once again focused international attention on the military's vicious tactics. With the local police saying that their investigation has been thwarted by the military, President Megawati was forced to bow to domestic and international pressure and appointed a national commission to investigate his death. Unfortunately, she also bowed to military pressure and undermined the commission from the outset with the inclusion o f a number o f TNI personnel. Because it is unlikely that the soldiers acted without high-level orders, TNI is in damage control. It will attempt to prove that "rogue elements" killed Eluay, thereby negating the need for further investigation into the individuals who ordered the crime and ensuring that the accused will be prosecuted in a tightly controlled military court. Because o f the historical resistance to its presence, Freeport, like other transnationals in Indonesia, has developed and relied upon a close relationship with TNI to the extent that around the Freeport mine site, in the surrounding villages, and in the town of Timika, surveillance is so pervasive that the people live in a constant state of fear and tension. For instance, there is but one main road in the whole concession. This access road, which was built by the company and runs from its port site at Amamapare through Timika and on to Tembagapura and the mine, is controlled by the military and Freeport security, who man numerous and regular checkpoints. No one can leave the lowland town o f Timika and go to the mountains via this road without permission. T h e only other

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readily accessible way into the concession is through Timika airport, where the military presence is also pervasive. In the eyes of the indigenous peoples and those critical of Freeport, the company's security forces (which officially run internal mine security) and the military (external mine security) are seen as an inseparable entity that terrorizes the local population. While Freeport welcomed the military in the past and indeed called upon its services to counter opposition, today the relationship is fraught with problems for both the ancestral owners of the land and the company.

FREEPORT'S "SPECIAL RELATIONSHIP" WITH TNI While military protection has hitherto been freely given by the host nation and welcomed by the transnational it has always, in the long term, been counterproductive. The problem today for transnationals is that the cost of such protection is rising as global mining companies face litigation in their home states over human rights abuses committed by the local military stationed around their sites. Royal Dutch Petroleum in Nigeria, Unocal in Myanmar, and Freeport in West Papua have been just a few of the defendants in these relatively new suits filed by indigenous groups with the financial and moral support of international NGOs. Such cases are claimed to be a logical progression from litigation against a foreign individual. The principle argued is that a corporation is responsible for human rights violations that it commits, that it is the "knowing beneficiary of," that were committed on its behalf, or that it "knew about and should have or could have prevented." 25 In the suit against Unocal in Myanmar, a U.S. District Court judge ruled that the company "could be held liable for abuses committed by the military of Myanmar against local people." 26 The loss of just one of these cases would pressure foreign mining companies to leave countries wherein the state has sponsored violations of human rights, such as Indonesia. Not only can a close relationship with a host nation's military leave a transnational legally vulnerable, but it can lead to what companies would categorize as a serious public relations problem with the potential to damage its reputation and involve it in costly litigation. At the same time such relationships usually lead to tensions between the company and the customary owners of the land and can be a continual drain on the company's coffers. 27 All mining companies, whether in the industrialized or developing worlds, have their own security. Not only are they responsible for the safety of their staff but, quite simply, in an industry

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where the loss of one day's production could cost millions of dollars, they must protect against damage to the machinery on site or the loss of production from sabotage or theft, all of which can be prohibitively expensive. In the less developed regions, and especially those where local resistance movements are active, the mine can become a prime site for sabotage, thereby justifying and even demanding a heavy security presence. Because security inevitably leads to cooperation with the local government forces (whether it be the local constabulary or the military), mining companies may be linked to any human rights violations committed against the local population by such forces. All of these issues are exacerbated around the Freeport mine, where outside access has been controlled, where normal checks and balances on military excesses have been absent, where the military is viewed by the customary owners as a hostile force, and where company security and the military have been viewed by the indigenous landowners as a single entity. Freeport's operations are legally afforded the full protection of the law within Indonesia. Yet because of the political situation in West Papua, the role that the military plays within society in Indonesia, and Freeport's perceived wealth, an unhealthy and destructive relationship has grown between Freeport's own security department and the military. That Freeport has a relationship with TNI, which is the principal law enforcer in the area, is not extraordinary. What is unusual is the nature of that relationship. Jakarta has always relied on the presence of the military to secure the interests of foreign capital by controlling unrest, yet because the central government was never able, or indeed willing, to adequately fund the military, both TNI and the police were encouraged to rely upon access to business—either through direct support or direct engagement—and through funds gained from illegal activities to perform its operations. This destructive alliance between the military and business has thrived around the Freeport concession. N o t only does the military openly steal from the company while participating in most of the legal and illegal businesses in Timika and the surrounding villages, 28 but it is directly logistically and financially reliant on Freeport support to the extent that, without the company, TNI would not be able to perform its operations and, claim the company's critics, would not be able to suppress the rights and aspirations of the people to the degree that it does. Because the company in 1968 did not relish the possibility of the military "spying and sponging" on it, Freeport says it initially refused a military presence. 29 Eventually the company came to accept the institution as a firm fixture within the concession, and, as OPM activity increased, it

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was welcomed for the protection it offered. After the discovery of Grasberg and the associated riches that it promised, the military increased not only its numbers in the concession but its attacks against the local landowners, which culminated in the violations of 1994-1995. Each of the competing arms of the services used the troubles of 1994-1995 and the hostage situation in 1996 (although this was outside the Freeport concession) to argue that its presence was needed in the contract area. By the end of 1996 the Freeport concession was reported to be the most militarized zone in Indonesia. What the various military divisions have attempted to create in the Freeport concession is accurately described by Chris Ballard as a culture of terror: "The perpetual imminence of the threat of death can create a 'space of death,' an imaginary zone in which fear blocks the senses as violence and representations of violence achieve a near-perfect circle of mirrors reflecting terror back upon both perpetrators and victims."30 Violence is written on and within the landscape through the process of the collective memory of violence visited upon the traditional community and the fearsome iconography painted on the landscape by the various military units stationed in the concession. While both serve as a perpetual reminder to the traditional peoples of the history of violence and the possibility of further violence, the absence of accountability and recourse serves to intensify this pervasive culture of terror deliberately created by the military.31 These icons are also, however, important symbols of demarcation by rival military units. Freeport states that, although not specifically dealt with in the first contract, its commitment to the military was, theoretically, well defined by the second: The original CoW was less specific in these areas than the 1991 CoW. However, in a review of this issue, our Indonesian outside counsel found that the provisions of our [1967] CoW must be read in context with Indonesian general law and that the two together provide a clear obligation on the part of [Freeport] to provide logistical and infrastructure support to the Government, including both military and civilian personnel, in all areas in which the government cannot supply such services. 32

Freeport states that it is also contractually "obligated to provide to the government, including the military, free and open access to its areas of operation and the use of certain infrastructure assets, including roads, airstrips and ports . . . [and] provide other support, including food,

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transportation and shelter to military personnel involved in routine security detail, upon request." 33 However, it believes that it is not obliged to provide any kind of assistance to the military with regard to combat operations. Nevertheless, Freeport facilities have been used by TNI during such operations. In its defense the company points out that it is common in many states for military personnel to appropriate civilian property in time of military or civil disturbances. Yet the language in the Freeport contracts does not appear to oblige it to offer any form of support for the military, during military operations or otherwise. The closest the 1991 contract comes to giving the government special rights is in Article 16 (3), which states that "the Government shall have the right of access to the Contract Area as provided in paragraph 3 of Article 14," which deals with government representatives entering the contract area to inspect operations. 34 Freeport also claims that its security personnel have never received military training and do not take orders from the military, nor are former military personnel employed as Freeport security officers. However, in 1997 journalist J o h n McBeth, who has a direct link to the company through his wife, Yuli Ismartono (senior manager of public affairs), reported that Freeport was "employing retired American and Indonesian military officers, ex-policemen, former U.S. federal agents and other security consultants to safeguard the mine and to counter activists."35 In fact, a Freeport employee advised that former and active Indonesian police and army officers, including army intelligence officers, are part of the company's security department, while an ELSHAM investigation is purported to have found that the company employs "hundreds of military personnel, including troops from Kopassus." 36 The company has also denied that its staff are armed, that it ever paid military wages, or that security personnel have doubled as Indonesian military personnel by simply changing uniforms when necessary. 37 However, in J u n e 2000 footage was shot of an Indonesian carrying a weapon and wearing Freeport security clothing. By way of explanation Freeport claimed that he was a member of the military. 38 Finally, journalist Julian Evans believes that he possesses an authentic company document listing Freeport office requirements that includes provision for TNI advisers. 39 More disturbing is the claim by Emmy Hafild from WALHI that in 1991 the military commander of the area boasted to her that Freeport directly supported military operations and helped pay military salaries. 40 A number of reports have also claimed that Freeport agreed to pay $11 million dollars annually into a communal fund for the military; the fund is reputedly topped up on request by negotiation. 41 At the same time it has

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been claimed that soldiers may be paid a monthly bonus by Freeport, estimated in 2001 to be approximately Rp 400,000. 42 Although Freeport has strenuously denied that it pays military wages, the readiness of the company's executives to deposit cash into the private bank accounts of the military undermines any such assertion. In response to a telephone call from a man identifying himself as the West Papuan police chief in February 2001, Freeport executive Prihadi Santoso (responsible for government and external relations in Jakarta) instructed his secretary to deposit $10,000 into a private bank account. It was only later, when the call was found to be a hoax, did Prihadi inform Jakarta police of the fraud. Although the incident was reported by the Indonesian press, no one seemed to question the appropriateness of senior Freeport executive's paying money directly into the private bank accounts of someone identifying himself as an Indonesian police chief. Such payments, it would appear, are common practice even with this new era of reformasi. Despite the ACFOA report of 1995 in which eyewitnesses reported the involvement of Freeport security personnel in the shooting of the villagers, it is difficult to find individuals who are willing to publicly testify that they have witnessed such atrocities. Nevertheless, in an Amungme video circulated by Survival International of London, Jacobus Niwilingame details his detention and physical abuse by Freeport security and Indonesian soldiers. 43 Although the timing of the incident is not clear, it would appear that Niwilingame was discussing one of the incidents detailed in the 1995 Catholic Church report, which failed to implicate Freeport security in the atrocities. In 1997 a document delivered to Komnas HAM by LEMASA, the organization cited a number of cases of assaults, disappearances and rapes, which it claimed were committed by Freeport security personnel. 44 In July 2000, Masmus Tipagau, who is employed by Freeport, told journalist Michael Shari that he witnessed a Freeport security guard "beat a man severely for playing cards in the street" in Tembagapura. 45 A source living in the concession also claimed that Amungme relate the story that on 24 December 1994 the military and a Freeport security officer tied a villager, Naranebalan Anggaibak, to the back of a Freeport vehicle and dragged him from near Tembagapura two miles away to Band village, where his corpse was tied upside down in front of the military post. The military allegedly informed the villagers that this was what would happen to them if they were found to be supporters of the OPM. The security guard was apparently subsequently dismissed by the company. 46 An article in The Nation cited an anonymous Western traveler's claim that he was held by both Freeport security and TNI for several hours and that Freeport personnel were, at

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the time, carrying guns. 47 In the documentary Blood on the Cross, Yudas Kogoya states that it was a Freeport employee who was piloting the Freeport helicopter in which the military traveled to Geselama, where it massacred innocent villagers on 9 May 1996.48 Dr. Tim Flannery, in his book Throwim Way Leg, details his discovery of a young Papuan boy, Arianus Muripu, who described to Flannery his beating at the hands of a Papuan member of Freeport security in the mountains within the Freeport project area. Despite being delivered to the Freeport hospital in Tembagapura, Arianus died in what Flannery believed were unexplained and suspicious circumstances. After spending some time in West Papua and working in the Freeport concession, Flannery came to the conclusion that the company had little control over its security forces, which, he believed, received their orders from T N I . 4 9 Finally, Tom Beanal told me in 1998 that Freeport security staff had been involved in human rights violations but that, in his opinion, Freeport personnel had not actually killed anyone. 50 In response to local anger and calls that Freeport disband its security department, the company claimed that by the end of 1996, thirtyfour out of thirty-five of the most recent security recruits were local Papuans from within the project area. By 1998 it claimed it was tightly vetting security personnel and that 60-65 percent were now locals. 51 Nevertheless, history has shown that a shared ethnicity does not necessarily guarantee a respect for human rights. From initially denying any relationship other than that stipulated in the terms of the contract and claiming that "they [TNI] have a j o b to do which is separate and distinct from our role in the area, which is to operate a mine," 52 the company today promotes the argument that between the company and the military there has grown a relationship over which it has little control, with the company often unwillingly co-opted into supporting actions or policies that it condemns and for which it should not be held accountable. According to Freeport it is all but impossible for staff to refuse military requests. TNI has command posts in all strategic areas—in Timika, along the Freeport road, and outside both Tembagapura and the village of Banti. And although Freeport states that it was only after the riots of 1996 that TNI personnel were actually stationed in Freeport security posts, LEMASA claims that military personnel shared a post in Tembagapura before the riots. Despite the fact that Freeport says TNI personnel are today forbidden entry to the company's security posts, they are a regular presence in the posts and the town. 53 Freeport's explanation of this contradiction is that TNI soldiers prefer to spend time in town and hanging out in the Freeport security posts rather than per-

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forming foot patrol in the surrounding jungle. While the security personnel are seen to fraternize on the j o b with the military who frequent the company shops, bar, and mess hall, Freeport facilities are also often freely used by the military. Military vehicles are serviced and refueled at Freeport depots, and the company helicopter is used to ferry military personnel and goods. The company acknowledges that outsiders may have difficulties differentiating between the two groups, especially when Freeport facilities are used by the military during operations against the people, when Freeport and TNI are seen fraternizing and sharing security posts, when Freeport cooperates with the military to move the traditional people from the mine site, and when military personnel are in the habit of walking around in civilian clothes in the concession. The company likes to argue that it supplies the same extended services to a number of other individuals and groups including clergy, researchers, and the International Red Cross. The difference, however, is that these relationships are not ongoing or quite so visible. Moreover, none of these groups are the perpetrators of well documented and systematic human rights violations. Any demarcation between the two is further muddied when Freeport is believed to go far beyond the legal limits of the official relationship or the military is believed to be working on Freeport's behalf. LEMASA has claimed that in August 1996 a list of claim forms signed against Freeport, which were to be sent to Beanal's lawyer, Martin Regan, in America, were confiscated by the police in Timika. In 1996 Regan was deported from West Papua by the police on fabricated charges before he had been able to meet with his clients, Beanal and Alomang. Two years later security forces refused to allow Alomang to travel to London to attend the Rio Tinto annual general meeting. 54 And, as noted previously, it was believed that Freeport was behind the military's deportation of groups planning to investigate allegations of human rights violations in the concession. Freeport counters that far from the military's being in the company's employment, or the lackeys of the company, as is the general perception, the military is a rogue force that causes serious problems for Freeport Leaving their families and risking their lives in the inhospitable and dangerous terrain to protect the wealthy foreign company, many soldiers resent Freeport and the expatriates who work there, believing that the company "owes them." While potentially dangerous and uncomfortable, a posting to the Freeport concession is simultaneously seen by military personnel as an exceptionally lucrative opportunity. The military and police control a number of extremely profitable enterprises in the area

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including the illegal harvesting of gaharu (a tree resin highly prized in Saudi Arabia), gold-panning in the Freeport concession, prostitution in Timika, the illegal selling of alcohol, the capture of and trade in tropical birds, logging operations, the running of black markets in the villages, the widespread pilfering of Freeport goods, and the extraction of payments from local villages each month when the villagers receive monies from Freeport's 1% Fund. Moreover, it is claimed that members of Freeport's security department participate in these illegal business activities associated with the military and police. According to one source, it is often Freeport security that recognizes potential business opportunities and informs the military while they then turn a blind eye to its activities.55 This potential for wealth accumulation has fuelled rivalries within and between the competing groups: the military and the police, the different military units, and the different political parties represented within the military. With Kostrad having the closest association with the company and the greater opportunity to accumulate wealth at the company's expense, Paul Murphy claimed that the military shooting at Timika airport on 15 April 1996, in which a soldier shot and killed fifteen people including four top army personnel from Kopassus' counterterrorist unit, was not a random act of violence as portrayed by the media but rather a military assassination by persons opposed to the presence of Brigadier General Prabowo's troops, who had recently entered the concession. 56 The murder of the military commandant of Timika Regency by the police in Timika in 2000 was also reputedly linked to control of business interests in the area. 57 Finally, after the fall of Suharto new political interests in Jakarta have vied to have their candidate replace Golkar's Prihadi Santoso on the PT Freeport Indonesia board while former Papuan governor Barnabas Suebo and Megawati's husband, Taufik Kiemas, are said to have expressed an interest in replacing Suharto's favorites as Freeport's business partners. 58 The company's problems with military have arisen for a number of reasons. The bureaucracy has been virtually nonexistent or at least ineffectual in the area while the police have not only been an arm of the military, but were trained under military command. In such a situation there was little use, according to Freeport, in lodging complaints with local authorities. Moreover, it was also pointless to complain to the distant, uninterested, and complacent military hierarchy, for such abuses were sanctioned, even encouraged, by Jakarta under Suharto. As is the situation throughout much of the archipelago, the would-be upholders of the law are seen around the Freeport mine site as criminals patently uninterested in upholding the law and protecting the citizenry.

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The attitudes of a number of the people in senior positions and their close relationships with military personnel have caused the company to defend the military's actions and, as such, effectively uphold the destructive culture of impunity within the institution. Some time ago it was discovered that all theft of company property, which the Indonesian police blamed on the Papuan inhabitants of local villages, could be linked back to the police in collusion with Freeport security personnel. However, Freeport chose not to confront the military over this issue nor report it to any Indonesian authority. Apparently the company was not about to accuse high-ranking Indonesian officers of corruption. Moreover, a Freeport employee has told me that there is a hierarchy of Freeport security locked in with police corruption, with active Indonesian colonels working through the company's security department. 59 While there are well-meaning and hardworking members of Freeport's Community Affairs Department, one notable employee is Freeport's senior community liaison officer, and former military attaché with the American embassy in Jakarta, Tom Green. According to one source, Green would like to run the department like a CIA operation: identifying and separating the "good guys" and "bad guys," using divide and conquer tactics within the community, and achieving objectives through force rather than by allowing grievances to be aired and time taken to build trust. 60 Green boasted close links to the highest echelons within the Indonesian military under Suharto, including notable and infamous past members Prabowo Subianto and General Wiranto. Believing that Prabowo was demonized, Wiranto was a good guy, and the military have done "their j o b pretty well" in West Papua, Green likes to use "Vietnam speak" such as "winning the hearts and minds" when describing the military's relationship with the traditional peoples. 61 Green dismissed military "trouble" as young men getting bored on their time off like "GIs anywhere. Just like marines in Okinawa for instance. So it creates a certain amount of friction within the community. Okay."62 Given that three American soldiers had recently been accused of gang raping a young Japanese schoolgirl on Okinawa, Green's comments were not only highly offensive but betrayed a frightening acceptance of what is universally unacceptable behavior.

FREEPORT'S ROLE IN KEFORMASI What came to exist between Freeport and the military over the years was a mutually supportive and, until recendy, mutually beneficial relationship

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that was generally considered so close that TNI was regarded as little more than an extension of the company's own private police force, with few people being able to distinguish between the two. Freeport was able to operate in West Papua without serious international attention until April 1995, not necessarily because it conducted business in a socially or environmentally responsible manner, but because of the power of its supporters in Jakarta, the impotence of its adversaries, and the indifference of the international community. Because early criticism of Freeport came from sources that lacked resources and influence—the NGOs of Indonesia, which until the late eighties to early nineties were impotent and all but nonexistent, and the OPM, which few people in the world had ever heard of and no one appeared to support—any attempts to draw the world's attention to the situation in West Papua generally met with indifference. At the same time the Suharto regime had vested interests in the company that ensured the latter's protection. If Freeport executives were astonished and offended by the attacks on the company's development record after 1995, they were livid with regard to the accusations of human rights abuses. While Freeport initially maintained that there was a separation between the company and TNI, there has always been crossover simply by virtue of the fact that they need each other to do theirjobs. After its investigation of the human rights abuses around the mine site in 1995, Komnas HAM recognized the problems this crossover presented and recommended that the relationships needed to be clarified, with a clear delineation being made between the responsibilities of the local government, the military, and Freeport. By this time Freeport was eager to act on this suggestion, for it no longer wished to remain responsible for the development and administration of the region nor for the military's actions. T h e price, which now went beyond mere dollar value, had become far too high for the company, for while the military continued to commit abuses, the nature o f the relationship meant that the company was implicated. Thus, in late 1995 Freeport became sensitive about its relationship with TNI. Engaging in rhetoric aimed at distancing itself from the institution and its growing list of atrocities, Freeport stated that the blame for such actions lay solely with the military. Unhappy with the company's comments, TNI became dissatisfied with the level of support it was receiving from Freeport. While all companies essentially paid the military protection money, TNI believed that, given Freeport's extraordinary wealth and its recent betrayal, the company could, and should, be more generous. What began as a spontaneous riot in Tembagapura in March 1996 over an incident between a Papuan and a Freeport security guard had,

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within two days, spread to Timika. However, by the time it reached the lowland town, the rioters' activities were clearly being orchestrated by "straight-haired" outsiders with walkie-talkies who directed the rioters to take their vengeance on company property. With the military and police taking a suspiciously long time to bring the rioters under control, suspicion fell upon the military. As a Freeport employee pointed out, if this riot had truly been of a spontaneous nature and aimed in anger at the company, one would have expected that the helicopters, which were a potent company symbol and essential to the company in its operations, would have been one of the first targets. The helicopters, which were also essential for military operations, were delibrately bypassed by the rioters. At the same time company infrastructure such as the environmental laboratory and other facilities, which were of no interest to the military, were badly damaged. While the company contentiously argued that its NGO opponents were the instigators of the riots but lost control to the military, everyone is aware that the military was indeed involved. 63 Rather than punishing the vandals, the military rewarded them with a trip to Jakarta under the escort of Brigadier General Prabowo. The Timika riots were a predictable response by the military for, as noted, when its presence is threatened it usually stages an "incident" aimed at self-justification. The riots were just such an incident, which had a threefold agenda: to rap the company on the knuckles for criticizing it and to remind Freeport to pay up (as the riots demonstrated that the company still needed the protection of the military); to pressure Freeport into dealing quickly with community issues raised in the wake of the human rights reports, which were embarrassing to Suharto and the military; and to justify an increase in military personnel at a time when its presence was being criticized by the international community. A month after the riots TNI announced an increase in its numbers, and Freeport not only agreed to provide "accommodation and other facilities," but agreed to spend tens of millions on the military. 64 It also learned to be more cautious about criticizing T N I . 6 5 Endeavoring to formulate an alternative response to its troublesome relationship with TNI, Freeport offered it incentives to choose separation and reform. The military apparendy requested $100 million but settled for $35 million from Freeport. 66 With this amount it agreed to supply the military with its own transport vehicles, build barracks, and help in the construction of its own naval base near the company port of Amamapare. 67 In this way Freeport hoped to define clear physical parameters between itself and the military and, through the provision of accommodation of a standard similar to that of its own employees, to lessen resentment. However,

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documentation held by Beanal's lawyer in the United States details Freeport's going even further by budgeting to supply "guard houses and guard posts, barracks, parade grounds and ammunition storage facilities... mess rooms, water, power and fuel installations, tennis and volleyball courts, flagpoles and sign writing."68 When questioned on the appropriateness of financially supporting the military, Thomas Egan, a senior vice president for FreeportMcMoRan, stated that it was normal procedure in a developing country. 69 This may well be correct, but it does not make such behavior legal or morally acceptable, especially when the company promotes itself as a corporate leader in the protection of human rights. What can possibly be considered appropriate, or even good company policy, about a foreign mining company financially supporting the host state's military, especially when that institution is a recognized violator of human rights on a massive scale? Freeport's financial support of this institution exceeds the terms of its contract, is morally indefensible, and places the company on legally dangerous ground. Even if Freeport shareholders do not care about the legal ramifications—which they should—they need to question the ethics of their company when it annually pays the perpetrator of human rights violations nearly as much as it allocates its victims. With regard to the bureaucratic presence in the area, Freeport has had some success in lobbying the central government. Yet the absence of funds and commitment from Jakarta has meant that there are only tentative beginnings of a normal civilian bureaucratic infrastructure to replace the military around the Freeport mine. Today the company claims that the relative stability of the area—which it believes has been, in part, due to the success of its development policies—has been instrumental in creating the environment in which a reduction in troop numbers could be achieved. By late 1998 Freeport was claiming that the combat unit normally stationed around the mine had been redeployed back to Ambon from where it had originated while the police presence had been upgraded to about six hundred people and the military downgraded to four hundred to five hundred. A more correct estimate was probably about nineteen hundred. In October 1998 Tom Green stated that most of the combat troops in the project area had been replaced with territorial troops trained in community work in the province; in addition, approximately half the troops were Papuan. 70 A month before this comment, a parliamentary commission had noted that the troops stationed around the Freeport operation were still from combat commands and that territorial (noncombat) troops trained in civic operations were not allowed to enter the region unless expressly asked to assist in combat operations.

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According to Green, the lessening of tensions in the area by late 1998 allowed the company to work with TNI to reform and humanize the institution within its project area. The ultimate goal was not only an improvement in the military's relationship with the local inhabitants and, by association, the company's own relationship with these people, but the security of the company's reputation and relief from the threat of future litigation. Quite fortuitously Freeport's attempts to reform TNI in its project area coincided with the new directives from Jakarta after the fall of Suharto. Freeport promoted the line of reasoning that, after more than thirty years of fighting the OPM, TNI could not defeat this group militarily for, like many armies before it, it could not defeat an enemy it could not see. At the same time the military proclaimed a fundamental change in its role in West Papua, claiming that it had abandoned its unpopular and disastrous security approach in favor of a more civic-minded approach, with the territorial troops carrying "spades, hoes and other agricultural equipment" in place of guns. 71 In 1998 Freeport, aiming at winning the trust of the people at village level in their project area, enthusiastically promoted this concept of a civil role for the military. Within this new model Green was proposing that ten to sixteen soldiers be charged with working within a village to assist with infrastructure construction and agricultural projects. 72 At the end of about six months the bulk of the contingent were to move on to the next village while a few soldiers remained permanently in the village to continue working. Green saw Freeport's role in this process, apart from moral and logistical support, as providing funds or goods to aid the projects. The company pledged initial financial support to cover development in fourteen villages, some of which were outside its project area. The success of this operation, Green believed, would rely on the ability of the soldiers to immerse themselves in village life and win the trust of the inhabitants. The ratio of villagers to troops would, argued Green, ensure that the military personnel acted responsibly. Given that the company cannot force the military to leave, the company promoted the above policy as an acceptable compromise and as a means of improving community relations. The plan, however, had obvious flaws. First, there is really nothing new about the military's being stationed in every village; it had essentially been there since 1996, doing nothing more than intimidating the villagers and forcing them to participate in illegal enterprises. Green's argument that acceptance and positive outcomes could be based on numbers and vulnerability had obvious flaws also; for the villagers know that behind those few soldiers are hundreds more who have not hesitated to rape, murder, torture, and generally

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terrorize the isolated villages and who were capable of doing so again. When questioned on this plan Beanal said the villagers would accept such a plan because they would be afraid to do otherwise. 73 Given the military's propensity for business, it could be reasonably assumed that any economic activity that existed in the village, or may have arisen in the future, would be commandeered by the soldiers stationed there. Moreover, they would have easier access to Freeport development monies going into the village. The Papuan composition of territorial troops is no guarantee of sympathetic relations either, for as recent history had demonstrated, Papuan soldiers could be just as cruel as their Indonesian counterparts, with inter-suku animosities, which may have existed for generations, proving hard to bury. Finally, this new policy was alarmingly reminiscent of the policy formulated by British counterinsurgency expert Sir Robert Thompson and used in Malaysia, the Philippines, and Vietnam. Its aim then, as it was in West Papua, was to deny the enemy (in this case the OPM) its support base while attempting to realign the villages with an unpopular and discredited government. In Vietnam the villagers were herded into compounds or "strategic hamlets" where new services were provided by the government and where outside access was denied. Around the Freeport project area, rather than move the villagers, Freeport was proposing to move the military into the village with the same intention. A couple of years after Freeport promoted that plan, it still had not been implemented.

CONCLUSION Presently, because of the international criticism t n i is facing over its actions in East Timor, Ambon, Aceh, and the Maluku Islands, it has adopted a lower profile within the Freeport concession. At the same time, it obviously has been disinclined to participate in Freeport's project to "win the hearts and the minds" of the local Papuans. Freeport may attempt to socialize the military to prevent further human rights violations in its contract area, but it is attempting to change a culture that has defined the institution for more than thirty years. Real change can come only from within. However, since the fall of Suharto, the military has essentially been able to ignore pressure to seriously reform. Indonesian politicians, under the leadership of the ineffectual and ultranationalist president, Megawati Sukarnoputri, have little inclination today to confront TNI over its continuing human rights abuses, especially in the

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restive provinces of Aceh and West Papua. Perhaps the best and only hope of reforming this powerful institution is through sustained international pressure. By refusing to normalize ties with TNI, by insisting that the generals responsible for the carnage in East Timor be brought to justice, and by linking financial support to reform, the West may be able to force TNI to address the problems within its ranks. Given recent history and the West's present concerns over the disintegration of the archipelago, however, optimism would be premature. For many years Freeport was content to have a close and highly visible relationship with the military in its project area to deter OPM activity and, according to Tom Green, as a force for peace, for he argued that without the military's presence the company would be embroiled in numerous tribal conflicts. 7 4 Until the events of 1995 the supply of infrastructure to the military was a small price to pay for TNI'S protection, but the international focus on the company's operations, brought on (in part) by the military's excesses, raised the price substantially. Freeport has become understandably highly sensitive of this relationship and nervous about the future, for not only could the relationship lead to costly and damaging litigation, but a close relationship with TNI no longer serves foreign business interests in the archipelago. Unlike Green, others within the company have been keen to place some distance between themselves and the military though, much to the company's chagrin, the military has been able to frustrate these endeavors. Paradoxically, while the military has always been reliant on the largesse of the company to perform its duties, TNI has not taken a subservient role to the multinational in the power relationship. The nature of the association between Freeport and TNI has meant that it has been difficult, if not impossible, for the company to disassociate itself from TNI'S actions. Far from creating distance, Freeport's direct allocation of funds to support the military's presence has strengthened the association and has left the company legally vulnerable and in a morally questionable position. Such assistance not only aids the military in its control of the local population, but assists it in its illegal activities. For obvious reasons it has remained difficult for the indigenous people and their supporters to differentiate between the two groups, with the Papuans viewing the militarization of the land for the protection of Freeport as the root cause of the violence committed against them. This perception is not entirely correct. The land is militarized not simply to protect Freeport, but to pacify resistance, which, itself, is not

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solely in response to Freeport's presence. Moreover, from the eighties the island, with its vast wealth of natural resources, was considered an economic treasure chest by the Indonesian governments. Furthermore, unlike East Timor, where Indonesia's claim of sovereignty had never been internationally sanctioned, West Papua is recognized as a part of Indonesia and the presence of an active separatist movement there has been seen as a political test case ofJakarta's ability to control ethnic tensions within the diverse Republic. The military was in West Papua before Freeport arrived and it would be there regardless of the company's presence. The aforementioned, however, does not detract from the fact that the company's presence ensured that the area became the most militarized within the Republic under Suharto. Today there are estimated to be fifteen thousand to twenty thousand Indonesian troops stationed in the province; many of their senior officers are East Timorese veterans. Until recently the military's position within the state was not challenged; and, although it was cognizant of the fact that Suharto regarded the company as a national asset, TNI has always regarded the company as secondary in importance to the province as a source of military revenue. Thus, while the military was happy to accept Freeport's largesse as its due, it would not tolerate company policy or actions that jeopardized its position. If the political situation in the Freeport concession should change in any way to threaten the military's stronghold, so too will TNI'S response. In such a situation there is little Freeport can do. But until Freeport succeeds in distancing itself from TNI (which includes ceasing to fund the institution) and the area is demilitarized, the relationship between the company and the traditional landowners will continue to be troubled. With the military currently reliant upon the company to perform its operations in the region and Freeport's presence helping to justify the Indonesianization and control of the province, the mine is still closely linked to the incorporation of West Papua into the Indonesian archipelago. At the same time its economic and political importance to Jakarta only serves to reinforce the province's significance to the center and to both Jakarta's and Jayapura's political aspirations. In this politically uncertain time in Indonesia, Freeport is attempting to protect itself by playing both ends. To appease its Indonesian critics, in late 2000 it was downgrading the influence of New Orleans and strengthening the Jakarta office and the offices in West Papua while replacing expatriates with Indonesians. At the same time it has been channeling funds to West Papua's nonviolent independence movement represented by the Papuan Presidium Council through Beanal.

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Clearly, it would be in Freeport's interest for West Papua to gain its independence. In such a scenario no longer would the company need to fund the Indonesian military or be threatened by its human rights abuses around the mine site or the OPM in its fight for independence. Moreover, it would be a powerful entity in the new state. Like all observers of the Indonesian situation, Freeport cannot predict what the political situation will be a year from now. All the company can hope to do is maintain a low profile, weather the coming storms, make new support networks to replace the old, and attempt to keep its secrets.

Chapter 10

Conclusion

W

ITHOUT THE COMPLICITY o f t h e i n t e r n a t i o n a l c o m m u n i t y , the cor-

ruption of the Suharto era could not have developed to the extent that it did. By participating in business or lending money to the New Order regime while failing to demand accountability, foreign capital and the international lending agencies demonstrated their acceptance of the corrupt business culture. At the same time such practices failed to encourage maturity or independence within the local business community and contributed to both the longevity of the regime and the domination of the archipelago by the center. Initially geopolitical considerations dictated the West's lending policies. Eventually, the profits enjoyed by the West's capital producers became the determining factor. Because of the inadequacies of the Indonesian business community (access to finance and expertise) and its general lack of interest in the long-term and unpredictable hard metals mining industry, this sector remains today under the domination of foreign capital. As demonstrated, Freeport-McMoRan Copper and Gold, through its operating subsidiary in West Papua, PT Freeport Indonesia, enjoyed a close and preferential relationship with Suharto for nearly thirty years, but every aspect of the company's operation, including its relationship with Suharto, came under scrutiny once the NGO community became effective in publicizing West Papuan issues. Although Freeport recognized the growing power o f human rights and environmental groups in the West, and in particular the potential of the Internet, it overestimated the president's and its own power to resist challenges from within civil society. T h e company believed that should environmental accusations against it arise they could not be proven because Freeport was self-regulating and the Indonesian government confirmed that it was operating within the law. Moreover, independent access to its concession was denied by the military with the support o f Freeport's own security forces so that, while accusations could be made, they appeared difficult, if not impossible, to prove. With regard 248

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to the social problems, the company felt secure in the knowledge that it had acquired the land in accordance with Indonesian law and, by providing opportunities and infrastructure for the traditional peoples who before the company's arrival had been living in "the Stone Age," it actually exceeded the terms o f its contract. Finally, the traditional landowners opposing the company's presence were devoid o f recognized leadership, fragmented, unsupported, and seemingly powerless against the combined forces o f the American transnational and the Indonesian government. Feeling secure in its political assessment o f the situation and believing that it would continue to operate in West Papua in obscurity for some time to come, Freeport thought that it had the luxury o f time to address the growing environmental and social problems in its contract area. Such complacency translated into vulnerability. Simply by possessing the largest known gold deposit on Earth in one o f the most pristine and ecologically diverse regions o f the planet, Freeport was an obvious NGO target. Not only was its environmental record in the United States highly contentious, but it had a close relationship with the Suharto regime, while TNI was committing human rights abuses within its concession. Under these circumstances it was inevitable that Freeport's operations in West Papua would eventually become the focus of sustained NGO activism. In 1995 the ACFOA report succeeded in breaking the wall o f privacy and silence surrounding the company's operations in West Papua and providing a rallying point for opposition groups. With the release of the report, Freeport's hitherto powerful insurance policy with Suharto actually became a political and economic liability. With attention being drawn to the company's relationship with the regime, Freeport became an obvious target for Indonesia's new anticorruption campaigners. At the same time, the company remains guarantor for the hundreds of millions of dollars o f loans for Suharto's friends. Should credible corruption investigations focus on Suharto's foundations the government could refuse to honor Nusamba's debts, one of which is underwritten by the company and has so far cost Freeport shareholders more than $40 million dollars in interest payments. 1

DEVELOPMENT O n c e Freeport became the focus of an international NGO campaign, it was no longer able to control the information coming out of its concession. Realizing that Jakarta could no longer protect it internationally,

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Freeport attempted to relieve the social tensions in the contract area. Initially, because of the pressure it was under and the company's lack of experience, it focused on high-profile projects with short-term results. Without input from the local community, the company imposed inappropriate development schemes that looked like charity and only succeeded in exacerbating social problems. By the end of the millennium, after much trial and error, a more acceptable development model involving the traditional peoples is being tested in and around the Freeport concession. However, because of the company's inexperience, the myriad difficulties involved in delivering development to the area, and the human frailties that surface as a result of an influx of money and the possibility of accumulating wealth, problems remain unresolved. The process of development, by its nature, is a slow, difficult, and thankless task for the company with its competing internal pressures and reliance on rapid and often predetermined outcomes. For the indigenous landowners who have lost access to, and control of, much of their traditional lands, and whose culture is being challenged and devalued by modernity, development is painful, disorienting, and confusing. Given the parties involved—a diverse and often fragmented community; a bankrupt and ineffectual central government; a discredited, largely undisciplined, and violent military machine; and tens of thousands of "outsiders" all intent on exploiting the wealth of the region and the company's presence there—it is difficult to see relations ever being free from tension in the Freeport concession. Moreover, while in the past Freeport was well pleased with Indonesian adatldcw, which allowed it to legally confiscate the traditional lands of the Kamoro and Amungme peoples, it proved to be a serious point of contention that continually blocked reconciliation and undermined relations with the traditional peoples. Mining companies, whose j o b has been the extraction or processing of minerals, have neither the expertise nor the sensitivity needed to bring development to the most isolated and traditional peoples of the globe. Moreover, development should be the responsibility of the government, not of a commercial enterprise. However, given the current economic and political climate in Indonesia, Freeport is aware that it will remain central to the development process for the foreseeable future. While throwing large amounts of money at a problem has never resolved issues in the Freeport concession, the company remains in the no-win situation of damned if it does and damned if it doesn't. What the company needs is a change of ethos, constructive assistance, the absence of the military, and the luxury of time.

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ENVIRONMENT While Freeport has acknowledged its failures with regard to social issues by promoting the seemingly more acceptable argument of ignorance rather than indifference, it has been loath to accept criticism o f its environmental policies. Other than confirming that in the early years the company was guilty of concentrating on technical problems over environmental ones, since the discovery o f Grasberg it has always argued that it has operated in an environmentally responsible manner, within the terms of its contract, and in accordance with Indonesian environmental law. T h e Suharto government always supported Freeport in this claim, as did two outside environmental audits commissioned by the company. T h e issue of environmental responsibility, however, is highly contentious for a number o f reasons. Dames and Moore based their assessment of Freeport's operations on compliance with Indonesian law within the context o f "best industry practice." Yet "best industry practice" and "site location" contingencies tend to undermine responsible operations. As noted, while Freeport may have been operating within the laws o f Indonesia and within the terms of its contract (and this is questionable given the overburden storage problems), compliance under Suharto was not difficult. T h e r e were also problems with the claims o f independence concerning the Dames and Moore and the Montgomery Watson audits. Most damaging o f these were their decisions not to collect or analyze their own samples. Given the criticisms associated with the Dames and Moore and Montgomery Watson environmental reports, until independent samples are taken and analyzed it is difficult to accept that, to date, a truly independent and comprehensive audit o f the company's operations has been completed. As a member of the ICME, Freeport boasts that it operates under sound environmental and health policies defined by home state standards. However, as has been shown, this claim is incorrect. In the United States, Freeport would not be allowed to discharge sewage and tailings directly into the local river system. Nor would it be given approval to store overburden, which is predicted will drain acid and leach copper into the environment for another hundred years, in an environmentally sensitive area the dynamics of which it does not fully understand. The massive scale of the operation, together with the lax monitoring history of the Indonesian environmental authorities under Suharto, has meant that it is currently impossible to appreciate the full extent of the damage to the environment

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when Freeport departs. However, what is known is that it is extensive, irreversible, and predicted to last into the next century. 2

HUMAN RIGHTS T h e Suharto regime was characterized by contradictions and myths. While it acknowledged that all Indonesians were indigenous, it failed to acknowledge the individuality of any group and, to hold the nation together, relied on the doctrine of Unity in Diversity, which, in practice, failed to accept diversity. That the Indonesian archipelago was a successful and benign experiment in homogeneity and development was also a myth widely propagated by the New Order regime and supported by rapacious Western governments. To preserve this construct the military was required to maintain a tight hold on ethnic, religious, and regional tensions while preventing free and open access to areas o f conflict such as West Papua. This was particularly the case around the Freeport concession, which under Suharto became one of the most militarized areas of the archipelago and characterized by systematic human rights abuses. By internationally recognized criteria, the company's involvement in the forced removal of villagers from their land and livelihood implicates the company in human rights abuses. Yet, in Freeport's defense, it must be said that the company was given a legal right to do so by Jakarta. In accordance with the original contract, the traditional owners of the Freeport concession could be forcibly removed from their ancestral homelands and hunting grounds to make way for the company. The company has also been indirectly involved in other forms of abuse. T h e presence of transmigration settlements and the company's support o f these settlements, through purchasing goods and giving employment, has directly led to the loss of Melanesian land, culture, and livelihood. Most significant, further to the ACFOA report, a number of as yet unsubstantiated accounts claim that Freeport security personnel have been involved in human rights abuses. Unquestionably independent investigations into each of these allegations is required and should be welcomed by a company that champions human rights and human dignity. Most significant, Freeport is implicated in human rights abuses by the nature of its relationship with TNI, the actions of the military in what it says is the defense of the company, and the company's responses, or lack of responses, to this institution's brutal actions. In its defense the

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company claims that the military is not in the concession to protect it but to fight the OPM. This is not entirely correct, as the company is aware. Freeport's importance to Jakarta, its positioning in an isolated region of the archipelago where a secessionist movement has been active, and the fact that the nature of the company's operation makes it vulnerable not only necessitates the military's presence, but in the military's assessment, has warranted a substantial commitment. The military contradicts Freeport's claims of noncomplicity by arguing that it is in the concession, stationed along the access road and outside the towns, to protect this national asset. Finally, Freeport undermines its own argument when conceding that it has called upon the military to protect it and apparently continues to financially support the military presence. At the same time Freeport claims that its contract with the government legally obliges it to support that presence. This is also incorrect, for nowhere in the contract does it state that the company is obliged to financially or logistical support the military by providing housing, transport, or food. The company cannot, therefore, disassociate itself from the military presence in its contract of work area. While any company may be forced to allow the host nation's military access to company infrastructure and utilities in time of war, the terms of the contract have been substantially exceeded when the company and its facilities have been used in combat operations against the traditional peoples that have resulted in the violation of basic human rights. Although the company professes innocence by arguing that its facilities are regularly commandeered by the military, it has a case to answer. Through its history of silence and inaction Freeport is, arguably, implicitly involved in the military's actions. Although some Freeport employees were aware of the possibility of abuses being committed in and around the project area during 1994—1995, including the torture and death of Papuans within the Freeport concession, on the Freeport bus, and within a Freeport compound, it would appear that the company made no effort to notify a higher authority, or indeed, any group or association outside the country that could bring the atrocities to the world's attention. Moreover, in only one of the documented instances of abuse was there any evidence that the company attempted to intervene, and that was only in response to a direct appeal from local villagers. It is difficult to defend Freeport's silence and inaction with the argument that the company was unable to report abuses because those in authority were themselves the perpetrators. Freeport is a powerful American company with myriad resources at its disposal. If Freeport could arrange to

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have Henry Kissinger meet President Wahid, or if the CEO could meet Suharto to protect the company's interests, then surely the company was morally responsible to make at least a similar, if not greater, effort to protect human life. After the release of the ACFOA report, the costs of the relationship, which had hitherto served both parties well over the years, rose dramatically. With the relationship making Freeport vulnerable, the company made a number of efforts to disassociate itself from the military's actions and to devalue the association in hopes of easing tensions in the area. It also adopted this course in an effort to legally protect itself against litigation arising from human rights violations committed by TNI. However, because Freeport remained reliant upon the military for protection and because TNI was not above demonstrating and exploiting its power over the company, Freeport found that its ability to separate was limited. The military, reacting violently to company initiatives, was able to extract a high financial price from Freeport. As a result the company spent tens of millions of dollars providing the military with separate facilities and infrastructure while allegedly agreeing to set up a multi-million-dollar slush fund for protection money. In return the company required the military to keep out of Freeport's security posts and desist from using its facilities. However, the military has done neither. Rather than creating distance between itself and TNI, the company's actions have only served to strengthen the direct links between the two. Eventually, in another attempt to ease the tensions that had led to the abuses, Freeport supported a plan that it promoted as improving relations between the military and the traditional landowners. As noted, this plan of moving the military into the village structure was at best inappropriate and at worst criminal. The support of such a plan would have seen Freeport assisting the military in strengthening its stronghold within the villages. It would also have reinforced the relationship between Freeport and TNI, linking the company to any negative outcomes. Today, because of the bad publicity the military is receiving internationally, it does little around the Freeport concession, including keeping the peace. Rather, military personnel appear to prefer to spend their time extracting payments from the Papuans and the company, running black markets, participating in illegal ventures, overseeing small-scale mining operations, and generally exploiting the lucrative nature of a Freeport posting. In an effort to prevent future litigation over human rights abuses linked to the military, Freeport announced that it had established mechanisms within the company structure to ensure that known or suspected

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instances o f human rights abuses are reported by company personnel. T h e company has undertaken to pass such reports on to the authorities within Indonesia. As noted, however, there are problems within this seemingly commendable policy. Freeport's focus on protecting its own personnel, while ignoring other abuses in the concession, coupled with concerns expressed by human rights activists with regard to the attitude of Freeport's high-profile human rights commissioner, raises questions about the depth o f commitment from the company. At the same time, through its membership in the US-ASEAN Business Council, Freeport has recently promoted lifting the embargo on providing military equipment and training to the T N I . 3 Such support for this lawless and violent institution so closely following the outrage of East Timor undermines Freeport's professed commitment to the protection o f human rights within its concession. Also, is it fair and reasonable reporting for Freeport to claim kudos by listing the millions it is paying directly to the traditional landowners and toward development on its balance sheet without offsetting this figure with what it costs to support the military? Where is Freeport's professed social conscience? Perhaps more interesting, where is the social conscience o f its shareholders who, year after year, remain silent as the company contributes to the military as much as, if not more than, it does to the military's victims? T h e best hope for Freeport in the future is an improvement in its relationship with the military and the West Papuan people and between these people and the military and Jakarta. Such an outcome will assist in removing Freeport as a potential OPM target and will remove the threat o f litigation that the relationship between the company and the military foreshadows. In the absence o f the above, the company cannot free itself from a damaging reliance upon the military. And while it continues to provide goods and service that are outside the terms o f its contract to an institution that continues to commit human rights abuses in its concession, then such abuses will invariably be linked to the company.

NGOs An examination of the environmental and social problems associated with the mining operation highlighted the extent to which the central government failed in its responsibility to its Papuan citizens and Freeport's complicity in this failure. Therefore, despite claims by transnational mining companies such as Freeport that they choose to

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operate responsibly, this study demonstrated that, in the absence of oversight by a benevolent and accountable government, it was only the activities of the NGOs that put pressure on the company to do so. A viable NGO community in Indonesia began to reemerge in the eighties, growing out of the need for equitable economic and social development. By the nineties Indonesian NGOs were attempting to promote democratic values within civil society and, along with other sectors of society including corporatist entities such as Komnas HAM, had begun to challenge the exclusionary nature of the state. By raising issues such as environmental degradation, resource depletion and exploitation, and human rights, NGOs were demanding responsibility and accountability of the Suharto government. Through sustained activity they strengthened their position as advocates for the disenfranchised to become a substitute for the emasculated political parties and one of the safest forms of political outlet in Indonesia. Accessing information technology and opening links to their international compatriots, these NGOS were able to avoid much of the coercive state apparatus and bring to the home state's attention the activities of their transnationals in Indonesia. In this way not only were NGOS able to bypass their government to bring pressure on the transnational, but, by attacking Jakarta through a third party (the transnational), they were able to raise the costs to Jakarta of committing such violations. In this regard Freeport became a powerful and convenient weapon for the Indonesian NGO community. By exploiting the grievances of the Amungme, WALHI made this traditional landowning suku a convenient vehicle through which the NGO could attack the company and, through it, the regime. At the same time international and Indonesian NGO support empowered the local community in its struggle against the company, assisted the Amungme in disseminating their message within the international community, and helped them address the imbalance between themselves and Freeport. Without such NGO activism, and the associated international pressure, Freeport would arguably not have addressed the social problems within its contract area to the degree that it has today. Having come so far, however, WALHI and the other high-profile NGOS steadfastly reject corporate engagement, preferring to maintain an adversarial role.

MINING COMPANIES, NGOs, AND CORPORATE ENGAGEMENT There is currently an international debate regarding the importance of environmental and political considerations in determining whether a

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mining site in the developing world should be approved. The OECD, the United Nations, and the mining industry assert that democracy is the preferred partner of FDI, while well-articulated environmental legislation, far from being a disincentive to investment, is actually preferred by the more dynamic transnational mining companies. It is argued that the global trend toward stronger environmental protection legislation will continue so that companies that currently operate in states with inadequate legislation will be forced to eventually adopt expensive, and perhaps prohibitive, environmental controls. 4 In defense of this argument, these organizations note that the countries with the tightest environmental controls, such as Australia, the United States, and Canada, still attract substantial mineral investment. 5 A couple of points need to be considered here. A preference for wellarticulated environmental law is more applicable to the larger transnational miners, which can afford to be sensitive about their corporate image and are wealthy enough to incorporate expensive environmental monitoring and control procedures. In more regimented environments these companies believe that they have the competitive advantage over their less well resourced rivals. With regard to continued mining investment in the West, this argument arises, in part, from incentives found in these states that serve to offset the stringent environmental controls: political security, a predictable legal system, cultural familiarity, wellestablished infrastructure and proximity to downstream businesses and corporate headquarters. However, the Freeport case study supports Robert Cox's opposing argument that "ideological mystification has obscured the fact that a stronger case can probably be made for the pairing of political authoritarianism with market economics." 6 That is, the inability of social forces to influence state policy to the detriment of the miner has historically been one of the great attractions for the transnational miner in the developing world. Moreover, environmental legislation per se is not necessarily a defining issue because most developing countries are adopting increasingly rigorous legislation. What is important to the miner, as was demonstrated by the Freeport case, is the degree to which environmental legislation is policed by the host nation and the society's ability to ensure that its government upholds such legislation. In this regard Freeport profited handsomely from the Suharto regime's ability to undermine well-defined environmental legislation and silence civil society. The promise of untapped resources, coupled with the regime's ability to shield mining operations from societal demands, made Suharto's Indonesia a state in which mining companies were increasingly eager to operate. Yet Freeport's experiences as Suharto's

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control crumbled confirm that operating in such an environment, while attractive in the short term, can eventually prove costly. A 1996 survey of major European companies found that 90 percent of those companies surveyed believed that pressure from NGOS and other social groups would either "remain the same or increase in the next five years." However, while the mining companies surveyed believed that mining was the industry most at risk from these pressure groups, at the time few of the companies admitted to having procedures in place to evaluate them. 7 With pressure on the mining industry increasing exponentially within a few years of that survey, the large transnational miners formed community relations and environmental departments whose sole responsibility was to address the issues raised by their detractors. Considerable resources are also being invested in waging media campaigns, lobbying governments and international agencies, establishing Web sites, funding conferences, and supporting university departments. These companies also profess a responsiveness to what they define as constructive criticism and like to be seen to be promoting open door policies to engage their detractors in direct dialogue. 8 This dialogue, called in the industry "corporate engagement," is a contentious issue. In support of corporate engagement, mining companies argue that they have little expertise in environmental and social responsibility. Therefore, if NGOS are genuine in seeking to change corporate behavior, they need to move on from the negative role of watchdog into the positive role of engagement with the company. Conversely, the NGO community is concerned that engagement will compromise their organizations, waste their time, and undermine what they define as their primary role, advocacy. Moreover, many feel they would be at a distinct disadvantage in direct negotiations with the corporate world. With one mining company executive being quoted as stating, "While we're working with them, they don't have time to sue us," the concerns of the NGO community could have some credence. 9 Not surprisingly NGOS tend to believe that corporate engagement will cause them to be exploited by the company to win political points. Given the current level and contentious nature of the debate within the NGO and mining communities with regard to the question of corporate engagement, this study, which addresses the questions of corporate responsibility and NGO accountability through an examination of the troubled relationship between Freeport and NGOS, is relevant. Although today's mining transnationals profess to be part of a responsible industry, it would be premature to accept this premise. Despite international attention and sustained NGO activities, Freeport has continued to oper-

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ate in an environmentally irresponsible manner. The study also demonstrates that, with regard to development delivery, mining companies such as Freeport, which generally lack experience and operate under corporate pressures without the assistance of a responsible government, will make errors. In such situations NGOS who choose to hold mining companies responsible for development delivery should reconsider their role in this issue for the sake of the traditional peoples. It is my contention that no longer should corporate engagement and advocacy be a question of either/or. Like the mining industry, NGOS must accept that they now have dual roles: engagement and advocacy. How to best fulfill these contending positions is today's issue.

CONCLUSION It is common for the hard metals mining industry to be challenged by various interest groups within metropolitan states, but until recently companies operating in the most remote regions of the globe have been able to do so without significant difficulties because of their isolation. Today new and equally powerful forces have arisen to challenge these transnationals and the regimes that protect them. Freeport, recognizing some of the limits of its power, attempted to adjust to some of these new realities and has survived. Suharto could not, and did not. Freeport's economic and political importance to Jakarta only serves to reinforce the province's significance to the center and means that it will remain central to both Jakarta's andjayapura's political aspirations. Today, however, because of its past associations, Freeport is vulnerable and not particularly trusted by any group. Should West Papua's fight for independence become increasingly violent, the company would be an obvious political and economic target for the OPM. At the same time, should Jakarta appear to be losing its struggle in West Papua, TNI would be loath to leave such an asset in the hands of the West Papuans. The future of Freeport is inextricably linked to the future of West Papua and fraught with difficulties; the current policies of the Indonesian government and the military only serve to further destabilize an already volatile situation. During 2000-2001 it was rumored within the company that FreeportMcMoRan was attempting to sell the subsidiary. While nothing seems to have come of this rumor, the accepted rationale behind it by those working in West Papua for the company are telling. Basically what was argued was that Freeport had dug itself into a hole. It had never tackled problems

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head on but relied on covering them over with money. And while Freeport may be the lowest-cost producer of copper, its expenses are extraordinarily high and set to rise. The company has borrowed huge amounts of money and will probably be left with the Nusamba debt. Its executives continue to pay themselves extraordinary amounts of money. There is a sea of disgruntled Indonesian workers who, while being paid well by Indonesian standards, are paid far less than their expat co-workers. Finally, the company can no longer expect favored treatment from Jakarta at a time when transparency is increasing and the country's environmental and social problems are growing. For more than thirty years Freeport was feted by the Suharto regime and was politically significant in Indonesia. Today Suharto's successors vilify the company for political expediency. While Freeport knew how to protect itself under Suharto, it is struggling in this new political climate. And although the company has excelled at the j o b of mining, its political blunders have left it with few friends within the archipelago and little political power. The future is as uncertain for Freeport as it is for the West Papuan people.

Notes

Preface 1. The term "New Order" was originally used to describe the new form of rule, or a "return to order," after what were considered the failures of both parliamentary democracy, in the fifties, and Sukarno's "guided democracy" of the late fifties to 1965. Eventually the term came to represent the whole of the Suharto era. 2. Old World, New Times, CNN video documentary supplied by PT Freeport Indonesia. Chapter I: Introduction 1. George A. Mealey, Grasberg: Mining the Richest and Most Remote Deposit of Copper and Gold in the World, in the Mountains ofIrianJaya, Indonesia (New Orleans: Freeport-McMoRan Copper and Gold, 1996), p. 71. 2. See Forbes Wilson, The Conquest of Copper Mountain (New York: Atheneum, 1981) for details of the expedition to Ertsberg. 3. Jeffrey A. Winters, Power in Motion: Capital Mobility and the Indonesian State (Ithaca, N.Y.: Cornell University Press, 1996), Preface, p. xi. 4. Freeport has underwritten loans for the former president's "charitable" foundation, Nusamba, to buy shares in its West Papuan operation. Suharto officially held the controlling 80 percent interest in Nusamba until about 1996 when, after the death of his wife Tien, his closest friend and business associate, "Bob" Hasan, appeared to assume the role of controller of the Suharto business empire. At about that time the Nusamba articles of association changed to list Suharto as holding only one share and his business partner, Hasan, the remaining 99 percent. However, it is widely understood that Suharto still retains the controlling interest and it is through Nusamba that the claim is made that Freeport funded the president's purchase of shares in PT Freeport Indonesia, whether that turns out to be a 1 percent holding in Nusamba or an 80 percent holding. See chapter 4 for further details of the relevant transactions. 5. Ariel Heryanto, "Indonesia: Towards the Final Countdown?" Southeast Asian Affairs (Singapore, 1997), p. 108. 6. Andrew Maclntyre, Business and Politics in Indonesia (Sydney: Allen and Unwin, 1990).

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7. Budiawan, "Human Rights Good for Business,"Jakarta Post, 2 December 1999. 8. Robert W. Cox, "Global Restructuring: Making Sense of the Changing International Political Economy," Political Economy and the Changing Global Order, ed. Richard Stubbs and Geoffrey R. D. Underhill (London: Macmillan, 1994). 9. When referring to the rise of political activism in parties such as the PUDI and PRD in the mid-nineties, Ariel Heryanto ("Indonesia," p. 109) identifies this same phenomenon. 10. Freeport threatened to sue journalists Robert Bryce and Daryl Slusher, university professors Steven Feld, Alan Cline, and Robert Boyer, and environmental activists Lori Udall and Bill Bunch unless they ceased making "false and damaging accusations" about the company. Andrew Duff, "Off the Desk," Austin Chronicle, 15-21 December 1995. 11. Greg Earl, "Foreign Miners Warned over Environment," Australian Financial Review, 7 December 1995. 12. Formed in 1991, the ICME provides a comprehensive list of its membership . 13. Eyal Press, "Freeport-McMoRan at Home and Abroad," The Nation 261.4 (31 July/7 August 1995): 126; "The Feds Undress Jim Bob: Freeport's Motherlode," Austin Chronicle, 10 November 1995, pp. 18-22; and Project Underground, Risky Business: The Grasberg Gold Mine. An Independent Annual Report on P.T. Freeport Indonesia (Berkeley, Calif.: Project Underground, 1998). 14. Michael Roe, Seattle Mennonite Church, 2001 FCX shareholder proposal (presented at 2001 Freeport-McMoRan annual general meeting). 15. Gavan Breen, Let Them Be: West Papua Revisited (Melbourne: Australian West Papuan Association, 1993), p. 3. The Morning Star hung beside the Dutch flag for eight months until the Indonesians took control. 16. Washington found very little reason to support the dying European power in this dispute. Moreover, the wishes of the indigenous people were irrelevant to the Americans given a number of important strategic and economic factors at the time: Washington wanted to protect its strategic interests in the area by checking what it saw as the growing Soviet influence in Indonesia under Sukarno; needed to protect established economic interests in Indonesia; desired Indonesian support to continue feeding the voracious Japanese appetite for oil and natural resources essential for rebuilding; and believed that if it entered the argument on the side of the Dutch a military conflict would be inevitable—a situation it desperately wanted to avoid with its already growing commitment in Vietnam. Finally, in the belief that it was only a matter of time before Jakarta eventually controlled the island, the United States and its compliant Western allies made the Realpolitik choice of supportingjakarta. 17. For a comprehensive critique of the New York Agreement and United Nations involvement see Paul W. van der Veur, "The United Nations in West Irian," International Organization 18.1 (Winter 1964): 53-73; a n d j o h n Saltford "United Nations Involvement with the Act of Self-Determination in West Irian

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(Indonesia West New Guinea), 1968 to 1969" (Ph.D. diss., Hull University, 2001). 18. British Embassy, Jakarta, "Confidential Report by Ian Morgan, 3rd Secretary to the British Embassy in Jakarta on visit to West Jaya and Eastern Indonesia," 23 September-2 October 1968 (London, Public Record Office) FCO 24/444, p. 24. 19. Hans Meijer, interview, Asia/Pacific Program, ABC Radio National (Australia), 17 April 2001. Meijer uncovered Dutch documentation that reputedly debunks the myth that Holland tried to protect Papuan interests. Aware that, given a free and fair vote, the Papuans would choose independence, Dutch officials turned a blind eye to the illegalities of the Act of Free Choice as "it was not in their interests to fight again with Indonesia because of the Papuans." 20. British Embassy, "Confidential Report by Ian Morgan," p. 24. 21. Reverend Origenes Hokujoku, a participant in the Act of Free Choice and at the time chairperson of the Soekarnoputra (Jayapura) City Council, said that the participants were given no choice by the Indonesian military. Three weeks before the referendum they [those who would vote] were isolated. Instructors continuously pressured them to vote for integration with Indonesia. The electors were given a piece of paper with exact instructions on what to say. There was no way of withdrawing from this sham. If you did there could be serious repercussions against you or your family. I remember we had a final rehearsal to see if we mastered our speeches. One man resisted. He refused to present the obligatory speech. The next morning his body was found in a gorge. My wife was pregnant at the time. Therefore I was given permission to stay home during the weeks preceding the referendum. General Ali Murtopo, the highest officer in Irian, tried to placate me. He had a box of apples imported from Australia to give to my wife, at that time apples cost 3 guilders a piece. We also received towels and transistor radios. We were taken for trips by helicopter. But other times he mocked me. This land belongs to Indonesia, he said. If you want a Free Papua state, then you should ask your god to create an island in the ocean. "The Day All Papuans Cried," Algemeen Dagblad (The Netherlands), 12 December 1998. E-mail "Kabar-Irian: The Day all Papuans cried" from Evelien van der Broek through KABAR-IRIAN , December 18 1999). 22. "West Papua: Efforts to Marginalize the People," Pacific News Bulletin 9.4 (April 1994): 7. 23. O n e of the two journalists, Hugh Lunn of the Courier Mail, described how he and the Dutch journalist were continually followed by Indonesians to limit their contact with the West Papuans. He states that the Act of Free Choice was the "saddest story" he covered in this thirty years ofjournalism. "West Papua: An Issue for the South Pacific Forum," Pacific News Bulletin 7.3 (March 1992): 6. 24. Ibid. Secret documentation released by the Australian government in late 1999 indicates that although aware that the consensus among the West

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Papuans was for independence, all states involved in the process colluded with the Indonesians to ensure incorporation. 25. M o h a m m a d Sadli, interview, 17 September 1998. 26. Soetaryo Sigit, interview, 18 September 1998. 27. Terms of the old "concession"-type contract were that "Freeport would surrender title to the government of any equipment brought into Indonesia; that revenues, and particularly the foreign exchange, generated by the project would be controlled by the government; and that project m a n a g e m e n t would be in the hands of the government, with only technical direction by Freeport. Once Freeport had recovered its capital investment the government of Indonesia would take over the project." Forbes Wilson, Conquest of Copper Mountain, p.157. 28. Ibid., pp. 157-159. 29. See . 30. A m e m b e r of the Freeport-McMoRan board since 1993, J u d g e McDonald had previously been a staff attorney for the NAACP Legal Defense and Educational Fund, a former U.S. district court j u d g e , and a visiting professor of law; she served for six years as a j u d g e of the International Criminal Tribunal for the f o r m e r Yugoslavia in T h e Hague, becoming its president in 1997. 31. J o s e p h a Alomang, interview, "Endless Extraction: Mining and Community Responses," Making Contact, National Radio Project, Oakland, California, 20 J u n e 2001 . Chapter 2: Business in Indonesia 1. Richard Robison, "Indonesia: Tensions in State and Regime," in Southeast Asia in the 1990s: Authoritarianism, Democracy, and Capitalism, ed. Kevin Hewison, Richard Robison, and Gary Rodan (Sydney: Allen a n d Unwin, 1993), p. 44. Maclntyre, in Business and Politics (p. 256) believes that this general attitude toward business was, to a large extent, reflective of attitudes toward the Chinese who traditionally dominated the sector. Raillon, on the other hand, disputes the interpretation of Javanese business culture as being adverse to business. Francois Raillon, "Can the Javanese Do Business?: T h e Awakening of Indigenous Capitalists in Indonesia," in Leadership on Java: Gentle Hints, Authoritarian Rule, ed. Hans Antlov and Sven Cederroth (Surrey: Curzon Press, 1994): p. 166. 2. By introducing a form of government called "guided democracy" Sukarno effectively e n d e d Indonesia's experiment with parliamentary democracy. Adam Schwarz states that in practice, guided democracy signaled "a return to a system of personal rule more reminiscent of Javanese feudalism than the chaotic democratic experiment of the 1950s." Adam Schwarz, A Nation in Waiting: Indonesia in the 1990s (Sydney: Allen and Unwin, 1994), p. 16. 3. T h e Dutch policy had been to favor the Chinese in business while banning Indonesian participation. Thus, the resultant Dutch and Chinese domination of the economy of the previous couple of centuries stifled Indonesian enterprise. J. A. C. Mackie, "The Indonesian Economy, 1950-1963," in TheEcon-

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orny of Indonesia: Selected Readings, ed. Bruce Glassburner (Ithaca, N.Y. a n d Lond o n : Cornell University Press, 1971): p. 45. 4. This system controlled the distribution of licenses f o r c o m m o n commodities to supposedly e n s u r e the growth of i n d i g e n o u s businesses. Despite assured profits to t h e thousands of beneficiaries, few m a n a g e d to b e c o m e efficient businessmen. Ibid., pp. 46-48. 5. Richard Robison, Indonesia: The Rise of Capital (Sydney: Allen a n d Unwin, 1986): p. 72. 6. As noted by the minister for industry in Soehoed, "Industrial Development during Repelita III," Indonesian Quarterly 10. 4 (1982), as quoted ibid., p. 215. 7. Jeffrey Winters has e x a m i n e d the power relationship between state a n d mobile capital to u n d e r s t a n d changes in state e c o n o m i c policy. Within this examination h e identifies t h r e e distinct periods a r g u i n g that "for the entire twenty-five years in question [mid-1960s to 1990], for instance, Indonesia has h a d t h e same president a n d team of e c o n o m i c ministers, a n d n e i t h e r u n d e r went any m a j o r ideological transformations. T h u s we can rule o u t theories focusing on presidential politics, p e r s o n n e l changes in key cabinet positions, o r t h e impact of ideology o r culture to explain m a j o r changes in the direction of econ o m i c policy a n d the climate for private investment." Winters, Power in Motion, p. xiv. Winters' examination, however, e n d s in t h e early nineties, after which t h e president's policy relationship with capital c h a n g e d . T h e last d e c a d e of t h e mill e n n i u m h e r a l d e d a f o u r t h stage of e c o n o m i c policy d o m i n a t e d by the children. 8. M e d e a Benjamin, J o h n Roosa, a n d S t e p h e n Zunes, "A R e p o r t o n t h e May 1997 Parliamentary Elections a n d Prospects f o r Democracy," Global Exchange, S e p t e m b e r 1997. 9. Within this military d o c t r i n e Nasution p r o p o s e d that, because of the military's pivotal role in securing t h e fledgling state, it would n o t be a "dead tool" of the politicians b u t would be an active participant in governing the nation (see c h a p t e r 9). 10. S u h a r t o was a successful a n d p o p u l a r c o m m a n d e r until a rival in S e m a r a n g r e p o r t e d him f o r "overzealous" business activities in 1959 a n d Jakarta removed him f r o m c o m m a n d of the D i p o n e g o r o Division. 11. By 1966 the economic situation in Indonesia had deteriorated substantially, with 56 percent of total government expenditure financed by central bank credits and inflation running at 639 percent. By the e n d of the Sukarno era, the decline in exports and increase in imports led to an accumulation of external debt. Indonesian Embassy, Canada, "Economy of Indonesia" 23 April 1998, p. 2. It was noted that a soldier's monthly wage would support a family for only o n e week. Ulf Sundhaussen, "Social Policy Aspects in Defence and Security Planning in Indonesia, 1947-1977," Occasional Paper no. 2 (Townsville, Queensland: Southeast Asian Studies Committee, James Cook University, 1980, as quoted in Lesley McCulloch, "Trifungsi: T h e Role of the Indonesian Military in Business" (paper presented at the "Soldiers in Business" Conference, Jakarta, October 2000).

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12. In 1966 Suharto secured authority over what was to become the other apparatus of state control when he placed the Indonesian police force under the direct control of the military and proceeded to give it paramilitary power. TAPOL, "Police Separation from the Armed Forces Is Only the First Step" (press release), 1 April 1999. 13. As Suharto secured his power over the military in the later years of his presidency, this number dropped to seventy-five seats. Michael R. J . Vatikiotis, Indonesian Politics under Suharto (London: Routledge 1993), p. 62; idem "Romancing the Dual Function: Indonesia's Armed Forces and the Fall of Soeharto," in The Fall of Soeharto, ed. Geoff Forrester and R. J . May (Bathurst, Australia: Crawford House Publishing, 1998), p. 158; and David Jenkins, "Countdown to Indonesian Election: Army's Reform Vows Fall on Sceptical Ears," Sydney Morning Herald, 1 June 1999. Also see Vatikiotis, Indonesian Politics under Suharto, p. 78, for description of the links between TNI and the creation of Golkar. 14. According to Vatikiotis, "By the late 1970s, half the cabinet and over twothirds of the regional governorships were military appointees. At the district level, 56 percent of district officers were military men. In the bureaucracy, 78 percent of director-generals and 84 per cent of ministerial secretaries were TNI appointees. Even in the diplomatic service, almost half the country's ambassadors were from the military in 1977. . . . More importantly, the military dominated the affairs of every cabinet department." Vatikiotis, Indonesian Politics under Suharto, p. 71. As noted by David Jenkins, "No fewer than nine of Indonesia's 17 ambassadors to Australia have been military men. In the 30 years to 1991, Indonesia sent nothing but superannuated generals and air marshals." Jenkins, "Countdown to Indonesian election." 15. Vatikiotis, Indonesian Politics under Suharto, p. 70. 16. Sutowo was never called to account for outstanding mismanagement of Pertamina or for overt corruption because an investigation would have led directly to the president. In his book Power in Motion, Winters cites interviews with both Mohammad Sadli and Tempo editor Fikri Jufri to confirm that, although it is a commonly held belief that Sutowo was fired because of his corrupt practices, Suharto dismissed Sutowo in early 1976 because he socially embarrassed him. See Winters, Power in Motion, p. 91, n. 122. For further details of the Suharto connection to Pertamina see Michael Backman, Asian Eclipse: Exposing the Dark Side of Business in Asia (Singapore: John Wiley and Sons, 1999); and idem, Power in Motion. 17. The Indonesian term (often used in a derogatory sense) for a SinoIndonesian businessman with close links to powerful entities who offer them protection. 18. Pertamina audit, PricewaterhouseCoopers, 1999, p. 8, as quoted in McCulloch, "Trifungsi," p. 43. 19. In Jakarta alone the military's presence has been noteworthy. In July 1999, 254 military personnel held positions in the administration, which has

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long had a reputation for being overtly corrupt; in addition, the governor, Sutiyoso, was a three-star general. "Military Still Has Strong Position in City Administration," Indonesian Observer, 16July 1999. E-mail "IO: Military Still Has Strong Position in Jakarta Administration," from through conference "act.indonesia" 18July 1999. 20. Robison, Indonesia: The Rise of Capital, p. 271. 21. As of early 1999 these discriminatory initials were removed by the central government under Habibie, but the Chinese state that the new numbering system, which replaces the initials, still allows identification of Chinese ethnicity. 22. George J. Aditjondro, "Chips off the Old Block: Suharto's Corrupt Children," Green Left Weekly, no. 305 (11 February 1998). 23. Schwarz, Nation in Waiting, p. 108. 24. This last practice has aided the undermining of Indonesian banking houses. Under pressure from the regime, these banks often breached lending limits, had a high incident of lending to their own directors, exceeded intragroup lending, and issued bad loans. After Suharto left office, many from within the industry argued that they had little choice in their lending practices. 25. Just one example among hundreds of avenues for building wealth for the privileged pribumi class was the national logistics board Bulog. Officially, Bulog was used by the government to control the pricing and distribution of basic commodities. Unofficially, it was also used to redistribute national wealth into private hands. O n e of the best examples was the private company PT Bogasari, in which Madame Suharto was involved and which eventually came to be owned, in principle, by Liem and Siti Hardiyanti Rukmana, better known as Tutut, Suharto's eldest daughter. The government sold wheat to this monopoly, which then processed it into flour. The flour was then sold back to the government with a 30 percent markup, which was passed on to the domestic market. 26. Schwarz, Nation in Waiting, p. 118; and Winters, Power in Motion, pp. 135-135. 27. Schwarz, Nation in Waiting, p. 119. 28. The central criticism of a six-hundred-page World Bank report on Indonesia in 1980 stated that new regulations hindered rather than helped the small pribumi businessperson while favoring those closest to the seat of power. Winters, Power in Motion, pp. 147-151. 29. See Ahmad D. Habir, "Managing Indonesia: From Patriarchs to Professionals," AustAsian Paper no. 2 (Sydney: Research Institute for Asia and the Pacific, University of Sydney, 1996?). In contrast, the Sino-Indonesians, who supplied the best business managers, always dominated the better-run private businesses and professional sectors and, as such, were seen as the more attractive business partners. 30. Maclntyre, Business and Politics in Indonesia, p. 56. Apparently the economic ministers had been planning tax reform since at least 1979, but the opportunity to enforce it only arose when petrodollars declined. Winters, Power in Motion, pp. 164—165.

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31. In 1996 the government "offered" the state-owned Bank Negara Indonesia to the public through a float. However, according to one Indonesian brokerage house, the whole business "was obscene in that it was just a straight transfer of wealth from the government to private individuals" at a substantially reduced rate. The shares rose 82 percent on listing. Jay Solomon, "A Private Affair: Indonesia's 1997 State Sell-offs May Only Benefit the Few," Far Eastern Economic Review, 30 January 1997. E-mail "FEER: A Private Affair," from KdP Net 8 February 1997. The second part of the privatization of PT Telkom was another questionable offering. The U.S. brokerage houses that were asked to bid for the underwriting of the offer felt compelled to withdraw for fear of contravening the U.S. Foreign Corrupt Practices Act (FCPA) of 1977. Ibid.; and Alan P. Larson, "U.S. Efforts to Combat Foreign Corrupt Practices," United States Information Service (usis), retrieved 5 May 1998 . 32. Maclntyre, Business and Politics in Indonesia, p. 251. 33. "Some New Left writers [saw] the early cultivation of the University of Indonesia economists by American institutions . . . and their link with the army . . . as p a r t . . . of a broad, twenty-year strategy by the United States political establishment to influence and intellectually dominate Sukarno's successors. While the United States Army was indoctrinating Indonesian officers at Fort Leavensworth, [the University of California,] Berkeley was allegedly deputized to train most of the key Indonesians who would seize government power and put their pro-American lessons into practice"—hence the epithet "Berkeley Mafia." Hamish McDonald, Suharto's Indonesia (Sydney: Fontana/Collins, 1980), p. 76. 34. See Robin Osborne, Indonesia's Secret War: The Guerilla Struggle in Irian Jaya (Sydney: Allen and Unwin, 1985), p. 118; and Jamie Mackie and Andrew Maclntyre, "Politics," in Indonesia's New Order: The Dynamics of Socio-Economic Transformation, ed. Hal Hill (Sydney: Allen and Unwin, 1994), p. 35. 35. By the end of the sixties, aid represented 25-30 percent of government revenue. Hal Hill, "The Economy," in Indonesia's New Order: The Dynamics of SocioEconomic Transformation, ed. Hal Hill (Sydney: Allen and Unwin, 1994), p. 93. For further information on the initial negotiations between Indonesia and the IGGI see Hamish McDonald, Suharto's Indonesia, p. 72. 36. Backman, Asian Eclipse, pp. 290-291. 37. Suharto's children in order of birth are Sid Hardiyanti Rukmana (Tutut), Sigit Harjojudanto (Sigit), Bambang Triatmodjo (Bambang), Sid Hediati Harijadi (Titiek, married to Prabowo Subianto), Hutomo Mandala Putra (Tommy), and Siti Hutami Endang Adiningsih (Mamiek). 38. Backman, Asian Eclipse, p. 255. 39. Pete Engardio and Michael Shari, "The President's Family and Its Foreign Allies Dominate Indonesia's Industry: What Will a New Regime Bring?" Business Week, 19 August 1996. 40. Backman, Asian Eclipse, p. 266. 41. For a list of the largest holdings of the Suharto children in 1996, see Engardio and Shari, "The President's Family."

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42. In 1989 foreign capital bid for a lucrative government contract to install telephone lines in Jakarta. The NEC Corporation and Sumitomo joined forces with Tommy while American Telephone and Telegraph boasted the services of Tutut. With the licensing bureaucrats unable to decide who should win the contract because they did not want to offend either of the Suharto children, the dilemma was solved by the minister, who simply doubled the size of the project so that both parties effectively won the same contract. 43. Engardio and Shari, "The President's Family." 44. See Schwarz, Nation in Waiting, chapter 6, for numerous examples. In 1990 Tommy Suharto formed the Clove Bufferstock and Marketing Agency (BPPC). This monopoly became the middleman in the clove industry, buying the cloves at cheap prices from the farmers and selling to the kretec (Indonesian clove cigarette) manufacturers at inflated prices. Within this process the BPPC also extracted its own commissions and service fees. All clove growers in Indonesia were forced to sell their cloves through the BPPC. The costs of this monopoly to the nation were many: the clove market collapsed in Indonesia, leaving the growers with worthless stockpiles; taxes were lost to the government (cloves had been the second-largest tax-earning industry after oil), and manufacturers who were forced to pay highly inflated prices for the cloves passed the costs on to consumers, who then began to disappear. For Tommy and his partners the clove monopoly was a money-making machine for which the Indonesian people paid dearly. For a more detailed description of the clove monopoly and other deals involving Tommy see Backman, Asian Eclipse, pp. 267-272. 45. Jenny Grant, "Trade Minister Snubs IMF Bid over Reforms," South China Morning Post, 17 March 1998. 46. Philip Hurst, Rainforest Politics: Ecological Destruction in South-East Asia (London: Zed Books, 1990), p. 9. 47. Backman, Asian Eclipse, p. 291. 48. Richard Borsuk, "The Suharto Regime Bungled Many Chances to Amass Wealth," Wall Street Journal, 30 December 1998. 49. Robison, Indonesia: The Rise of Capital, p. 355. 50. William R. Liddle, "Indonesia in 1996: Pressures from Above and Below," Asian Survey 37.2 (February 1997): pp. 167-168. 51. Robison, Indonesia: The Rise of Capital, p. 232. 52. J o h n McBeth and Jay Soloman, "First Friend," Far Eastern Economic Review, 20 February 1997. 53. Cesar Bacani and Keith Loveard, "Suharto's Man," Asiaweek, 1 March 1997. 54. Rahul Jacob, "How Suharto's Point Man Walked into an Economic Minefield and Emerged Top," Time, 10 March 1997. E-mail "Time: Bob Hasan's Gold Touch," from KdP Net , 12 March 1997. 55. Habir, "Managing Indonesia," p. 1. 56. Hong Kong-based Political and Economic Risk Consultancy Limited survey in 1999. Agence France-Presse, "Singapore Least Corrupt Country in Asia, Indonesia Dirtiest: Survey," 31 March 1999. E-mail "AFP: Singapore Least Corrupt Country in Asia, Indonesia Dirtiest: Survey," from TAPOL. , 31

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March 1999. Also in 1999 Transparency International ranked Indonesia as the most corrupt state in Asia. Information was drawn from surveys and represents perceptions rather than facts. They also note that many of the people interviewed were part of the problem. Transparency International, Corruption Perception Index: An Index of Perceptions of Corruption around the World (Berlin: Transparency International, 31 July 1997); and T. Sima Gunawan, "Corrupt Legal System Blocks Justice for All "Jakarta Post, 7 November 1999. 57. Schwarz, Nation in Waiting, p. 135. 58. In a survey conducted by the Institute for Research, Education, Economic and Social Information in Jakarta, none of those surveyed believed that a low-level employee who "asked for extra money for his services was corrupt." See "Corruption Worse over Last Five Years: Survey"Jakarta Post, 1 May 1998. This is in direct contrast with Suharto's views on corruption. According to Adam Schwarz, Suharto did not see his cronyism as corruption. However, he did see the activities of petty officials as corrupt. Nation in Waiting, p. 136. 59. Marcus W. Brauchli, "World Bank Is Hurt by Its Failure to Anticipate the Indonesia Crisis," Wall Street Journal, 14 July 1998. A couple of years before the 1997 crash, when the Indonesian state-run banks first faltered under the weight of bad debts (which were for the most part directly attributable to the Suharto family and their business associates), the World Bank lent these institutions $307 million to keep them afloat. These funds, however, were once again lent to the same corrupt business groups. 60. Agence France-Presse (AFP), "World Bank Rates Its Indonesia Performance as 'Marginal.'" E-mail "AFP—World Bank rates its Indonesia Performance as 'Marginal,'" from tapol , through conference "act.indonesia" , 10 February 1999. 61. Mari Pangestu at the time was an economist from the Indonesian Center for Strategic and International Studies and wrote reports for the World Bank. 62. Brauchli, "World Bank." 63. Ibid. 64. Benedict Anderson, "The Idea of Power in Javanese Culture," in Language and Power: Exploring Political Cultures in Indonesia, ed. Benedict Anderson (Ithaca, N.Y.: Cornell University Press, 1990), pp. 17-77, as cited in Schwarz, Nation in Waiting, p. 45. 65. Catholic Church, Jayapura, "Violations of Human Rights in the Timika Area of Irian Jaya, Indonesia," August 1995. Chapter 3: The Business of Mining in Indonesia 1. Art Ettlinger, "Indonesia: Elephant Hunting in the Jungle," Indonesia research report published on the Web at , p. 1. 2. The volcano-plutonic arcs through the archipelago contain "about onesixth of the world's porphyry copper-gold deposits . . . and more than 98% of

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the known copper-gold deposits." Kuntoro Mangkusubroto, "Towards Modern Management of the Indonesian Mineral Industry," Asian Journal of Mining, N o v e m b e r / D e c e m b e r 1995, p. 41; and idem, "Mining Investment Policies in Indonesia," AJM Asia Pacific Mining Yearbook (Melbourne: AJM, 1996), p. 81. 3. Data show that the local inhabitants of the islands that now make u p the Republic of Indonesia were mining as far back as two h u n d r e d years ago and using foreign miners (Chinese) in an early form of the production or profitsharing contract. However, unlike the Portuguese, who were mining in their colonies for gold in the 16th century, the Dutch were m o r e interested in the strategic position of the East Indies and the richness of the spice trade. Therefore they showed little interest in the mineral wealth of the islands. Any mining that they participated in was focused on the acquisition of silver to feed the Dutch mint. Bondan Winarno, Scam: Bre-X and Its Indonesian Gold Mine (proof copy), pp. 2-3. Also see Soetaryo Sigit, "Indonesia's Mineral Potential and the Awakening of Its Mineral Industry," (paper presented to the B a n d u n g Institute of Technology, Indonesian Mining Association, 9 March 1996). 4. Carroll Ann Hodges, "Mineral Resources, Environmental Issues, and Land Use," Science 268.5215 (2 J u n e 1995):1305-1308 < h t t p : / / w e b 4 . searchbank.com/infotrac/session/614/709/21462918w3/17txm_l&bkm>, p. 3. 5. Beni Wahu, interview, 22 September 1998. 6. United Nations Economic and Social Council, "Economic and Social Development Needs in the Mineral Sector: Flow of Financial Resources, Develo p m e n t , a n d Transfer of Technology to Develop the Mineral Resources of Developing Countries and Economies in Transition," E / C . 7 / 1 9 9 4 / 7 , 12 January 1994, para. 26. 7. United Nations Conference on Trade a n d Development (UNCTAD) , "The Mineral Sector in Indonesia," (UNCTAD/COM/38), 28 January 1994, p. 11. 8. T h e contract of work sets out the terms of the a g r e e m e n t covering all aspects of individual mining operations and details the obligations of the miner to the government. Each foreign mining contract is part of a group, or generation, of contracts with subsequent generations being defined by a change in the rules governing foreign mining investment. While some negotiation and accommodation of needs and interests are possible within individual contracts, it is a highly regulated system, so that for each generation there is little difference between contracts. T h e changes in generations are dictated by the power relationship between the state and capital. U n d e r Suharto these adjustments were always a process of attempting to find a balance between what was n e e d e d to maintain stability (patronage and development funds) and what was n e e d e d to create an attractive climate for international capital. According to the contractual obligations between the foreign miner and the government, each mining company must explore its contract area within a given time frame, spending agreed-upon amounts each kilometer on this work. At predetermined stages of the exploration period, the company is required to relinquish to the government agreed percentages of the exploration area, usually in

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25 p e r c e n t lots, a n d usually at least 75 p e r c e n t of t h e exploration area must eventually be r e t u r n e d to the government, together with all relevant geological, geophysical, a n d geochemical data, until, by t h e expiry date of the exploration permit, it has either relinquished all the claim—should it be proven n o t to be commercially viable—or retained a small percentage in which to develop mining operations. At each of these stages the g o v e r n m e n t collates the surveys a n d geological data, which also contain the results of the company's exploration programs, a n d places this information in the public d o m a i n . 9. Such a p r o g r a m defines the company's obligations to develop a n d train small business enterprises that will t h e n , in theory, be able to subcontract their services back to the company. T h r o u g h this p r o g r a m , skills transfer, employm e n t , a n d wealth are i n t e n d e d to be positive offshoots f o r t h e local c o m m u n i t y f r o m m i n i n g operations. 10. Chris Harris, "Trade Liberalisation a n d Mining: T h e C o r p o r a t e Agenda," Ecologist Asia 6.2 (March/April 1998) :6. This increase was clearly related to increasing a n n o u n c e m e n t s of gold at t h e Busang site in East Kalim a n t a n (to be discussed). 11. Jeff Atkinson, Undermined: The Impact of Australian Mining Companies in Developing Countries (Melbourne: C o m m u n i t y Aid Abroad, J a n u a r y 1998), p. 9. 12. Adjat Sudradjat, "Overview of the Indonesian Minerals Industry, "Asian Journal of Mining: Mining Indonesia Supplement (1997), p. 12. 13. In 1990 revenue to the state f r o m foreign mining, as o p p o s e d to revenue to provincial governments f r o m this group, was only $85 million, o r "less than 1% of total public revenue." Atkinson, Undermined; and "Greed on Stage—After Busang, Both Jakarta a n d Investors Have Work to Do" (editorial), Asiaweek, 23 May 1997 < h t t p : / / w w w . a s i a w e e k . c o m / 9 7 / 0 5 2 3 / e d l . h t m l > . 14. Please n o t e that these figures include all m i n i n g sectors, including oil, r a t h e r than j u s t the h a r d metals m i n i n g industry. "Investors U r g e d to Seek Military H e l p "Jakarta Post, 12 July 2000. 15. A study in Chile showed that a m e r e 10 p e r c e n t increase in c o p p e r production led to an increase in e m p l o y m e n t of 24,000 people. If the linkages, or effect on associated industries, were factored into the equation, then it caused an increase of a b o u t 50,000 employees, UNCTAD, "Mineral Sector," p. 11, n. 4. 16. Ibid., p. 46. 17. Ibid. 18. For instance, N e w m o n t Mines is widely respected within t h e industry for r e m a i n i n g in Peru in the eighties d u r i n g t h e S e n d e r o Luminoso insurgency when o t h e r m i n i n g c o m p a n i e s left. Control Risks G r o u p , "No hiding place" (Special R e p o r t ) , J u l y 1997, p. 29. 19. Placer D o m e a n d Barrick are respectively the third- a n d fourth-largest gold p r o d u c e r s in the world. 20. Until Barrick a n d the g o v e r n m e n t interfered, Willson believed that h e h a d b e e n in serious a n d potentially fruitful negotiations with Bre-X. Willson, like many in t h e m i n i n g industry, was used to t h e heavy-handed tactics of Barrick a n d

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its chief, Peter Munk, whose reputation was never complimentary. McBeth and Soloman, "First Friend." 21. Harsono, who worked for Sigit, approached Hasan suggesting that Nusamba (which would bring in Sigit, Suharto, and Hasan) should consider taking an interest in the Syakerani stake. This same source also stated that it was Harsono's idea to bring in Freeport. In the end Harsono became managing director of the Syakerani's PT Askatindo and PT Amsya Lynd. Winarno, Scam, p. 80. 22. As quoted ibid., p. 81. 23. Salting is the illegal practice of adding gold to the core mineral samples taken from the site. 24. J o h n McBeth, interview, 18 September 1998. 25. Some of the greatest financial winners were the Bre-X board and their friends, who appear to have become extremely rich on the practice of insider trading (that is, they dealt in the company's shares when they were privy to knowledge denied the market). For instance, they sold shares after the government quietly informed the company (in August 1996) that it was not intending to renew the exploration permit and again in December 1996, when Barrick informed the government that the company's due diligence tests had come up with only negligible amounts of gold. Neither of these pieces of vital information was made available to the share-holding public at the time. The big losers were the investors punting on Bre-X and the institutions that lent millions to the company through the purchase of shares to support the exploration program. 26. "All in the Game to Suharto Clan: Indonesia's First Family Shrugs off the Debacle but Investors May Be Less Calm," Financial Times, 8 May 1997. 27. Interestingly, when the government signed its deal with Bre-X, the aforementioned ownership disputes, which had been used by the ministry as the justification for the cancellation of the permit, were no longer a consideration. 28. As quoted in Chris Ballard, "Bungle in the Jungle: Bre-x and the Busang Scam," (seminar paper for the Indonesia Study Group series), Research School of Pacific and Asian Studies, Australian National University, Canberra, 4 J u n e 1997. 29. "Indonesia: Minister Told to Stop Mining Uproar," Jakarta Post, 28 January 1997 through Reuter Business Briefing, 28 January 1997. 30. Ibid.; and "Indonesia: Government Should Stop Freeport Mining," Jakarta Post, 11 January 1997, Reuters Business Briefing, 11 January 1997. 31. According to article 33 of the 1945 Constitution, "i. Branches of production of importance to the State which vitally affect the life of the people shall be controlled by the State, ii. Land and water and natural resources contained therein shall be controlled by the State and used for the maximum prosperity of the people." 32. According to a letter from the Department of Mines and Energy (31 December 1998), Freeport pays 1. Deadrent in respect of the Contract Area or any Mining Area 2. Royalties in respect of Freeport's production of minerals

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3. Income taxes with respect to the Taxable Income of Freeport 4. Personal income tax 5. Withholding taxes on dividends, interest and royalties, rental, technical service, management service and other service 6. Value Added Tax on purchases and sales of taxable goods 7. Stamp duty on legal documents 8. Import duty on goods imported into Indonesia 9. Land and Building Tax 10. Levies, taxes, charges and duties imposed by Regional Government in Indonesia which have been approved by the Central Government 11. General administrative fees and charges for facilities or services rendered and special rights granted by the government to the extent that such fees and charges have been approved by the Central Government 12. Tax on the transfer of ownership of motorized vehicles and ships in Indonesia 13. Tax compliance 33. Confidential interview. 34. Berni K. Moestafa, "Confusion Reigns over Mining Laws," Jakarta Post, 26 February 2001. 35. Douglas Goold and Andrew Willis, TheBre-XFraud (Toronto: McClelland and Steward, 1997), p. 141.

Chapter 4: Freeport and Jakarta 1. On 30 September 1965 the Indonesian military effectively sidelined President Sukarno. Although he was not officially relieved of his presidency until 1967 the country was run by the military under the direction of General Suharto. 2. Forbes Wilson, Conquest of Copper Mountain, pp. 153, 155. 3. Declassified Documents Quarterly Catalogue, 1982, 002507 (cable of 15 April 1965, from U.S. delegation to the United Nations), as quoted in Peter Dale Scott, "The United States and the Overthrow of Sukarno, 1965-1967," Pacific Affairs 58 (Summer 1985):239-264. 4. See H. W. Brands, "The Limits of Manipulation: How the United States Didn't Topple Sukarno," Journal of American History 76.3 (December 1989):785-808; Kathy Kadane, transcript of interview with Marshall Green ; and idem, transcript of interview with Jack Lydman . 5. Tahija, Horizon Beyond: Entrepreneurs of Asia (Singapore: Times Books International, 1995), pp. 159-160. 6. Lisa Pease, "David Atlee Phillips, Clay Shaw, and Freeport Sulphur," Probe?).3 (March-April, 1996), through ; Gerard Colby with Charlotte Dennett, Thy Will Be Done: The Conquest of the Amazon: Nelson Rockefeller and Evangelism in the Age of Oil (New York: HarperCollins, 1995), and Cary Reich, The Life of Nelson A. Rockefeller: Worlds to Conquer 1908-1958 (New York: Doubleday, 1996), pp. 216-217. 7. Walter Isaacson, Kissinger: A Biography (Boston: Faber and Faber, 1992), p. 357; Arthur M. Schlesinger, A Thousand Days: John FKennedy in the White House (Andre Deutsch, 1965), pp. 116, 128, and 685. 8. Colby, Thy Will Be Done, pp. 221-222. 9. Forbes Wilson, Conquest of Copper Mountain, pp. 186-187; and Schlesinger, Thousand Days, p. 181. 10. It has been stated that the Freeport mine was "the world's first major mining effort begun via helicopter." Tahija, Horizon Beyond. 11. Mealey, Grasberg, p. 84. 12. Mining Advocacy Network (JATAM), Indonesia, Kerebok (on-line bulletin), 1.2, J u n e 2000 . 13. "When we started out attracting foreign investment in 1967 everything and everyone was welcome. We did not dare to refuse; we did not even dare to ask for bonafidity [sic] of credentials. We needed a list of names and dollar figures of intended investments, to give credence to our drive. The first mining company [Freeport] virtually wrote its own ticket. Since we had no conception about a mining contract we accepted the draft written by the company as basis for negotiations and only common sense and the desire to bag the first contract were our guidelines." Sadli as quoted in Hamish McDonald, Suharto's Indonesia, p. 81. 14. Sadli, interview. 15. Backman, Asian Eclipse, p. 356. 16. Sadli, interview. 17. Hamish McDonald, Suharto's Indonesia, p. 80. 18. Robison, Indonesia: The Rise of Capital, p. 110. 19. Forbes Wilson, Conquest of Copper Mountain, p. 187. Wilson details some of the problems of building the road when he describes the experience of Steele Ansley, a Freeport supervisor. Ansley had no trouble understanding why progress had been slow. There was one thing, though, that he was having considerable trouble understanding. In fact, it had him baffled. At the end of each day, Ansley's men would measure the additional footage that had been laid down. After several weeks of work, these daily figures, when added together, equaled nearly twice as much distance as the length of the road that was actually in place. Close to two miles of road had been laid down. But the actual road was now only a mile long. Glancing at where the previous day's construction had ended, which was about 100 feet from where he was standing, Ansley tried to figure out what had happened to the unaccounted for road.

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'Rather graphically, the answer abruptly presented itself. Before my very eyes,' he recalls, 'the last 75 feet or so of the road broke off and started sinking.' The missing two miles of road lay underneath the visible two miles. The road, in effect, was requiring a double layer of fill. (Wilson, Conquest of Copper Mountain, pp. 189-190) 20. Laton McCartney, Friends in High Places. The Bechtel Story: The Most Secret Corporation and How It Engineered the World (New York: Ballantine Books, 1989), p. 157. 21. Mealey, Grasberg, pp. 84-85. 22. Ibid., p. 164. 23. Ibid., p. 85. 24. Ibid., p. 82; Forbes Wilson, Conquest of Copper Mountain, p. 156; a n d Toed Adhitama, "Foreign Business Plays a Role," Eksekutif S e p t e m b e r 1983, t h r o u g h . 25. T h e first official contact F r e e p o r t h a d with the g o v e r n m e n t of I n d o n e sia was with Suharto's close f r i e n d a n d influential army general I b n u Sutowo, who held the post of minister f o r mines a n d p e t r o l e u m in both t h e S u k a r n o gove r n m e n t a n d t h e new S u h a r t o g o v e r n m e n t a n d was later to siphon off billions f r o m the state oil c o m p a n y Pertamina. 26. McCartney, Friends in High Places, pp. 138-139. 27. T h e I n d o n e s i a n T h i r d G e n e r a t i o n m i n i n g contracts, which began in 1976, a n d were c u r r e n t at t h e time Grasberg was discovered, were not attractive to foreign capital. In response to the e c o n o m i c a n d political difficulties facing the g o v e r n m e n t at the time a n d as a result of a leveling off in oil revenues a n d the n e e d to service Pertamina's debt, Jakarta h a d b e e n f o r c e d to increase taxes in o t h e r sectors. N e e d i n g to offset this u n p o p u l a r move domestically, Jakarta o f f e r e d indigenous business sweeteners, including an e n t r é e into the m i n i n g sector. While the T h i r d G e n e r a t i o n contracts were initially a direct response to these domestic considerations, they were also a reflection of an international t r e n d in the seventies wherein global m i n i n g investment was viewed in the develo p i n g nations as a violation of national sovereignty. Subsequently, a decision to lessen u n p o p u l a r foreign involvement in the sector by increasing domestic participation was reflected in t h e contracts. Provisions were a d d e d directing j o i n t ventures with Indonesian partners a n d stipulating an initial 80 p e r c e n t foreign ownership decreasing gradually to 49 percent. T h e contracts also p u t an e n d to t h e practice of offering any type of tax concession to foreign applicants, stipulated m i n i m u m investment levels, a n d rewarded the foreign investor who used local processing. These conditions were unattractive to Freeport, as well as unrealistic at the time. Not only was the foreign m i n e r the sole risk taker f o r t h e first unprofitable years, b u t given the small size of t h e domestic capital m a r k e t (Indonesia did not even have a stock e x c h a n g e ) , fulfilling t h e r e q u i r e m e n t for eventual 51 p e r c e n t Indonesian ownership posed a serious p r o b l e m to t h e transnational miner. T h e mid-eighties saw m o r e attractive investment regulations guiding the Fourth G e n e r a t i o n of contracts b u t F r e e p o r t still h a d to buy out its m i n o r partner, Oost B o r n e o Maatschappij.

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28. As with t h e 1967 foreign investment laws, Jakarta provided guarantees that it would n e i t h e r nationalize n o r e x p r o p r i a t e t h e company's m i n i n g operations; provision f o r international dispute arbitration was also included. U n d e r the terms of the new contracts, F r e e p o r t agreed to progressively relinquish u p to 75 p e r c e n t of this area over a set period a l t h o u g h it is allowed to m i n e potential areas of mineralization. Julius Tahija has described how in the early nineties t h e c o m p a n y p r e s e n t e d a proposition to t h e g o v e r n m e n t that it could hardly refuse. While a n u m b e r of c o m p a n i e s h a d b e e n given exploration permits a r o u n d the F r e e p o r t mine, n o n e h a d the capital to p r o c e e d with t h e costly operations. F r e e p o r t p r o p o s e d that Jakarta give the c o m p a n y permission to explore these areas a n d , in r e t u r n , it would s p e n d $20 million o n exploration while m a k i n g t h e results available to the g o v e r n m e n t . Jakarta was then f r e e to give the concessions to whomever it wished. T h e g o v e r n m e n t agreed, canceling the exploration permits it h a d given to o t h e r companies. W h e t h e r or n o t this led to Freeport's 1994 contract is unclear. Tahija, Horizon Beyond, p. 178. 29. T h e r e are currently a n u m b e r of s u r r o u n d i n g smaller mines in production, b u t Grasberg contributes 90 p e r c e n t of t h e o r e going to t h e mill. 30. However, F r e e p o r t is n o t t h e largest gold-producing c o m p a n y in t h e world. Anglo American in South Africa has mines totaling 294.83 tons of gold. F r e e p o r t is the fourth-largest gold-producing c o m p a n y in t h e world b e h i n d Anglo American, N e w m o n t (124.62 tons), Placer D o m e (106 tons), a n d Barrick (99.91 tons). Project U n d e r g r o u n d , "Vital Statistics: Small-scale Mines in Develo p i n g Countries," Drillbits and Tailings 4.8 (15 May 1999). 31. For a useful comparison it is worth noting that at its height Bougainville discharged a b o u t 140,000 tpd a n d O k Tedi less t h a n 100,000 tpd. 32. J o h n McBeth, "Start Digging: Indonesia Plans a S h a r p Expansion in Gold O u t p u t , " Far Eastern Economic Review, 21 J a n u a r y 1996, p. 114. 33. David E. O r t m a n , Notes of m e e t i n g with David Lowry, FreeportMcMoRan C o p p e r a n d Gold VP for Social a n d C o m m u n i t y A f f a i r s / H u m a n Rights Compliance Officer, 3 March 2001. 34. J o h n McBeth, "Freeport u n d e r Siege," Far Eastern Economic Review, 25 J a n u a r y 1996. 35. Freeport-McMoRan news release, " O p e r a t i n g Unit Signs New Contract of Work with G o v e r n m e n t of Indonesia," 30 D e c e m b e r 1991. 36. Contract of Work between t h e G o v e r n m e n t of t h e Republik of I n d o n e sia a n d PT F r e e p o r t Indonesia C o m p a n y (1991), Article 24(2a) a n d (2b). 37. Freeport-McMoRan, Annual Report, 1991, p. 5. 38. T h e Foreign C o r r u p t Practices Act was i n t e n d e d n o t only to prevent U.S. c o m p a n i e s f r o m participating in c o r r u p t acts, b u t also to b e a safety net f o r American c o m p a n i e s o p e r a t i n g abroad. In theory, c o m p a n i e s would be m o r e able to resist t h e pressure to pay bribes by explaining that bribery a n d corruption were illegal a n d if they participated they were liable to prosecution u n d e r U.S. law.

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39. Richard Borsuk, "Straight Shooter: Bakrie Chief Builds Fortune on an Unusually Blunt Style," Asian Wall Street Journal, 13 April 1994, p. 1. 40. Murphy, interview, 24 April 1996; and Waldman, "Hand in Glove: How Suharto's Circle, Mining Firm Did So Well Together," in Wall StreetJournal (interactive edition) 29 September 1998 . 41. In the 1991 annual report Freeport-McMoRan did not record a profit on the original sale because payment for the shares was made in January of the following year—the same year in which 50 percent of the shares were repurchased. 42. "Soeharto's Share in Freeport," Xpos, no. 28/1/11, Komunitas Informasi Terbuka (London), 17July 1998. 43. Waldman, "Hand in Glove"; and Garland Robinette, letter to editor, Wall Street Journal, 1 October 1998. 44. Interview with Hoediatmo Hoed, president of Freeport Indonesia, in Imanuddin, "Freeport Indonesia No Longer Alone," Jakarta Post, 17 June 1995. 45. Waldman, "Hand in Glove." 46. "If I failed to arrange meetings with ministers, I had to ring up either Sigit or Tommy. In running shipping companies, I have received help from Sigit, and in the automotive business, Tommy has helped me much." Schwarz, Nation in Waiting, p. 150. 47. Waldman, "Hand in Glove." 48. Freeport-McMoRan, Annual Report, 1994, p. 32. 49. Ibid., 1999, p. 26. 50. Ibid, p. 40. 51. Waldman, "Hand in Glove." 52. Ibid.; and Freeport-McMoRan, Annual Report, 1995, p. 34. 53. Interview with Clarence Ray, president of the Duke-Fluor Daniel joint venture as quoted in Waldman, "Hand in Glove." 54. Ibid. 55. Confidential interview, 27 September 2001. 56. Freeport-McMoRan, Annual Report, 1994, p. 33. 57. James Jones e-mail 1 November 2000. Tommy and Galael were both convicted of a real estate swindle and sentenced to eighteen months in jail in September 2000. 58. Freeport-McMoRan, Annual Report, 1997 ("Management Discussion and Analysis, Other Matters") . 59. PT Freeport, "Waste Management," Warta Freeport 23,2d quarter (1996): 16. 60. Waldman, "Hand in Glove." 61. Freeport-McMoRan Copper and Gold Inc. Annual Report, 1999, pp. 26 and 40. 62. "RTZ and Freeport-McMoRan Sign Definitive Agreements and Initiate Expansion Feasibility Study," Reuters Business Wire, 2 May 1995. 63. As detailed in the agreement, Rio Tinto was to be paid back $850 million of the original purchase price, plus interest. The repayment was to be alio-

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cated from income and profits realized from Grasberg output above 118,000 tpd. Moreover, Freeport was not to receive income from Grasberg operations above 118,000 tpd until this money, plus accrued interest, was paid back in full to Rio Tinto. This is another reason why Freeport continually pushed the expansion rates at Grasberg: to pay back Rio Tinto as soon as possible. 64. By 1996 Freeport's borrowings were $1.8 billion and the debt-to-equity ratio, despite the influx of capital from Rio Tinto in 1995, stood at a high 30 percent (although this is not unprecedented in the mining industry). The venture entailed sharing directors and management personnel and setting up joint operating committees to direct future exploration activities. The signing of the contracts represented the world's largest mining deal involving two of the world's largest mining companies. Rio Tinto, with a market capitalization of more than $15 billion, is the world's largest mining company, employing more than seventythree thousand people worldwide and is involved in mining almost every major metal or mineral used. The company is no stranger to Indonesia, nor to the island of Papua. According to an agreement with the government, Rio Tinto was supposed to carry out "appropriate environmental and rehabilitation work" when the Monterado mine closed; but, according to a report by Down to Earth, Rio Tinto failed to fulfill these obligations, leaving the local people with no houses or running water and barren agricultural land. Down to Earth '"Mining: Thirty More Years of Freeport," Down to Earth, newsletter no. 14, August 1991, p. 8. 65. PT Freeport Indonesia, "Economic Impacts" , 18 May 2000. 66. Freeport-McMoRan, "Environmental and Social Program" < h t t p : / / www.fcx.com/esp>, retrieved 28 March 2001. 67. PT Freeport Indonesia, "Issues and Answers: Freeport in Irian Jaya," Media Relations, , 8 September 1999; Shoeb Kagda, "PT Freeport Denies Any Links to Suharto," Business Times (Singapore), 11 July 1998; and David Liebhold, "Busang Affair Rocks Mining," Straits Times, 1 March 1997, p. 4. 68. Moffett, quoted in McBeth, "Freeport under Siege." E-mail "IN/IRJA: FEER—Freeport under siege," from 25 February 1996. 69. Freeport was one of only 18 companies chosen out of a potential 11,300 corporations. "Suharto Presents Service Awards to 18 Companies," Jakarta Post, 12 August 1996. In 1992 Freeport received the Work and Health Safety Ward. PT Freeport Indonesia Infokit, pp. 4—5. 70. Schwarz, letter, 1 November 1995. 71. Environmental Mining Council of British Colombia, "Vital Contributions to United States Elections from the U.S. Mining Industry, 1999-2000." E-mail "KABAR-IRIAN: [EN] Freeport spends big in the US" from , 3 October 2000. 72. A society member was so supportive of the regime that it was apparently willing to break U.S. law. According to Progressive Magazine, society trustee Roy

280

Notes to Pages

82-88

Huffington—who heads the U.S. oil company Huffco and has lucrative contracts with the military's Pertamina—was caught illegally shipping torture equipment to the regime for which he was subsequently fined $250,000 by the Commerce Department. Eyal Press, "The Suharto Lobby," Progressive Magazine, May 1997. E-mail communication from Charles Scheiner , "Progressive: Meet the Suharto Lobby (Part 1 of 2)," 6 May 1997; and Tim Shorrock, "U.S. Firms Influence Policy on Indonesia: Foreign Contributors Called Secondary Players," Journal of Commerce (on line) , 26 November 1996. 73. "Soeharto Gets Billions from Freeport," Prospek (Jakarta), 12 July 1998, p. 16. 74. Ibid. Chapter 5: The Difficulties of Development 1. Until the Baseline Study, Freeport officially recognized only about four hundred people as inhabitants of the areas directly affected by the company's presence. T h e two tribes claim that there were more than two thousand. See UNCEN-ANU Baseline Studies (UABS) Project, Amungme Baseline Study Commissioned by PTFreeport Indonesia, tabled on 24 December 1998; and idem, Kamoro Baseline Study, Commissioned by PT Freeport Indonesia, tabled on 24 December 1998. 2. As quoted in UABS, Kamoro Baseline Study, p. 3.3.5. For further information regarding the history of the Kamoro and foreign penetration, see source mentioned. 3. Forbes Wilson, Conquest of Copper Mountain, p. 223. T h e Amungme Baseline Study found that the infant mortality rate in the Aroa Valley remains alarmingly high today, at more than 25 percent. UABS, Amungme Baseline Study, appendix 2. T h e UNCEN-ANU Baseline Studies Project was essentially the combined efforts of staff from the Universitas Cenderawasih (UNCEN) in Jayapura and the Australian National University, Canberra. It lasted from 1996 to 1998 and addressed the social and economic issues associated with Freeport and the Kamoro and Amungme peoples. 4. UABS, Amungme Baseline Study, p. 3.3.3. 5. LABAT-Anderson, Final Social Audit Report: PT Freeport Indonesia, 15 July 1997. LABAT-Anderson was commissioned by Freeport in 1995 to conduct a social and cultural audit report within its concession. T h e interim report was completed in May 1996 and the final report in July 1997. 6. For details of Jakarta's transmigration policy and its political and economic motivation refer to "Human Rights" section in chapter 8. 7. T h e traditional landowners are a minority within the Papuans living in the concession area which, in turn, are a minority to the Indonesian inhabitants. 8. Todd Harple, "General Report on Kamoro (Mimika) History/Culture," draft report for the Smithsonian Institution (undated). Also Kal Muller, inter-

Notes to Pages 8 9 - 9 5

281

view, 5 October 1998; Todd Harple, interview, 10 November 1998; LABAT-Anderson, Final Social Audit Report, pp. 3-2-1 and 3-2-2; and Amungme and Kamoro baseline studies. Harple was supervisor of Social Research, Office of Social Research and Information Dissemination, PT Freeport Indonesia, while Muller, among other jobs, was the ghostwriter for Grasbergon behalf of the company. 9. LABAT-Anderson, Final Social Audit Report, pp. 3-2-6 and 3-2-7; and Todd Harple, "Permanence in Change," paper presented to PT FI AMDAL Social Workshop in Abepura, Irian Jaya, 4-5 September 1997. 10. UABS, Kamoro Baseline Study, p. 8.3. 11. Harple also draws attention to the fact that in Freeport propaganda the company tends to mythologize the Kamoro incorrectly as engaging in headhunting, cannibalism, and ritualized homosexuality. As pointed out by Harple and extensively documented by others, the Kamoro never engaged in these practices, which they found abhorrent. According to Harple, Freeport "actually create an image of the Kamoro based not on ethnographic evidence but by creating an exoticized other. In this case, they are implicitly and explicitly compared to the Asmat." Harple, interview. 12. When LEMASA was formed it represented many other groups that lived in the Amungme tribal area as, according to Amungme traditional laws, any tribe or individual that lives in another tribe's territory must adhere to that tribe's laws. Emmy Hafild, interview, 24 September 1998. 13. Ibid. 14. Apong Herlina, director of the Jakarta Legal Aid Foundation (Lembaga Bantuan Hukum; LBH) as quoted in Andreas Burdani, "Environment-Indonesia: As Big Mines Settle In, Indigenous Folk Crowded Out," Australia West Papua Association, Sydney, newsletter, December 1997-January 1998. 15. Mathias Kelanangame, interview, 2 October 1998. 16. Edward Pressman, facsimile, 28 March 1996. 17. Ibid. 18. Ibid. 19. As quoted in J o h n McBeth, "The Lost Mountain," Far Eastern Economic Review, 24 March 1994, p. 31. 20. Forbes Wilson, Conquest of Copper Mountain, p. 223. 21. Brother Theo van den Broek, facsimile to Paul Murphy, 19 July 1996. E-mail "Amungme People's Rejection on '1%-offer,'" from WALHI. through , 14 August 1996. 22. Ibid. 23. Carolyn Cook, "Papuan Gold: A Blessing or a Curse? The Case of the Amungme," Cultural Survival Quarterly, Spring 2001. 24. LABAT-Anderson, Final Social Audit Report, appendix B, p. 4. 25. Muller interview. 26. UABS, Amungme Baseline Study, p. 8.6. 27. To facilitate constructive dialogue and overcome the years of mistrust in 1998, Freeport engaged the services of official facilitators such as Marzuki Darusman,

282

Notes to Pages

96-99

who at the time was the chairman of Komnas HAM, the Indonesian human rights body, and Chris Ballard, from the Australian National University. Murphy as quoted in "Transcript of Meeting in Washington, D.C. between Freeport and NGO. Representatives," p. 23. This move to find independent mediators could also be seen as an effective way to undermine the power of the NGOs by removing them from the negotiating process. 28. The Dani suku, which more than a hundred years ago forced the Amungme to migrate from their lands to what is now the Freeport concession area, today live side by side with the Amungme and are in many respects equal recipients of Freeport development funds. Between January and May 1997 fighting between these two groups over the allocation of development funds resulted in eleven deaths. Understandably the Amungme feel that once again they are being deprived of what is rightfully theirs and once more being driven from their land by more aggressive groups. 29. As quoted in Forbes Wilson, Conquest of Copper Mountain, p. 222. The Damal are referred to as the northern half of the Amungme. 30. Robert Mitton, "Development of the Freeport Copper Mine," paper presented at Ninth Waigini Seminar, Port Moresby, May 1975. See J o h n H. Winslow ed., The Melanesian Environment, p. 367, as quoted in Osborne, Indonesia's Secret War, p. 200. 31. Peter Lawrence, Road Belong Cargo, as quoted in Forbes Wilson, Conquest of Copper Mountain, p. 213. 32. Mealey, Grasberg, p. 299. 33. At the end of 1997 West Papua suffered from a crippling drought with some of the worst-hit areas being in the highlands near the Freeport area of work. The International Committee of the Red Cross together with the Indonesian Red Cross, Freeport, and other NGOS launched a massive relief program, dropping supplies to the worst-affected areas. According to a Freeport employee, because a number of these villages received excess supplies, which they stockpiled, the villagers did not see any need to plant their crops for the coming year. 34. Mealey, Grasberg, p. 315. 35. Edward Pressman, e-mail, 30 November 1998. 36. Carolyn Cook, interview, 29 September 1998. 37. Ibid. 38. The Ok Teki landowners eventually settled out of court in 1996 for approximately $500 million. 39. "Focus on Freeport," West Papua Update, (June 1994): no. 17, 4. 40. Cutts is the child of American missionaries. He was hired by the company after the discovery of Grasberg and the securing of exploration concession area B. Greg Probst, e-mail, 20 May 1999. 41. Between 1992 and 1999, $153 million was spent. Murphy as quoted in "Transcript," p. 21; Pressman, e-mail, 30 November 1998; "House to Question Freeport," Jakarta Post, 19 October 1998; and Freeport-McMoRan Copper, "Inte-

Notes to Pages 9 9 - 1 0 8

283

grated Timika Development Plan," Fast Facts . 42. LABAT-Anderson, Final Social Audit Report, appendix B, p. 3. 43. Pressman, facsimile, March 1996. 44. Murphy as quoted in "Transcript," p. 22. 45. Australian Embassy, Jakarta, "The Taylor Report," sect. 3, p. 3, para. 74. 46. According to WALHI, its breakthrough with the indigenous people only came in 1992 after it elected Beanal to its board. WALHI, "Moving from Problem Exposing to Problem Solving," concept paper, undated, p. 4. 47. By self-definition ELSHAM is "a human rights organization, created to promote, advocate and defend the rights of the people of West Papua work[ing] in close cooperation with grassroots organizations and institutions in West Papua . . . to internationalize the West Papuan case." Institute for Human Rights Study and Advocacy, letter to Mrs. Mary Robinson, high commissioner on human rights, United Nations, 7 April 2000. 48. According to LABAT-Anderson, the social-cultural audit was conducted "under the guidance of Indonesia's Environmental Impact Management Agency (BAPEDAL) using the General Guidelines on Environmental Audit decreed by the State Minister of the Environment (No. KEP42/menlh/XI/94). The purpose of this audit [was] to assess the status and performance of Freeport's social and cultural programs." LABAT-Anderson, Final Social Audit Report, p. 1-2. 49. Freeport-McMoRan, "Integrated Timika Development Plan." The way the 1 percent is calculated ensures that there will always be funding for development even if the company does not make a profit. Funds are taken from gross revenues—that is, how much Freeport sells in any given year minus the costs of extraction—rather than net profits. Leroy Hollenbeck, interview, 2 October 1998. 50. Freeport-McMoRan, "Social Change and Development: Freeport Fund for Irian Jaya Development," , 23 March 2001. 51. Toward this end it established the Timika Basic Skill Development Center and the Office of Irianese Employment and Development. FreeportMcMoRan Copper, "Integrated Timika Development Plan," pp. 1-3. 52. LABAT-Anderson, Final Social Audit Report, p. 3-1-5. 53. Tom Beanal, LEMASA, letter to James Moffett, Freeport-McMoRan Copper and Gold Inc., 14 April 1996. 54. Matthew Jamison stated that Hidelis Sungkonao, being of the highlands Moni suku, was a relative newcomer to the area whom the Amungme needed to deal extensively with to prevent further trouble. Interview, 13 May 1996. 55. Pieter Yan Magal, "The Land Is Ourselves. The Land Is Our Mother," paper presented at the ACFOA Public Forum, "Freeport in Indonesia: Reconciling Development and Indigenous Rights," Canberra, 24 April 1996. 56. Cook, interview. 57. One of the directors was Andreas Anggaibak, who had been a leader of the Amungme.

284

Notes to Pages

108-112

58. Cook, interview; a n d UABS, Amungme Baseline Study, a p p e n d i x 5. 59. Tom Beanal, interview, 2 O c t o b e r 1998. 60. J o h n O t t o O n d a w a m e , "The Impacts of Freeport's Mining Activities o n the A m u n g m e a n d K o m o r o Peoples in West Papua," speech d u r i n g t h e Visions a n d Actions f o r Peace C o n f e r e n c e , Australian National University, Canberra, 24-27 April 1997, p. 3. T h e cycle of land cultivation a n d m o v e m e n t of hamlets is well described within t h e Amungme Baseline Study. "While hamlets are relocated periodically to take advantage of restored soil fertility in different parts of a valley, or to avoid u n p l e a s a n t associations with f o r m e r settlements (for example, where p e o p l e have died), communities simply move a r o u n d within t h e same territory. This is n o t a n o m a d i c lifestyle. A m u n g m e communities enjoy an intense association with the small territories that they consider to be theirs, a n d their knowledge of that territory is very detailed." UABS, Amungme Baseline Study, p. 4.2. 61. Freeport-McMoRan, "Chronological History of the A g r e e m e n t for Additional Voluntary Recognition [i.e., t h e so-called rights trust f u n d ] ) " < h t t p : / / w w w . f c x . c o m / f c x / i a l l . h t m > , 20 O c t o b e r 1997, p. 1. 62. F r o m J a n u a r y 1974 a g r e e m e n t , signed by R. L. West, vice president a n d general manager, Freeport, a n d Tuarek N e r i k m e (Wa), N a i m u n Narikme (Wa), Arek Beanal (Tsinga), a n d Pitarogome Beanal (Tsinga), Paulus Magal (Waya), as cited in Carolyn Marr, Digging Deep: The Hidden Costs of Mining in Indonesia, Down to Earth a n d Minewatch Special R e p o r t no. 2 ( L o n d o n : Down to Earth a n d Minewatch, 1993), pp. 73-74. 63. Freeport-McMoRan, "Environmental a n d Social Programs," a n d Pressm a n , interview, S e p t e m b e r 1998. 64. Freeport-McMoRan, "Environmental a n d Social Programs," p. 1. 65. Murphy as q u o t e d in "Transcript," p. 21. 66. LABAT-Anderson, Final Social Audit Report, p. 3-3-6. 67. Freeport-McMoRan, "Chronological History," p. 1. 68. Martin E. Regan, e-mail, 29 April 1996. Two weeks later t h e claim was withdrawn—officially because the plaintiffs did n o t have e n o u g h time to prepare their case a n d because Beanal did n o t like the use of t h e words "ecoterrorism" a n d "cultural genocide" in t h e d o c u m e n t . Tom Beanal, letter to Martin Regan withdrawing lawsuit against F r e e p o r t a n d cancelling Power of Attorney, 2 May 1996. Unofficially, however, it was withdrawn because Beanal discovered that h e did n o t have a secure line of c o m m u n i c a t i o n to his lawyers in Baton Rouge. In an interview with Matthew J a m i s o n in early April 1996, h e claimed that Reuters (and presumably F r e e p o r t a n d Jakarta) was receiving t h e confidential information Beanal h a d b e e n s e n d i n g to his lawyers. W h e n safe c o m m u n i c a t i o n channels were established, the claim was reinstated. From private information it is obvious that Beanal a n d his lawyers h a d n o t sufficiently prep a r e d their case against F r e e p o r t b u t were p u s h e d to lodge it by the NGOs prior to the F r e e p o r t a n n u a l m e e t i n g that m o n t h f o r m a x i m u m effect. T h e case, withdrawn in early May 1996, was reinstated later that m o n t h , but it was clear that

Notes to Pages 1 1 2 - 1 2 0

285

even direct communications between Beanal and his lawyer were unsatisfactory. During a press conference held by Martin Regan, Tom Beanal walked out because he was not supplied with an interpreter. 69. "With prejudice" means that "the plaintiff may not amend or refile the suit in the Civil District Court." Freeport-McMoRan, "State Court Dismisses with Prejudice Complaint against Freeport-McMoRan Copper and Gold Inc.," press release, 23 March 2000. 70. Edward Pressman, e-mail, 19 November 1998. 71. Yan Magal, "The Land Is Ourselves." Chapter 6: Company Development Policy and Its NGO Critics 1. In Melanesian cultures, because everyone in the village needs to have a voice, it is not always easy to find a recognized leader capable of speaking for the entire village or representing the village in negotiations. 2. Tim Dodd, "Cash Culture Fails to Appease," Australian Financial Review, 9 December 2000. 3. Apparently he was put in jail when he returned home for a visit and angry residents reported him to the police. Ibid. 4. Daniel Ajamiseba, interview, 18 April 2000. By mid-2000 Freeport had built 4,139 houses. Paul S. Murphy, response to Michael Shari and Sheri Prasso, "Can the Miners Make Peace with Critics of its West Papua Operation?" Business Week, 31 July 2000. 5. Freeport-McMoRan, "Environmental and Social Program," p. 9. 6. According to Osborne, only four West Papuans held semipermanent positions at the end of the construction phase while those who had worked were paid on an hourly rate of about 10 cents, which was paid "in kind." Osborne, Indonesia's Secret War, p. 119. Bechtel is also accused of destroying the housing of those whose jobs it terminated. See UABS, Amungme Baseline Study appendix 5. For Forbes Wilson's comments on the Amungme in the early years see Conquest of Copper Mountain, p. 212. 7. Terry Doyle as quoted in Osborne, Indonesia's Secret War, p. 120. 8. Each transmigrant is provided with "0.75 ha of land for the construction of a house built at official expense, 0.75 ha for cultivation, clean water, a village health center, family planning clinic, dispensary, junior (SD) and intermediate (SMP) schools, general meeting hall and a house of worship. The government was also responsible for financing the moving expenses of any transmigrants to Irian Jaya and ensuring their initial welfare immediately after arrival." Australian Embassy, Jakarta, "Taylor Report," sect. 2, p. 15, para. 59. 9. When asked about local craft shops, Indonesians directed me to a couple of shops clearly operated by Indonesians. Only later did I find out that the Kamoro have their own craft center, which is financially supported by Freeport. 10. The importance of produce selling cannot be overstated for the Kamoro. The Kamoro baseline study found that "over 95% of the Kamoro

286

Notes to Pages 121-126

households we surveyed sold p r o d u c e , either in Timika o r in t h e village. Taken together, this marketing of their own p r o d u c e was t h e single largest source of i n c o m e f o r the Kamoro community." UABS, Kamoro Baseline Study, p. 8.3. 11. UNCTD, "Mineral Sector," p. 51, n. 9. 12. UABS, Amungme Baseline Study, p. 5.2.2. 13. PT F r e e p o r t Indonesia, "John Faidiban, S u p e r i n t e n d e n t of C o m m u n i t y Affairs (Office of Irianese E m p l o y m e n t a n d Development)," Warta Freeport 25, 3rd q u a r t e r (1997) :8. 14. Edward Pressman, letter, 20 February 1998. 15. Mealey, Grasberg, p. 312. 16. Wilson, Conquest of Copper Mountain, pp. 219-220. 17. Carolyn Cook, e-mail, 23 August 2000. 18. Greg Earl, "Explosive Mix o n Indonesia's Eastern Frontier," Australian Financial Review, 25 O c t o b e r 1995; a n d Down to Earth, "Mining," August 1991, pp. 6-7. 19. See Nancy Jouwe, "Women a n d War in West Papua," p a p e r presented at the International Women's Day f o r Peace a n d Disarmament, 24 May 1998, pp. 8 - 1 0 , p r i n t e d in Australia West Papua Association (Sydney), Australia West Papua Association Newsletter, May 1998. 20. Ibid., p. 10. 21. David Lowry as q u o t e d in O r t m a n , Notes of m e e t i n g with David Lowry, p. 3. 22. PT Freeport Indonesia, "Public Health a n d Medical Programs," Fast Facts, p r o m o t i o n a l publication, u n d a t e d . U p to 60 p e r c e n t of the hospital's patients are said to be West Papuans. Owen-Davies, "Miners Face Challenges in Indonesian ' C o p p e r City,'" Reuters Business Briefing, 25 April 1994. Dr. T i m Flannery, however, n o t e d that American doctors were n o t allowed to "interfere" with the Indonesian or West P a p u a n patients. Tim Flannery, Throwim Way Leg: An Adventure (Melbourne: Text Publishing, 1998), p. 290. 23. T h e hospital is owned by LMP. Freeport-McMoRan, "Environmental a n d Social Program," p. 7. 24. PT F r e e p o r t Indonesia, "Public Health a n d Medical Programs"; a n d Mealey, Grasberg, p. 307. 25. In 1990 F r e e p o r t began a j o b - t r a i n i n g p r o g r a m in Jayapura that by 1996 s u p p o r t e d t h e education of 15 teachers a n d 160 students while in early 1996 F r e e p o r t o p e n e d a Work Skills Development Center in Timika to provide basic skills to t h e A m u n g m e a n d the Kamoro in areas such as "carpentry, masonry, typing, bookkeeping, mechanics, welding a n d hotel work." Mealey, Grasberg, p. 310. It has also built a b o a r d i n g school in Timika a n d a c c o m m o d a t i o n for students in Tembagapura, a n d it operates schools in the two c o m p a n y towns of Tembag a p u r a a n d Kuala Kencana. According to Freeport, by 1995 it was s u p p o r t i n g h u n d r e d s of university scholarship p r o g r a m s a n d ran m o r e than 250 j o b skills training p r o g r a m s for local employees annually. PT F r e e p o r t Indonesia, Working around the Clock, p r o m o t i o n a l booklet, November 1995. Moreover, the FFIJD,

Notes to Pages 1 2 6 - 1 3 2

287

having completed the new hospital in Timika, is now planning to build a "school of excellence" in the area for children f r o m elementary through high school. 26. Arthur Zich, "Indonesia: Two Worlds, Time Apart," National Geographic, January 1989, p. 125. 27. Yan Magal, "The Land Is Ourselves." 28. Zich, "Indonesia," p. 125. 29. Muller interview. BO. UABS, Kamoro Baseline Study, Executive Summary, Education. 31. Cook, inteview, and e-mail. While arrangements are usually m a d e for the children to stay with family in the lowlands, it is often difficult for the adults "to keep track of kids and ensure that they go to school and keep out of trouble." 32. They are using old missionary texts, which use their own language (Amungkal), to teach the Indonesian language. Cook, e-mail. 33. Demianus Jabame, interview, 28 J u n e 2000. J a b a m e claims that he was refused an opportunity for education in Australia by the military. 34. Ridwan M. Sijabat, "Papuans Wait Impatiently for Autonomy—or Freedom, "Jakarta Post, Opinion, 27 August 2001. 35. WALHI had a four-phase program to address what it saw as the environmental and social problems for the A m u n g m e associated with the mining operation. WALHI aimed to force Freeport to o p e n u p to environmental scrutiny through an Environmental Impact Assessment (problem recognition), to build a relationship with the traditional landowners (problem recognition), and to make accessible and known to the public information regarding the operation of the mine and its relationship with the traditional landowners. In this way it h o p e d to be able to pressure the company and Jakarta into addressing the problems the NGO identified in the area (problem exposing). T h e final phase of the operation has b e e n to achieve a just and fair solution for the A m u n g m e (problem solving), which will encompass the conformation by the company to "current international standards of environmental m a n a g e m e n t of o p e n pit mining, a free political environment and a j u s t and fair compensation for the A m u n g m e people." WALHI "Moving f r o m Problem Exposing to Problem Solving," pp. 5-6. 36. Philip J. Eldridge, Non-Government Organizations and Democratic Participation in Indonesia, (Kuala L u m p u r : Oxford University Press, 1995), p. 214. 37. Hafild, interview. 38. Ibid. 39. Beanal, interview. 40. T h e LABAT-Anderson report explains how the A m u n g m e have b e e n able to rationalize these contradictions: In the people's perception, the lawsuit [Beanal's lawsuit against Freeport] and the 1% fund have different functions. The lawsuit represents their quest for recognition, respect, and continued existence. The 1% fund is a pragmatic matter that they can access by creating new yayasans representing them in different ways. The Amungme can accept this contradiction: on one side the lawsuit continues symbolizing rejection of the 1 % fund and on

288

Notes to Pages

132-135

the other side they can still access the money through additional yayasans. (LABAT-Anderson, Final Social Audit Report, p. 3-2-5). 41. As n o t e d by J o h n Cutts, I went through a book this thick when I was back in the States which had all o f the

NGOS

in the U.S. . . . and pulled out all the

NGOS

which work in

Indonesia. And then I said which one of these has a big budget and really does some real live stuff on the ground? And then I started contacting them saying can we work together and try to make things better? And you know what I come up with. . . . "Sorry, if you are Freeport we don't want to deal with you." Now is that someone who really wants to deal with the real issues and make things happen? T h e bottom line is we want to see things done right and we want to work with anyone who wants to make that happen. (John Cutts, interview, 2 October 1998). 42. J o h n Scott-Murphy, interview, 2 6 April 2 0 0 0 . 43. G l e n n Banks, " C o r p o r a t e E n g a g e m e n t , " Mining

Monitor 4.1 (March,

1 9 9 9 ) , Letters to the Editor, p. 2. 44. B o b B u r t o n , "Beware C o r p o r a t e Courtship, Warns N G O , " Mining

Mon-

itor (Sydney), 3 . 4 ( D e c e m b e r 1 9 9 8 ) , F o r u m : C o r p o r a t e E n g a g e m e n t , p. 10. 45. Partizans is an NGO whose sole purpose is to oversee and expose the activities o f the m i n i n g giant Rio T i n t o . 46. Partizans, " B a d Actors D o n ' t Make ' G o o d Works,'" press release, 2 5 Sept e m b e r 1997. 47. L e e R h i a n n o n , " F e e d i n g the Politics o f D r o u g h t , " Australian

Financial

Review, O p i n i o n , 2 9 D e c e m b e r 1997. It would have b e e n easy for R h i a n n o n to c h e c k with Freeport. Louise Williams, a c o r r e s p o n d e n t in J a k a r t a , simply contacted the c o m p a n y regarding its involvement in the d r o u g h t relief operations and was supplied with extensive information, including a video showing the plight o f the p e o p l e in the mountains. R h i a n n o n could have d o n e the same. Steve Wignall, e-mail, 6 March 1999. 48. Edward J . Pressman, " F r e e p o r t H e e d s Crisis Call," Australian

Financial

Review, Letters, J a n u a r y 1998. 49. Christine Chatelan, e-mail, 4 N o v e m b e r 1994. T h i s was n o t the first time F r e e p o r t had b e e n accused o f ignoring the suffering caused by the d r o u g h t in its area. In the letters section o f the Jakarta Post, the c o m p a n y was accused o f actually causing the drought. 50. As stated by Conservation International, T h e survey visited a region o f New Guinea that biologists had previously never entered because of its inaccessibility. This was accomplished through the assistance of the PT Freeport Indonesia's logistics infrastructure and helicopters. Without the logistical support so generously provided by Freeport, this survey would likely not have been possible. T h e costs would have been extremely high, and logistics support would have to have been

Notes to Pages 1 3 5 - 1 5 6

289

purchased from Freeport's contractors anyway. The opportunity provided by this collaboration translated into a significant leap forward in our knowledge of Irian Jaya's biota, all accomplished in less than a month of fieldwork. (Conservation International, "Preliminary Summary of Conservation International's RAP Biological Survey in the Freeport Exploration Block II, Irian Jaya, Indonesia" ). 51. Danny Kennedy, e-mail, 4 November 1998. 52. Brother T h e o van d e n Broek, interview, August 1999. 53. Freeport-McMoRan, "Initial Cooperative Projects Launched," press release, 18 August 2000. The MOU outlines the aspirations of the three groups within the areas of socioeconomic development, land and h u m a n rights, and the environment, committing each group to cooperate within a framework of goodwill and with equality and respect. M e m o r a n d u m of Understanding between LEMASA and PTFI regarding H u m a n and Socioeconomic Resources, H u m a n Rights, Land Rights, and Environmental Rights, 13 July 2000 . 54. Freeport-McMoRan, "Freeport-McMoRan Copper and Gold Inc. to Establish Trust for Tribal Communities," news release, 24 September 2001. 55. UABS, Final/General Report, Commissioned by PT Freeport Indonesia, UABS Report no. 6 24 December 1998, p. 4.2.

Chapter

1: The

Environment

1. A visa is required to visit West Papua, and the Indonesian embassies and consulates in Sydney will not issue tourist visas for the area of the Freeport concession unless o n e can produce a sponsoring letter f r o m the company. Moreover, until recently a visitor to West Papua was required to produce a pass or a suratjalan, which, theoretically, needed to be presented at the local police office whenever the visitor changed location. 2. Carol Warren and Kylie Elston, "Environmental Regulation in Indonesia," Asia Paper 3 (Perth: Asia Research Centre, University of Western Australia Press, 1994), p. 8. 3. Ibid., p. 7. In January 1975 the ShowaMaru oil tanker spill led to the proposal of a parliamentary bill to prevent oil spills. This was the first attempt by the Suharto government to deal with environmental problems. 4. Salim became minister of state for development supervision and the environment, and although he worked to instill an appreciation of environment protection within the government and the bureaucracy (and continues to this day to be an advocate of environmental protection), in the initial years h e was criticized for focusing on h u m a n population growth and forest protection at the

290

Notes to Pages

156-159

cost of air, water, and land pollution. Robert Cribb, "The Politics of Pollution Control in Indonesia," Asian Survey 30.12 (December 1990) :1125. 5. Warren and Elston, "Environmental Regulation," pp. 7-8. Emil Salim became its chairperson. 6. Colin MacAndrews, "Politics of the Environment in Indonesia," Asian Survey MA (April, 1994) :89. 7. Warren and Elston, "Environmental Regulation," p. 24. 8. If the project involved foreign investors, then the Coordinating Bureau for Capital Invesment (Badan Koordinasi Penanaman Modal) was also included. 9. As quoted in Warren and Elston, "Environmental Regulation," p. 25. For the mining industry it is the Department of Mining and Energy that accepts or rejects an AMDAL. According to Community Aid Abroad, this decision is made with priority being the minimizing of environmental damage. The procedure for environmental assessment is as follows: ( l ) T h e company prepares a "presentation of Environmental Information" and on the basis of this the authorities decide whether the proposed project warrants an Environmental Impact Analysis (EIA) or not. If there is no answer within thirty days, the decision goes by default to the company. (2) A government commission sets the terms for the EIA, which is then carried out by the company and submitted to the authorities. (3) The government commission evaluates the EIA, mainly on the basis of clarity, and accepts or rejects it within ninety days of receipt. If it is rejected, the company has a further thirty days to redraft the submission. If no decision is given, agreement goes by default to the company. If it is accepted, the company then submits an Environmental Management Plan and an Environmental Monitoring Plan, which the authorities accept or reject within thirty days. If rejected, the company has fourteen days to appeal. Atkinson, "Undermined," p. 10. 10. For instance, when the AMDAL process was made compulsory in 1986, the government stipulated that existing projects that affected the environment needed to complete an environmental assessment by 1992. However, two thousand companies, or 85 percent of all companies required by law to carry out this assessment, had failed to comply by the deadline. The bureaucracy's inability to enforce this requirement meant it was quickly dropped. 11. Warren and Elson, "Environmental Regulation," p. 9. 12. Vanessa Johanson, Green News Indonesia, Bulletin of the Indonesian Center for Environmental Law , February 1997. E-mail "(INDONESIAL) Green News Indonesia #01/02/97" through , 5 March 1997, p. 7. 13. Colin MacAndrews, "The Indonesian Environmental Impact Management Agency (Bapedal): Its Role, Development, and Future," Bulletin of Indonesian Economic Studies 30.1 (April 1994):101. Also see Joan Hardjono, "Resource Utilisation and the Environment," in Indonesia's New Order: The Dynamics ofSocioEconomic Transformation, ed. Hal Hill (Sydney: Allen and Unwin, 1994), p. 215. 14. Cribb, "Politics of Pollution Control," pp. 1131-1132.

Notes to Pages 1 5 9 - 1 6 0

291

15. "Technocrats consider a ratio in excess of 25% to be unsustainable." Schwarz, Nation in Waiting, p. 78. 16. This emphasis on cronyism at the expense of the environment was evident when, u n d e r the instructions of Suharto, Bob Hasan was allocated Rp. 250 billion to finance his pulp and paper mill in East Kalimantan f r o m government resources that had previously been allocated to a national reforestation project. In 1997 Hasan was h o n o r e d by the Suharto government with the Indonesian environment prize, the Kalpatura. Down to Earth, "Bob Hasan Gets Environm e n t Prize." E-mail "DtE: Bob Hasan Gets Environmental Prize," f r o m Liz Chidley through KdPNet , 23 J u n e 1997. 17. MacAndrews, "Politics of the Environment," pp. 374—376. 18. Refer to Ariel Heryanto, "Indonesian Middle-class Opposition in the 1990s," in Political Oppositions in Industrialising Asia, ed. Garry Rodan (London: Routledge, 1990), pp. 241-271; and Eldridge, Non-Government Organizations and Democratic Participation in Indonesia, p. 213. Eldridge noted that although a trend toward political activism emerged in the more radical NGOs d u r i n g the late eighties, h e believed that even in 1993 the majority of NGOS remained focused on local issues rather than political reform (p. 7). 19. To establish an NGO one had to apply to the government. O n e requirem e n t was that members n e e d e d to be passed as "environmentally clean"—that is, they did not have connections to the illegal Indonesian Communist party. They also had to periodically report their activities to the government. Thus, once they were recognized by the state, their activities were restricted. Medea Benjamin, J o h n Roosa, and Stephen Zunes, "A Report on the May 1997 Parliamentary Elections and Prospects for Democracy," Global Exchange, September 1997. E-mail "GX: (1 of 2) Prospects for Democracy in Indonesia," f r o m Charles Scheiner , 20 September 1997; a n d Cribb, "Politics of Pollution Control," pp. 1132-1133. 20. In 1993 Sidney Jones, executive director of Asia Watch, identified f o u r groups of Asian NGOs emerging f r o m the seventies: civil liberties organizations (often made u p of middle-class lawyers), community development organizations, environmental organizations, and women's rights organizations. By the nineties, h e believed, the lines of distinction between these groups had blurred. Sidney Jones, "The Organic Growth: Asian NGOS Have Come into Their Own," Far Eastern Economic Review, 17 J u n e 1993, p. 23. 21. Cribb, "Politics of Pollution Control," p. 1132; and Hafild, interview. 22. In testimony before the House International Relations Committee in May 1997, Aurelia E. Brazeal, deputy assistant secretary for East Asian a n d Pacific affairs, stated that the United States provided "approximately $20 million in financial support [in the] areas of h u m a n rights, democratization, good governance, and the environment, m u c h of which [was] spent through NGOs." Aurelia E. Brazeal, Prepared Testimony by Aurelia E. Brazeal, the Deputy Assistant Secretary for East Asian a n d Pacific Affairs, before the House International Relations Committee and the Pacific Subcommittee, 7 May 1997. E-mail "Dept. Asst.

292

Notes to Pages 161-164

Sec. of State on I n d o n e s i a n / E T (Part 1 of 2)," f r o m Foreign Bases Project , 12 May 1997. 23. Hafild, interview, a n d Eldridge, Non-Government Organisations," p. 135. 24. Warren a n d Elston, "Environmental Regulation," p. 15. 25. Hafild, interview. 26. Heryanto, "Indonesia," p. 115. 27. "Irian Jaya Leads t h e World in Biodiversity," Asia Pulse, 5 O c t o b e r 1999. E-mail "Because of Irian, I n d o n Is T h e World L e a d e r in Biodiversity," f r o m TAPOL through conference "reg.westpapua" , 7 O c t o b e r 1999; a n d Conservation International, The Irian Jaya Biodiversity Conservation Priority-Setting Workshop, Final Report (CD-Rom) (Washington, D.C.: Conservational International, 1999). Robert J o h n s , "Unlocking the Secrets of a Botanical Goldmine," Network 21 (publication of Royal Botanical Gardens, Kew), no. 10, p. 29. J o h n s believes that d u r i n g his time t h e r e h e may have discovered a b o u t sixty as yet u n n a m e d f e r n species. Dan Murphy, "Green Gold: O n e of t h e World's Richest Biological Treasure Troves—An Isolated Area of Indonesia— Is Also H o m e to a Mother-lode of Minerals; S o m e t h i n g Has to Give," Far Eastern Economic Review, 27 May 1999. E-mail " F E E R / I n d o n : O n e of the World's Richest Biological Treasure Troves," f r o m TAPOL , 24 May 1999. 28. Second Biodiversity Convention C o n f e r e n c e of Parties, Jakarta, "Stop F r e e p o r t Mine's Destruction of Irian Jaya Biodiversity: NGO Statement at Biodiversity Convention C o n f e r e n c e of Parties II," 6 - 1 7 N o v e m b e r 1995. E-mail "Biodiversity Treaty & F r e e p o r t Mine," f r o m c o n f e r e n c e "reg.westpapua" , 19 D e c e m b e r 1995. For a personal a c c o u n t of the diversity a n d u n i q u e n a t u r e of t h e flora a n d f a u n a of t h e region refer to Flannery, Throwim Way Leg. 29. Adam Schwarz, "Mining a Mountain," Far Eastern Economic Review, 4 July 1991, p. 47; a n d "Freeport to S p e n d US$36m o n Environment," Jakarta Post, 26 May 1995. 30. Richard H. K. Vietor, "Freeport Indonesia," p a p e r p r e p a r e d f o r the Harvard Business School (N9-796-124), 15 March 1996, p. 13; a n d Marsh, e-mail, 26 March 1999. 31. T h e original contract area was a p e r f e c t square ten kilometers by ten kilometers c e n t e r e d on Ertsberg but also encompassing t h e glacier, which is only a b o u t six kilometers f r o m the mine. Muller, interview. T h e park was n a m e d after Dr. H. A. Lorentz, the leader of a Dutch expedition to the snow fields in the central highlands. In 1907 Lorentz r e a c h e d the snowline of Mt. Wilhelmina (now G u n u n g Trikora). Mealey, Grasberg, pp. 52-53. T h e area was first given protective status by t h e Dutch in 1919. Four years after F r e e p o r t went into p r o d u c t i o n (1978) the area b e c a m e a strict n a t u r e reserve, a n d in March 1997 an area of 2,505,600 hectares, representing 0.6 p e r c e n t of West Papua, was declared a national park. Today the Lorentz National Park "is the largest protected area in Southeast Asia (2.35 mil. ha.) a n d the only protected area in the world which

Notes to Pages 164-166

293

incorporates a continuous, intact transect from snow cap to tropical marine environment." It also boasts "a high level of endemism and the area supports the highest level of biodiversity in the region. The area also contain fossil sites that record the evolution of life on New Guinea." United Nations World Heritage Committee, "Convention concerning the Protection of the World Cultural and Natural Heritage," report of the 23d sess., Marrakesh, Morocco, 29 November-4 December 1999, pp. 25-26. 32. The first report was completed by PT Hatfindo Prima, which is part of the international Hatfield Group. They were assisted in their work by the West Papuan University of Cendrawasih, the Bishop Museum in Hawaii, the Australian Museum in Perth, the Smithsonian Institution in Washington, and Indonesian environmental groups. See Hatfield Group, Biodiversity Surveys in the PTFreeport Indonesia Contract of Work Mining and Project Area, Mimika Regency, Irian Jaya, Indonesia (1997) < h t t p : / / w w w . h a t f i e l d g r o u p . c o m / s p o t l i g h t / b i o . h t m > . 33. W o r l d Wildlife F u n d , Indonesia: Institutional

Support for WWF Indonesia

Programme Office, document ID0083, WWF Web site . 34. World Wildlife Fund, Lorentz Nature Reserve, WWF-Indonesia Web site . The other glacial areas are Mts. Kenya, Kilimanjaro, and Ruwenzon in East Africa; Chimborazo in Ecuador; and Huascaran in Peru. In total there are perhaps about fifty equatorial glaciers in the three equatorial regions—West Papua, South America, East Africa. 35. Alex W. Wilson, "A Report on the Status of the Glaciers of the Mount Jaya Massuf, Irian Jaya, Indonesia" (Tucson, Arizona, May 1992), pp. 15-18, as quoted in Vietor, "Freeport Indonesia,' p. 31, n. 8. Also see "Freeport Indonesia: Legacy of Multinational Mining," Environesia 4.1, (March 1990): p. 5; and Dames and Moore, PTFI Environmental Audit Report, 25 March 1996, pp. 32-33. 36. World Conservation Monitoring Centre, World Heritage Sites, Protected Areas Program, "Lorentz National Park," ; and United Nations World Heritage Committee, "Lorentz National Park," report of the 24th sess., Cairns, Australia, 27 November-2 December 2000. 37. Murphy as quoted in "Transcript," p. 3. 38. James R. Moffett, "Executive Summary of Activities of PT Freeport Indonesia," letter to President Soeharto, dated 28 January 1997.

Freeport-McMoRan, "Operations and History," . 1973-1974 1987 1988

7,000 tpd 16,000 tpd with 100 million tonnes of ore reserves 18,600 tpd with 200 million tonnes of ore reserves; with Grasberg discovery, approval given to lift rate to 32,000 tpd

1989

24,700 tpd, approval for 52,000 tpd

294

Notes to Pages

167-168

1990 1991 1992

31,700 tpd ore reserves increase to 483 million tonnes 66,000 tpd; ore reserves revised to 786 million tonnes; approval for 90,000 tpd

1994

ore reserves revised to 786 million tonnes; approval for 90,000 tpd 120,000 tpd approval for 300,000 tpd 230,000 tpd

1995 1997 1999

39. This process allows the recovery of 85 percent to 90 percent of the copper sulphite in the ore. Mark Cloos, "Responsible Mining: Environmental Management at Grasberg," Geotimes 42.5 (May 1997): p. 26. 40. Paul Murphy argued that the company examined eight different options for tailings management. A pipeline across the mountains was ruled out as being too damaging to the environment, while tailings dams in the highlands near the mine site would pose too great a risk in such precipitous terrain, which straddles a major geological fault. Murphy as quoted in "Transcript," pp. 6-7. 41. However, it should be noted that flooding of the river system would mean that the accumulated sediment transported would be higher over the long term. Cloos, "Responsible Mining,' pp. 26-27. 42. According to a 1993 Freeport interoffice memo, between 1990 and 1993 the riverbed rose approximately five meters at Mile 23 near Koperapoka. PT Freeport Indonesia, "Tailings Facts," interoffice memo, 3 December 1993. 43. In 1994 the traditional landowners around the Ok Tedi mine launched a multibillion-dollar lawsuit against the mine operator, BHP, for discharging more than thirty million tons of tailings directly into the Fly and Ok Tedi rivers annually, BHP settled out of court, agreeing to pay more than $500 million and to devise a more suitable tailings management plan, for, like Freeport, it had been depositing tailings directly into the river. In August 1999, on the back of a rumor that the landowners were again planning to sue the company because its tailings deposition breached the settlement terms, BHP admitted it could no longer manage its tailings and was considering closing the mine because environmental damage had exceeded company predictions. According to Paul Anderson, chief executive officer of BHP, "with 20/20 hindsight. . . the mine is not compatible with our environmental values and the company should never have become involved." Geoffrey Barker and Stewart Oldfield, "BHP Admits Ok Tedi's a Mess, but Downer Says Dig In," Australian Financial Review, 12 August 1999, p. 1. Environmental groups such as the Mining Policy Institute claim that BHP's announcement was an attempt to walk away from the ecological disaster predicted by its critics. To date no buyer has been found for the mine, which the PNG government, being part owner and financial beneficiary, does not want to see closed.

Notes to Pages 1 6 8 - 1 7 0

295

44. Down to Earth (London), "Freeport Still Getting Away with It," Down to Earth Newsletter, no. 47, November 2000. 45. "Pollution Created by Freeport's Tailing Spreading to More Areas," Petromindo, 18 April 2001. 46. Danny Kennedy, "Freeport Follies," Down to Earth Newsletter, no. 34, August 1997, p. 11. 47. Dames and Moore, PTFI Environmental Audit Report, p. 23. 48. Hatfield Group, "Biodiversity Surveys." 49. L. R. Baskoro and M. Kholifan, "Sucofindo Memberi, Freeport Menolak," Forum Keadilan (Jakarta), no. 9 ( 1 1 August 1997), p. 68, as quoted in Project U n d e r g r o u n d , Risky Business, p. 24, n. 80. 50. Freeport-McMoRan, Annual Report, 2000, p. 14. 51. AMD results f r o m the oxidation of sulfide minerals and their leaching by water percolating through the ore. These problems associated with the high c o p p e r content of the ore are a relatively new p h e n o m e n o n for the mining operation related to the discovery of Grasberg. Unlike Grasberg, Ertsberg was high in concentrations of limestone a n d carbonates, which acted as natural buffers to the ore body's copper a n d sulfur. At the m o m e n t , Grasberg currently lacks the necessary buffering limestone. Stuart Miller, interview, 9 September 1999. 52. Yahya Alkatiri, Freeport s u p e r i n t e n d e n t at the reclamation project, claimed that exotics such as pineapples, coconuts, rice, sweet potatoes, oranges, mangoes, and bananas were growing well. Yahya Alkatiri, interview, 2 October 1998. Also see Freeport-McMoRan, "Original Lowlands Reclamation Site Reopens—Many Plants Successfully Grown on Tailings Soil," < h t t p : / / www.fcx.com/esp/article8.html> and idem, "Fruit Trees, Shrubbery, and Plant Life Flourish When Planted in Tailings." 53. This standard is apparently "a voluntary, industry derived standard with no e n f o r c e m e n t mechanisms." See Seattle Mennonite Church, "Comments by the Seattle Mennonite Church on the Montgomery Watson Environmental Report Commissioned by Freeport," pp. 1-7. 54. Vie tor, "Freeport Indonesia," pp. 13-14; PT Freeport Indonesia, "Timika Environmental Laboratory," Fast Facts, promotional publication (undated). 55. Freeport-McMoRan, Annual Report, 2000, p. 15. 56. PT Freeport Indonesia, "Timika Environmental Laboratory." In defense of this p r o c e d u r e Freeport states that while the company would be more than willing to publish these data, it was prevented f r o m doing so byjakarta. Freeport argues that the efficacy of its testing procedures would not only reflect badly on other companies in Indonesia, which are not as rigorous in their c o m m i t m e n t to the environment, but, by association, would reflect badly on the regime's oversight of other mining operations. Pressman, discussions, September and October 1998. 57. Seattle M e n n o n i t e Church, "Comments," 7.2.1.2 (p. 7). 58. Freeport-McMoRan, "Tailings Management," Fast Facts, retrieved 21 April 2001 , p. 3.

296

Notes to Pages I 7 0 - 1 7 6

59. PT Freeport Indonesia, "Tailings Facts." 60. Murphy as quoted in "Transcript," p. 10; and Miller, interview, 9 September 1999. 61. Dames and Moore, PTFI Environmental Audit Report, p. 17; and Montgomery Watson Indonesia, PT Freeport Indonesia Executive Summary, 1999 External Environmental Audit: PT Freeport Indonesia Operations, Irian Jaya Indonesia (Jakarta, 1999) p. 2. According to Montgomery Watson, it was "ranked by Engineering News Record as No. 2 among the top 200 environmental firms and as No. 1 in water and wastewater treatment" (p. 6). 62. A karst system is underground rock that is predominantly made up of calcium carbonate. When it is leached by water, cavernous holes are created. 63. Cloos, "Responsible Mining," p. 25. Miller, however, sees no problem with this as it could sustain a small industry in the highlands recovering copper concentrate and metal. Miller, interview, 9 September 1999. 64. Seattle Mennonite Church, "Comments," pp. 3-8. 65. Freeport-McMoRan, "Implements Overburden Stockpile Stabilization Plan," news release, 12 July 2000. 66. Freeport explained on its Web site that "some of the residents of the village [Banti] felt threatened after an incident in May 2000 when an overburdened stockpile slipped and a wave of water and material flowed down the river adjacent of the village. . . . Discussions with Banti residents resulted in a plan to build new homes . . . in another location." Freeport-McMoRan, "Social Change and Development." 67. Judge Gabrielle McDonald as quoted in Theo van den Broek, "Memo Kunjungan Timika: MOU Lake Wanagon," No. 037/TB/01/3.4.2, 21 February 2001. 68. Ibid. 69. Montgomery Watson Indonesia, PT Freeport Indonesia Executive Summary, p. 18. 70. Montgomery Watson Indonesia, 1999 External Environmental Audit: PT Freeport Indonesia Operations, Irian Jaya, Indonesia (Jakarta: Montgomery Watson Indonesia, 1999), pp. 3-9. 71. The colors apparently derive from the plankton and algae that thrived in the lakes. 72. Not until 1997 were the environmental laws strengthened so that it became compulsory for large companies to establish an annually accumulating reclamation guarantee. Yet without the will and ability to police such regulations within the bureaucracy, it will become just another worthless regulation. 73. Murphy as quoted in "Transcript," p. 10. 74. Political risk insurance tends to cover war, insurrection, government expropriation, and the like. 75. OPIC listed the sheeting of tailings across to the Minajerwi River four years previously in 1991 as one of the reasons it cancelled Freeport's insurance. OPIC letter to Freeport-McMoRan, "OPIC Policy of Contractors and Exporters Insurance No. C592," 10 October 1995, p. 2.

Notes to Pages 1 7 6 - 1 7 8

297

76. At the time of OPic's 1990-1991 scientific study of Freeport's operation ( u p o n which it officially based the cancellation), the agency was fully aware of the company's intention to increase its output. How could something anticipated be justification for the cancellation? T h e sequence of events also lends credence to the speculation. If OPIC'S sole consideration for canceling the insurance was concern with expanding o u t p u t rates, why did it issue the policy in the first place or wait f o u r years to raise the matter? Was it mere coincidence that the cancellation was raised shortly after the publication of the Munninghoff report on h u m a n rights abuses in August 1995? And while this is highly probable, could not a n o t h e r consideration have been the highly publicized Ok Tedi landowners' litigation against BHP? 77. OPIC letter to Freeport-McMoRan. 78. In discussing the power of patronage, Houck noted in reference to Freeport that "once you receive major money f r o m 'A'" and you rise to their defense then "you are n o longer d e f e n d i n g 'A' to the general public; f r o m then on, you are d e f e n d i n g yourself." Oliver A. Houck, "Major Money's Influence in Freeport-Indonesia Affair," Times-Picayune, 29 February 1996, p. B-7. E-mail received f r o m Charles Scheiner, "Freeport and New Orleans Media," West Papua conference "reg.westpapua" , 29 February 1996. 79. Jim Mann, "Washington May Face Rights Test in U.S. Firm's Indonesian Operations," Los Angeles Times, 2 November 1995, p. 2. It could be argued, however, that his representations on behalf of Freeport were not purely altruistic. Publicity of this kind, which highlighted the Suharto government's cavalier attitude to environmental protection, would have b e e n embarrassing. 80. Perhaps the most powerful enemy Freeport faced at the time was the one of political expediency, for it would a p p e a r that the White House decision not to intervene was essentially a pragmatic o n e m a d e by an executive that wanted to be seen as strongly supporting h u m a n rights and the environment. Steven Feld interview, Background Briefing (transcript), ABC Radio National (Australia), December 1995, p. 3. 81. "Freeport Loses Its Insurance," Far Eastern Economic Review, 16 November 1995, reprinted in Inside Indonesia, December 1995, p. 22. 82. T h o m a s Egan (senior vice president, Freeport-McMoRan) as quoted in "Transcript," p. 36. MIGA is the World Bank's political risk insurance arm; Freeport was its first client. In September 1995 Freeport had apparently decided not to renew any of its political risk insurance policies. T h e company argued that the few h u n d r e d million dollars of insurance covered by the various policies covered only about 3 percent of the company's investment and was of little value relative to the $4 billion investment made in the province. Given that n o insurance company would be able or willing to cover in excess of $4 billion political risk, the company argued that what policies it did have were expensive for the return they offered. For the company, political risk insurance was a hangover f r o m when it n e e d e d to raise capital f r o m banks, which insisted on such cover-

298

Notes to Pages I

78-180

age for their investment; according to Tom Egan from Freeport, the investment had simply outstripped the coverage. Pressman discussions September and October 1998; and Thomas Egan as quoted in "Transcript," p. 36. Finally, by canceling its coverage, Freeport was no longer politically vulnerable on this front. 83. Apart from the company's making donations to the Breaux campaign, Freeport is also one of the state's largest employers. J e f f South and Ralph K. M. Haurwitz, 'Freeport-McMoRan Generous in Its Donations to Texas, U.S. Law Makers." 84. Robert Bryce, "Rough Times for OPIC," Austin Chronicle . 85. Ibid. 86. Ibid. 87. In 1990 Dames and Moore did the favorable environmental assessment report on Freeport upon which OPIC based its political risk insurance policy even though there was at the time, according to company critics, "serious contrary information already available about negative environmental impacts, especially tailings and acid drainage." Steven Feld also claims that once OPIC granted the insurance to Freeport in 1990, Dames and Moore was rewarded with a number of contracts from Freeport. Steven Feld, e-mail, 20 April 1996. 88. Dames and Moore was not only charged with environmentally assessing Freeport's operations, but was also asked to make assessments of the choices that Freeport had made and make recommendations for better environmental programs. Edward Pressman, facsimile, 28 March 1996. 89. Dames and Moore, PTFIEnvironmental Audit Report, pp. 2-3. 90. Indonesian Center for Environmental Law, "ICEL Legal Point of View on Freeport Audit," Green News Indonesia, 10 May 1996. E-mail "Green News Indonesia #3." From Green News Indonesia through , 10 May 1996. 91. Earthbeat, ABC Radio National; and interview with Emmy Hafild (24 September 1998), who said her organization requested, but failed, to view a copy of the original report. 92. Murphy, interview, 3 March 1996. 93. Montgomery Watson Indonesia, "PT Freeport Indonesia Executive Summary," p. 11. 94. "PTFI has a comprehensive environmental monitoring program. . . . As a result Montgomery Watson did not believe it was necessary to independently collect and analyze samples during the audit even though the audit scope clearly allowed for sample collection and analysis to occur." Ibid., p. 21. 95. Dames and Moore, PTFI Environmental Audit Report, p. 15. As Bruce Marsh explained, the company had "the best experts in the world" consider alternative tailings disposal methods but settled for the reclassification of the river and the ADA plan. Marsh says that the classification of the river "was more so that planners in Jakarta would not encourage incompatible development downstream." Bruce Marsh, e-mail, 6 October 1999.

Notes to Pages 1 8 1 - 1 8 4

299

96. Montgomery Watson Indonesia, "PT Freeport Indonesia Executive Summary," p. 26. 97. Hafild, interview. 98. Mann, "Washington May Face Rights Test." 99. Paul Murphy, letter to United States Agency for International Development on behalf of PT Freeport Indonesia, 7 September 1995. 100. Ibid., pp. 1-3. 101. "Pollution created by Freeport's tailing," Petromindo. 102. "No Plan to Shut Down Freeport: Sonny," Jakarta Post Business News, 29 April 2000. 103. "Freeport Told to Improve Its Waste Management," Petromindo, 20 January 2001. 104. "NGO Reports about Freeport Tailing All Scientific: Sonny Keraf," Petromindo, 9 May 2001. 105. "Indonesian Forum to Campaign for Environment Audit on Freeport," Asia Pulse, as quoted in Antara News Agency, 11 April 2000. E-mail "Letter Protesting US Amb. Celbard's Pressure to Defend WAHLI," from conference "act.indonesia" , 30 April 2000. 106. Friends of the Earth and International Labor Rights Fund, Washington, D.C., letter to Secretary of State Madeline K. Albright, 28 April 2000. 107. "Jakarta Court Says Freeport Misled Parliament," Reuters Business Briefing, 28 August 2001. 108. Members of the mining industry have their own organizations formulated specifically to direct debate and lobby governments. One such organization is the ICME. Formed in 1991, it describes itself as a nongovernment environmental organization. According to the group, it was set up "to promote the development and implementation of sound environmental and health policies and practices in the production, use, recycling and disposal of nonferrous and precious metals" and as such participates in, and initiates, international forums on environmental issues. While promoting itself as an nongovernment environmental organization, its membership list includes the largest transnational mining companies in the world: BHP and WMC of Australia; Rio Tinto-CRA from Britain and Australia; Barrick Gold and Placer Dome from Canada; Freeport-McMoRan from the United States. By its own account, this group of the most powerful mining companies in the world is a political actor through its fostering of close associations with institutions such as the World Health Organization, the United Nations, and the OECD. It also contributes to international economic, social, and environmental programs and to policy development. By the simple act of participating in debate and, by association, being able to influence government policies in relation to environmental, economic, labor, and indigenous rights policies, transnational miners and their lobby groups such as the ICME are powerful political actors. For a comprehensive list of its membership see . Also see .

300

Notes to Pages 184-18

7

109. Pressman, e-mail, November 1998. 110. "Freeport Violated Government Regulation: Minister Sonny," Jakarta Post, 16 September 2000. 111.1 witnessed this twice in the space of one week in June 2000. The waste treatment works for Tembagapura, which is situated by the Utekini River flowing by Banti village, released sewerage directly into the river, which joins the tailings stream and flows past Banti village. 112. Melissa Kronenthal and Barbara Taylor, "Students' Right to Free Speech Stifled," Environmental Forum: A Project of the Tulane Green Club 4.3 (December 1995): 1. 113. Steven Feld, letter of resignation to Chancellor William H. Cunningham, The University of Texas, 11 September 1995, p. 1. The 193.6 million pounds of toxic material the company released into the environment in 1993 was reputedly nearly three times as much as America's next largest polluter. Eyal Press, "Freeport-McMoRan at Home and Abroad," p. 128. 114. "Sonny Alexander Keraf: 'I Have Won Half The Battle,'" Tempo, 12-18 June 2001. Chapter 8: Human Rights 1. The Indonesians have had three constitutions. The first was drafted in 1945, before independence was declared with the aid of the Japanese. The second was a federal constitution drawn up in 1949; the third was written in 1950 after the country won independence from the Dutch. The 1950 Constitution gave greater weight to human rights provisions based on the Universal Declaration of Human Rights of 1948 and curtailed the power of the president. In 1959 the 1950 Constitution was abandoned by Sukarno, at the insistence of the military, in favor of the 1945 Constitution. For discussion of the deliberations on the Constitution, see Asian Forum for Human Rights and Development (ForumAsia), Stability and Unity on a Culture of Fear (Bangkok: Forum-Asia, 1995), pp. 25-35. 2. See Benedict Anderson, The Spectre of Comparisons: Nationalism, Southeast Asia, and the World (London: Verso, 1998). Carmel Budiardjo describes this collective amnesia as an "apparent calm made possible by pretending to forget." Carmel Budiardjo, Surviving Indonesia's Gulag: A Western Woman Tells Her Story (London: Cassell, 1996), p. vii. 3. Edward S. Herman, "Good and Bad Genocide: Double Standards in Coverage of Suharto and Pol Pot," Extra! (September/October 1998) . 4. Pramoedya Ananta Toer, "Echoes of the Javanese Dictator: Former Indonesian President Suharto," New Perspectives Quarterly, June 1999. E-mail "npq: Echoes of the Javanese dictator; former President Suharto," from tapol through conference "act.indonesia" , 12 July 1999.

Notes to Pages 1 8 8 - 1 9 1

301

5. "Pancasila has served to maintain social control in various ways. Not only has it undercut the legitimacy of alternative ideologies . . . but it has had the effect of constraining the public expression of dissentient ideas and opinions within the limits of what is safe and uncontroversial. It has thereby induced a strong inclination toward conformity and self-censorship in public utterances because of the risks involved in straying beyond the limits, intentionally or otherwise." Mackie and Mclntyre, "Politics," p. 27. It should also be added that because the "limits" were seldom clearly defined, this uncertainty also had a selfcensoring effect. 6. Ibid., p. 26. 7. Pramoedya, "Echoes of the Javanese Dictator." 8. Asian Forum, "Stability and Unity," p. 49. 9. Saleh Abdullah, "One Year of the National Commission on Human Rights," Inside Indonesia, September 1994, p. 10. 10. Amnesty International, Indonesia: Continuing Human Rights Violations in Irian Jaya, ASA 2 1 / 0 6 / 9 1 , April 1991, p. 16. 11. Jack Freeman, "Indonesia Is Cited for Gross Abuses in Human Rights," Earth Times News Service, 2 May 1997 . Other laws used to control dissent were sections 154, 155, and 166 of the criminal code. Under these articles the sentence for "public expression of feelings of hostility, hatred, or contempt toward the government" was seven years. For expressing these views in the media, imprisonment was four and a half years. Six years could be given for "inciting others to disobey a government order or to break the law" or insulting the president. Asian Forum, Stability and Unity, p. 52. 12. Mackie and Maclntyre, "Politics," p. 29. 13. Pramoedya, whose books were banned by the New Order government, was imprisoned and held under house arrest for a total of thirty years. Steve Proffitt, "Escaping Indonesia's Iron Fist in Fiction, but Not in Life," Los Angeles Times, 6 J u n e 1999. 14. See Vatikiotis, Indonesian Politics under Suharto, pp. 111-114. 15. Juwono Sudarsono, "Human Rights: An Indonesian View," paper presented at the Conference on Contemporary Indonesia, Carleton University, Ottawa, 25 February 1997. 16. U.S. Department of State, Indonesia: Country Report on Human Rights Practices for 1998 (Washington, D.C.: GPO, 1999); released by Bureau of Democracy, Human Rights, and Labor, 26 February 1999. 17. Freeman, "Indonesia Is Cited for Gross Abuses in Human Rights." 18. As far back as 1959, when the Indonesian Constituent Assembly (Konstituante) was drafting the ultimately discarded 1950 Indonesian Constitution, Dr. Buyung Nasution noted "the present prevailing notion on human rights in Indonesia is that they represent Western values and that Indonesia has its own norms of human rights derived from the state philosophy of Pancasila. . . . Nevertheless, the validity of human rights—as inherent to human dignity and as the core of the Constitutional government—was acclaimed by all factions in the

302

No tes to Pages

191-193

Konstituante." A d n a n Buyung Nasution, The Aspirations for Constitutional Government in Indonesia (Jakarta: Sinar H a r a p a n , 1 9 9 2 ) , as q u o t e d in Asian F o r u m , Stability and Unity, pp. 2 7 - 2 8 . 19. Schwarz, Nation in Waiting, p. 2 2 3 . 20. A n o t h e r e x a m p l e o f the West's preferential t r e a t m e n t o f the president over h u m a n rights violations was its reaction to the j a i l i n g o f trade u n i o n leader M u c h t a r Pakpahan. A recognised nonviolent activist, Pakpahan was illegally j a i l e d by the regime in 1996 for inciting violence although n o evidence was ever p r o d u c e d . Despite the obvious miscarriage o f j u s t i c e a n d the

similarities

between Pakpahan a n d L e c h Walesa in Poland, in the I n d o n e s i a n case the West never c o n s i d e r e d sanctions against its trading partner as it did against the eastern bloc country. B e n j a m i n , Rossa, a n d Zunes, " R e p o r t on the May 1 9 9 7 Parliamentary Elections." 21. After the first five years ( 1 9 9 8 ) , h a l f the m e m b e r s were to retire, a n d new m e m b e r s were to b e c h o s e n by those remaining. After a n o t h e r five years the last o f the original m e m b e r s are to retire so that, theoretically, by 2 0 0 3 n o m e m b e r s a p p o i n t e d by S u h a r t o will r e m a i n . Asian F o r u m , Stability and Unity, p. 71; U.S. D e p a r t m e n t o f State, Indonesia Report on Human

Rights Practices for 1997;

and

Abdullah, " O n e Year o f the National Commission on H u m a n Rights," p. 11. 22. Also see "A Few G o o d M e n (and W o m e n ) , " Indonesia Business Weekly, 17 D e c e m b e r 1993; a n d National H u m a n Rights Commission, "Komnas HAM History,"

,

14

J u n e 2000. O n e o f the most p r o m i n e n t m e m b e r s o f K o m n a s HAM is Marzuki Darusman, who o n c e served as c h a i r m a n . In 1992, j u s t o n e year b e f o r e the commission was f o r m e d , Marzuki fell out o f favor with the president by voicing the b e l i e f that it was natural f o r o t h e r politicians to want to c h a l l e n g e f o r the presidency. In Suharto's Indonesia n o o n e c h a l l e n g e d for the presidency. As a means o f controlling the t r o u b l e s o m e politician, S u h a r t o a p p o i n t e d him to the newly f o r m e d , but emasculated, H u m a n Rights Commission. D u r i n g his time with the commission, Marzuki's reputation rose a l o n g with the commission's. S e e Abdullah, " O n e Year o f the National Commission o n H u m a n Rights," pp. 9 - 1 0 . H e also h a d f o u n d a high-profile position a n d vehicle through which h e could selectively criticize g o v e r n m e n t actions. In 1 9 9 9 h e was given the position o f attorney-general in the Wahid g o v e r n m e n t . In 1 9 9 9 - 2 0 0 0 h e also h e a d e d the investigation into the events surrounding the East T i m o r e s e i n d e p e n d e n c e vote. Miriam Budiardjo, apart f r o m b e i n g the wife o f Ali Budiardjo, h a d held a post in the Indonesian Ministry o f Foreign Affairs; she has a master's d e g r e e from Georgetown University. Muladi, who was a p p o i n t e d to Suharto's last "crony" c a b i n e t as minister o f j u s t i c e a n d h a d l o n g b e e n c o n s i d e r e d a close associate o f Suharto's eldest daughter, Tutut, was also a m e m b e r o f the commission. H e previously h e l d the position o f dean o f D i p o n e g o r o University in S e m a r a n g . "In a study issued by the Legal Aid Institute at the e n d o f 1 9 9 7 assessing the c o n d u c t o f p r o m i n e n t Indonesians a n d their views on the universality o f h u m a n rights, Muladi was sin-

Notes to Pages 1 9 3 - 1 9 7

303

gled o u t as o n e of t h e worst. His statements have repeatedly contradicted t h e fifty year old Universal Declaration of H u m a n Rights." TAPOL, "All t h e President's (Wo)men" (TAPOL bulletin 146), April 1998. E-mail "Re: Selected Articles f r o m TAPOL Bulletin 1461," f r o m TAPOL t h r o u g h c o n f e r e n c e "act.indonesia" , 13 April 1998. 23. "Asmara Nababan: ' H u m a n Rights Belong to Us,'" Inside Indonesia, no. 47 (July-September 1996) , 10 March 2000. 24. '"Jakarta Tells Rights Watchdog to be Cautious in Riot Probe," Agence France-Presse (AFP), 21 August 1996. E-mail "AFP: govt warns Komnas HAM on riot" t h r o u g h c o n f e r e n c e "act.indonesia" , 21 August 1996. 25. "Introduction to the English Edition: Towards the E n d of Soehartocrasy," in Luwarso, ed., Jakarta Crackdown, ed. Lucas Luwarso (Bangkok: AJI, Forum-Asia, a n d ISAL), p. xvi; National H u m a n Rights Commission, "Findings of t h e National H u m a n Rights Commission regarding the 27 July 1996 Incident," 12 O c t o b e r 1996, as printed ibid., pp. 69-77; a n d Heryanto, "Indonesia," pp. 110-115. 26. J o h n Rumbiak, interview, 13 S e p t e m b e r 2001. 27. Ibid., 4 O c t o b e r 1998. 28. T h e shooting has b e e n a p o i n t of some c o n t e n t i o n a n d bears an u n c a n n y resemblance to the military's usual m o d u s o p e r a n d i . An employee of a F r e e p o r t subcontractor, who was also shot in the same area only m i n u t e s after G o r d o n R u m a r o p e n was killed, believes h e saw who shot at him a n d also killed R u m a r o p e n . A short time after h e a r i n g t h e original gunshot, this person saw an Indonesian soldier wearing a balaclava a n d camouflage u n i f o r m disappear into the bushes a n d seconds later was shot in the leg himself. H e t h e n drove past the area where, u n b e k n o w n s t to him, R u m a r o p e n was lying dead. H e did n o t see the body because t h e position, which was usually isolated, was s u r r o u n d e d by Indonesian soldiers. It was, h e believes, t h e Indonesian military w h o shot him a n d killed R u m a r o p e n . T h e military, h e stressed, n o t the OPM, wear camouflage clothing a n d balaclavas. Moreover, h e still has the bullet, which h e says is Indonesian military issue. Confidential interview, 30 April 1998. In July 2000 an OPM operative told journalist Michael Shari that t h e OPM h a d killed R u m a r o p e n because h e h a d b e e n a spy. Michael Shari a n d Sheri Prasso, "Can t h e Miners Make Peace with Critics of Its West Papua Operation?" Business Week, 13 July 2000. 29. See Catholic C h u r c h , Violations of Human Rights. 30. Australian Council f o r Overseas Aid (ACFOA) , Trouble at Freeport: Eyewitness Accounts of West Papuan Resistance to the Freeport-McMoRan Mine in Irian Jaya, Indonesia, and Indonesian Military Repression, June 1994-February 1995 (Canberra: ACFOA, n . d . ) , p . 2.

31. T h e r e p o r t detailed a n u m b e r of abuses over the year in a n d a r o u n d t h e F r e e p o r t concession. O n 26 December, it claimed, two p e o p l e were taken in a F r e e p o r t security vehicle to t h e F r e e p o r t security station in T e m b a g a p u r a where

304

Notes to Pages

197-200

they were held by the military a n d F r e e p o r t security after which they were moved to a F r e e p o r t container in a n o t h e r part of the town. Along with two o t h e r people they were b e a t e n by t h e military. These m e n were t h e n moved down to Timika, where they were part of a g r o u p of twenty b e a t e n a n d t o r t u r e d by t h e military over the course of a few weeks. T h e M u n n i n g h o f f r e p o r t also describes t h e shooting of t h e Dani m a n o n t h e F r e e p o r t bus on Christmas Day a n d the moving of a n u m b e r of p e o p l e on this bus to a F r e e p o r t c o n t a i n e r at the company workshop in Koperakopa (lowlands). These p e o p l e were t o r t u r e d in Koperakopa by t n i ; t h r e e of t h e m died f r o m b r o k e n necks. Catholic C h u r c h , Violations of Human Rights, pp. 21-27. 32. Brig. Gen. Suwarno Adiwijoyo, h e a d of TNI I n f o r m a t i o n Centre, as q u o t e d in translation of "Armed Forces Denies H u m a n Rights Violations in West Papua," Suara Merdeka, 21 August 1995, in BBC Monitoring Service, Asia Pacific, 22 August 1995. 33. "Rights Commission Finds Evidence of Timika Killing," Jakarta Post, 19 S e p t e m b e r 1995. Over the period of t h e New O r d e r g o v e r n m e n t , this e u p h e m i s m of "procedural error" was used ad n a u s e a m by the military to justify unethical a n d criminal activity, including the most blatant violations of basic h u m a n rights such as abduction, torture, a n d m u r d e r . It also b e c a m e an effective m e c h a n i s m whereby senior m e m b e r s of the force avoided accountability. 34. "Who Needs Enemies!" Bulletin of the Indonesian Resources and Information Program [irip] News Service, r e p r i n t e d in Inside Indonesia, D e c e m b e r 1995, p. 20. 35. T h e troops that killed the eleven p e o p l e in t h e village of H o e a on 31 May 1995 a n d were involved in the torture of five p e o p l e in O c t o b e r 1994 were f r o m the 752 Trikora Battalion, which is o n e of t h r e e locally raised territorial battalions in West Papua. T h e soldiers are usually Melanesian, while t h e officers a n d NCOS are usually non-Melanesians. It was the Melanesian soldiers who were accused of killing t h e eleven Papuans while they were praying on Christmas Eve. As has b e e n t h e case in East Timor, it would seem that atrocities are sometimes p e r p e t r a t e d by locally raised troops against their own people. David Jenkins, "A Blot o n Suharto's Calling Card," Sydney Morning Herald, 30 August 1995; a n d Krisna, "Soldiering in Irian Jaya: Army Attitudes Alienate Locals," Suara Independent, r e p r i n t e d in Inside Indonesia, D e c e m b e r 1995, pp. 25-26. 36. Australian Embassy, Jakarta, "Taylor Report." 37. Amnesty International, Full Justice ?—Military Trials in Irian Jaya, ASA 2 1 / 1 7 / 9 6 , March 1996. 38. Freeport-McMoRan, "Issues a n d Answers: F r e e p o r t in Irian Jaya," p. 6. . Retrieved 8 Sept e m b e r 1999. 39. Brother T h e o van d e n Broek, e-mail, 3 May 2000. 40. S t a t e m e n t given to a u t h o r by Alfred Boll of t h e ICRC in Sydney. Boll has worked in West Papua a n d a r o u n d the F r e e p o r t concession. Alfred Boll, interview, 9 February 2000. F r e e p o r t has since deleted f r o m its Web site the claim that it was cleared by an i c r c investigation.

Notes to Pages 2 0 0 - 2 0 4

305

41. iRIP News Service, "Who Needs Enemies!" p. 18. 42. Asmara Nababan, interview, 22 September 1998. 43. iRIP News Service, "Who Needs Enemies!" p. 18; and Nababan interview. 44. Brother Theo van den Broek, e-mail, 3 May 2000. 45. Australian Embassy, Jakarta, "Taylor Report," sect. 3, p. 5, para. 82. 46. Ibid., p. 6, para. 88. 47. Ibid., p. 4, para. 78. 48. United States Information Service, American Embassy, Jakarta, letter to Ralph K. M. Haurwitz, 17 January 1996 , 8 September 1999. Also see Freeport-McMoRan, "Issues and Answers," p. 6. Unproductive efforts were made to obtain a copy of the American embassy's report from the American embassies in Jakarta and Canberra, the American consul in Sydney, the United States Information Service in Sydney, and the U.S. State Department. 49. Freeport-McMoRan, "Environmental and Social Program," p. 16 , retrieved 23 November 2000. 50. Murphy, interview, April 1996. 51. Catholic Church, Violations of Human Rights, p. 26. 52. Discussions with Robert Levin from the Freeport Community Affairs Department in West Papua 1 October 1998. 53. Confidential interview, 4 J u n e 2001. 54. Pressman, discussions September and October 1998. 55. "Three ABRI Commands in Timika" (abridged), Suara Pembaruan, 27 December 1997 , 13 September 1998; and Antara News Agency, "ABRI Has New Facilities in Timika," 30 December 1996. 56. Indonesian Evangelical Church, Mimika, Irian Jaya: Catholic Church, Three Kings Parish, Timika; and Christian Evangelical Church of Mimika, Irian Jaya, "Human Rights Violations and Catastrophe in Bela, Alama, Jila and Mapnduma, Irian Jaya," May 1998. E-mail "Re: Report on atrocities in Bela, Alama Mapnduma" (four parts), from TAPOL through conference "act.indonesia" , 25 May 1998. On 8 January 1996, shortly after the publication of the ACFOA and Catholic Church report, the OPM kidnapped a group of researchers from the World Wildlife Fund and held them for four months in the jungles of West Papua. After the breakdown of extensive negotiations, the army attacked, giving the kidnap victims an opportunity to escape, but not before two Indonesians in the group were killed. For a detailed account of the ordeal refer to Daniel Start, The Open Cage: The Ordeal of the West Papua Hostages (London: HarperCollins, 1997). While the military likes to blame the killing of the two hostages on the OPM, it is generally accepted that their deaths should be attributed to the military. Also refer to Mark Davis, "Blood on the Cross," Four Corners, ABC TV, Australia, 12 July 1999. As part of the military operation to set the hostages free, innocent Papuans were gunned down by unknown assailants who landed in the highland village of Geselema in a Red

306

Notes to Pages

204-207

Cross helicopter. Witnesses say t h a t Sylviane B o n a d e i , a Red Cross e m p l o y e e w h o was assisting in t h e n e g o t i a t i o n s with t h e Opm f o r t h e f r e e d o m of t h e hostages, was in t h e h e l i c o p t e r at t h e time, as were o t h e r "white p e o p l e " w h o killed villagers. A n i n d e p e n d e n t i c r c investigation has s u b s e q u e n t l y c l e a r e d B o n a d e i a n d t h e R e d Cross of any complicity. 57. T h e W o r l d B a n k was t h e m a i n d o n o r f r o m 1976 to 1985. Asian F o r u m , Stability and Unity, p. 175. 58. D u r i n g a s e m i n a r o n t r a n s m i g r a t i o n h e l d by t h e m i n i s t e r of transmig r a t i o n , t h e IGGI m e m b e r s p r e s e n t w e r e told "demographically, t r a n s m i g r a t i o n of p e o p l e f r o m Java d o e s n o t m e a n very m u c h b e c a u s e t h e rate of growth o n this island is big. . . . It is e v i d e n t t h a t d e m o g r a p h i c a l l y t h e target of t r a n s m i g r a t i o n is n o t i m p o r t a n t . . . . For 150 years t h e r e l o c a t i o n of p e o p l e f r o m Java has n o effective m e a n i n g . " M a r c u s Colchester, " B a n k i n g o n Disaster: I n t e r n a t i o n a l Supp o r t f o r T r a n s m i g r a t i o n , " TheEcologist 1 6 . 2 / 3 (1986): 62. Finally, t h e r e is a persuasive a r g u m e n t t h a t u n e q u a l d i s t r i b u t i o n of resources, n o t o v e r p o p u l a t i o n has c a u s e d t h e greatest s o c i o e c o n o m i c p r o b l e m s . 59. As Minister of T r a n s m i g r a t i o n M a r t o n o n o t e d in 1985: "By way of transm i g r a t i o n , we will try to realise w h a t has b e e n p l e d g e d , to i n t e g r a t e all t h e ethnic g r o u p s i n t o o n e n a t i o n , t h e I n d o n e s i a n n a t i o n . T h e d i f f e r e n t e t h n i c g r o u p s will in t h e l o n g r u n d i s a p p e a r b e c a u s e of i n t e g r a t i o n a n d t h e r e will b e o n e k i n d of m a n . " Asian F o r u m , Stability and Unity, p p . 176-177. 60. " I n d o n e s i a n s T h r e a t e n i n g to O u t n u m b e r P a p u a n s , " Pacific News Bulletin, 9.9 ( S e p t e m b e r 1994): 9. It s h o u l d b e n o t e d t h a t n u m b e r s of g o v e r n m e n t assisted a n d s p o n t a n e o u s t r a n s m i g r a n t s may b e highly suspect, as estimates can, a n d do, vary considerably. Moreover, t h e n u m b e r of i n d i g e n o u s Melanesians is also a n elusive figure. T h e r e a s o n f o r these p r o b l e m s is, o n c e again, t h e a b s e n c e of reliable g o v e r n m e n t statistics. 61. A c c o r d i n g to t h e I n d o n e s i a n Legal Aid Institute, f o r c e d l a n d e x p r o p r i ations such as t h o s e associated with t r a n s m i g r a t i o n s e t t l e m e n t s "are t h e m a j o r s o u r c e f o r h u m a n rights violations in t h e country." As q u o t e d in B e n j a m i n , Roosa, a n d Zunes, " R e p o r t o n t h e May 1997 P a r l i a m e n t a r y Elections." With twenty t h o u s a n d t r a n s m i g r a n t s o n t h e i r traditional l a n d , t h e K a m o r o feel t h a t they are h i n d e r e d in freely p r a c t i c i n g a n d d e v e l o p i n g t h e i r c u l t u r e o r living in peace. 62. In J a n u a r y 1999, i n d i g e n o u s w o m e n a n d c h i l d r e n , led by A l o m a n g , p r o t e s t e d in t h e streets of T i m i k a against t h e sale of alcohol. T h e y also d e m a n d e d t h a t t h e g o v e r n m e n t investigate t h e military a n d police w h o were involved in t h e selling of a l c o h o l while c l a i m i n g that t h e c o n s u m p t i o n of alcohol a m o n g t h e M e l a n e s i a n males n o t only killed individuals, b u t destroyed families a n d with it any h o p e f o r t h e f u t u r e . "Mothers, C h i l d r e n Protest against Alcoholic Beverages in I n d o n e s i a , " A g e n c e France-Presse (AFP), 22 J a n u a r y 1999. E-mail "AFP: Timika: 1,000+ m o t h e r s , c h i l d r e n p r o t e s t alcoholic beverages," f r o m TAPOL t h r o u g h c o n f e r e n c e "reg.westpapua" , 22 J a n u a r y 1999.

Notes to Pages 2 0 7 - 2 1 3

307

Christine Ajamiseba interviewed the Indonesian prostitutes in Timika and health workers in the area where AIDS has been detected. It would appear that the West Papuan men, while having heard of the HIV/AIDS virus, do not know how to protect themselves. Freeport is attempting to provide information about sexually transmitted diseases and their prevention to the local Papuans. Discussion with Christine Ajamiseba, 22 June 2000. 63. Paul Murphy as quoted in McBeth, "Freeport under Siege." 64. Paul Murphy as quoted in "Transcript," p. 3. 65. Contract of Work between Indonesia and Freeport Indonesia, Incorporated—Decision of the Cabinet Presidium No. 82/EK/KEP/4/1967 of 7 April 1967, Jakarta, pp. 7-8. 66. Cook, interview, 29 September 1998. 67. J o h n Rumbiak, paper (untitled) presented at the ACFOA Public Forum, "Freeport in Indonesia: Reconciling Development and Indigenous Rights," Canberra, 24 April 1996. 68. UABS, "Executive Summary," Amungme Baseline Study. The report also notes that many of those who live in the lowlands around Timika today were part of the failed 1960s Dutch Akimuga Resettlement Project. Ibid., p. 3.3.8. 69. Jamison, interview, 3 March 1996. 70. Confidential interview. 71. Osborne, Indonesia's Secret War, p. 123; and Cook, interview, 29 September 1998. 72. UABS, Amungme Baseline Study, appendix 5. 73. Cook, interview. 74. Forbes Wilson, Conquest of Copper Mountain, p. 221; and UABS, AmungmeBaseline Study appendix 5, Timeline date 1975. Kwamki Lama today is home to many other sukus so that the Amungme are less than 10 percent of the population. 75. Mealey, Grasberg, p. 221. For a description of the incident, see UABS, Amungme Baseline Study, p. 3.3.7. In addition, the Amungme can recount details of the first two meetings with Europeans (in 1912 and 1936), which led to the deaths of many tribespeople who followed the expeditions down to the lowlands. The second of these two meetings was the expedition in which JeanJacques Dozy discovered Ertsberg. UABS, Amungme Baseline Study p. 3.3.5. 76. See ibid., p. 5.2.1, and section on the Wa Valley in the Amungme Valley Profiles. 77. Forbes Wilson, Conquest of Copper Mountain, p. 221. 78. Forbes Wilson held the position of president of Freeport Indonesia from 1966 to 1974. Ibid. 79. Confidential interview, and Todd Harple, e-mail, 16 November 1998. 80. UABS, Kamoro Baseline Study, appendix 2, Kamoro Village Profiles, pp. 18-23. 81. Ibid., p. 8.1. 82. For political purposes, however, TNI historically found it convenient to downplay the national security issue with Jakarta in the ridiculous position of

308

Notes to Pages 213-216

n e e d i n g to destroy t h e OPM while simultaneously refusing to acknowledge its existence: officially t h e r e were n o g r o u p s in the archipelago o p p o s e d to Jakarta's rule, only groups that wished to disrupt social harmony. 83. In O c t o b e r 2001 w h e n the OPM took control of the highland village of Ilaga (fifty miles f r o m t h e mine) f r o m the military a n d military p e r s o n n e l were w o u n d e d in the fighting, F r e e p o r t refused to carry the soldiers on F r e e p o r t helicopters. It is sometimes h a r d to know w h o m the vulnerable c o m p a n y fears t h e most, the military or the OPM. 84. According to the social m a p p i n g r e p o r t f u n d e d by Freeport, t h e r e is evid e n c e of t h e presence of the A m u n g m e ' s ancestors in t h e Wa Valley a n d the m i n e site as long as 5,500 years ago. UABS, Amungme Baseline Study, p. 3.3.2. Also refer to Angel M e n e m b u , "The First People," Inside Indonesia, D e c e m b e r 1995, p. 24. 85. As q u o t e d in Forbes Wilson, Conquest of Copper Mountain, p. 223. 86. Freeport-McMoRan, "Social a n d H u m a n Rights Policy" < h t t p : / / www.fcx.com/esp/socpolicy.html>, 8 S e p t e m b e r 1999. "I hereby declare that I have n e i t h e r participated in n o r witnessed any action which deprived t h e h u m a n rights of any person in o r a r o u n d t h e operations' area of any PTFI o r PTFI affiliate. I f u r t h e r agree in t h e c o m i n g year to r e p o r t to the company's H u m a n Rights C o m p l i a n c e Officer any action I see taken by either employees o r others in o r a r o u n d the operations' area of any PTFI o r PTFI affiliate that could be c o n s t r u e d as a violation of h u m a n rights." PT F r e e p o r t Indonesia, " H u m a n Rights a n d I m p l e m e n t a t i o n " (policy p a p e r ) , l j u n e 1999. 87. Daniel C. Ajamiseba, interview, 5 May 2000. 88. O r t m a n , Notes of m e e t i n g with David Lowry, p. 3. 89. Shari a n d Prasso, "Can the Miners Make Peace with Critics of Its West P a p u a n Operation?" 90. O r t m a n , Notes of m e e t i n g with David Lowry, p. 3. T h e Indonesian police chief in West Papua, Brig. Gen. Silvanus Wenas, claimed that t h e r e h a d b e e n n o shooting, n o o n e was injured, a n d the police h a d peacefully removed a b o u t fifty p e o p l e f r o m a c h u r c h g r o u n d s at t h e request of t h e priest. 91. Amy G o o d m a n , interview (interviewer), " C o p p e r a n d Gold Mining Giant Freeport McMoRan Receives Council f r o m the F o r m e r H e a d of t h e International Criminal Tribunal f o r Yugoslavia; A Democracy Now! Exclusive with a West P a p u a n Environmental Activist W h o Rejects $250,000 f r o m Freeport," Democracy Now! Pacifica Radio, 2 May 2001. 92. T h e o van d e n Broek, "Memo K u n j u n g a n Timika." 93. Abigail Abrash, interview (interviewee), " C o p p e r a n d Gold Mining Giant F r e e p o r t McMoRan Receives Council f r o m t h e F o r m e r H e a d of t h e International Criminal Tribunal f o r Yugoslavia; A Democracy Now! Exclusive with a West P a p u a n Environmental Activist W h o Rejects $250,000 f r o m Freeport," Democracy Now! Pacifica Radio, 2 May 2001. 94. A representative of the WWF was dismayed to learn that information she

Notes to Pages 2 1 6 - 2 2 3

309

had given to J. Stapleton Roy during what she believed had been a confidential briefing had been passed on to James Moffett. McBeth, "Freeport under Siege." 95. Abrash, interview. 96. Secretary of State Madeleine K. Albright, press briefing, 20 December 2000 . 97. United States, Department of State, press briefing on voluntary principles on security and human rights, 20 December 2000 . 98. Freeport-McMoRan, "Social Change and Development." 99. Recently Rumbiak heard that the military was coming to arrest him. He had time to make a number of phone calls to human rights organizations, including Komnas HAM, which immediately sent a message to the military warning them not to hurt the activist. Chapter 9: Freeport and TNI 1. Vatikiotis, Indonesian Politics under Suharto, pp. 63-64. 2. Ibid., p. 63. 3. At the time of reformasi (1999) it was estimated that more than six thousand military officers held civilian posts, with three thousand of these participating in either the national or local parliaments. J o h n McBeth, "Battle Fatigue: Military Fears for Its Future in a Nation Run by Civilians," Far Eastern Economic Review, 17June 1999. E-mail "FEER: ABRL fears for its future in a nation run by civilians," from TAPOL through conference "act.indonesia" , 14June 1999. 4. "Armies in Business: Asia's Boardroom Brass," The Economist, 10-16July 1999. 5. Derwin Pereira, "Dwifungsi in Trouble," Straits Times, Perspective, 11 October 1998. 6. Yang Razali Kassim, "Keeping the Lid on Pandora's Box: Interview Followed by Profile of Marzuki," Business Times (Singapore), 13 May 1999, p. 4. 7. "Indonesia's Bloodstained Military: Will the Army Defend or Defeat Indonesia's New Democracy?" The Economist, 10-17 April 1999. 8. International Crisis Groups report as quoted in Don Greenless, "Indonesia: Force of Corrupt Habit," The Australian, 3 March 2001, p. 8. "The majority of military personnel earn less than $100 a month, depending on their individual circumstances.... A Chief Sergeant who has served fourteen years, is married and has three children, will earn $105 per month. While a First Sergeant who has served only four years and has neither children or wife will earn slightly less at $89. Although the amount paid to top ranking officers is substantially greater, it does not compare favorably to their peers elsewhere. For example, a Brigadier General's salary (supposing he has a wife, three children, and has served 26 years) is $439, while a Colonel with the same number of dependents and time served will

310

Notes to Pages

224-232

amass $213. A report by the army in 1999 showed that salaries paid to the rank and file of the military are only sufficient to sustain them and their families for two weeks of the month an improvement from the mid-sixties, when their wage sustained a family for only one week. Based on Ministry of Defence, Indonesia, figures dated August 2000 as quoted in McCulloch, "Trifungsi," p. 13. 9. Osborne, Indonesia's Secret War, p. 141. 10. Australian Embassy, Jakarta, "Taylor Report," sect. 2, p. 12, para. 45. 11. Amnesty International, Full Justice? 12. Krisna, "Soldiering in Irian Jaya," p. 25. 13. Australian Embassy, Jakarta, "Taylor Report," sect. 1, p. 13, para. 46. 14. Rumbiak, interview, 4 October 1998. 15. Australian Embassy, Jakarta, "Taylor Report," sect. 1, p. 5, para. 9. 16. Franzalbertjoku, interview, 7 J u n e 2001. 17. See Peter King, "Morning Star Rising? West Papua between Merdeka and Chaos," p. 23 (unpublished paper). Tom Beanal is the most popular leader of the West Papuan people, but at the assembly Chief Theys used strong-arm tactics to be elected. 18. Ibid. 19. No doubt his position on the Freeport board protected Beanal, as did the threats from the local community that should he be arrested, they would destroy the mine. 20. Beanal as quoted in Tim Dodd, "Risky Business-Freeport Dances to a New Tune," Australian Financial Review, 16 December 2000, as cited in Abigail Abrash, "The Amungme, Kamoro, and Freeport: How Indigenous Papuans Have Resisted the World's Largest Gold and Copper Mine," Cultural Survival Quarterly, Spring 2001. 21.Joku, interview. 22. Ibid. 23. Ibid. 24. For excellent analysis of the political situation in West Papua prior to the murder of Eluay, see King, "Morning Star Rising?" and Richard Chauvel, "Indonesia: Ending Repression in Irian Jaya," iccAsia Report, no. 23, 20 September 2001. 25. Peter Weiss, lawyer and vice president of the Center for Constitutional Rights, New York, as quoted in Stewart Yerton, "World Will Watch Lawsuits' Outcome," Times-Picayune, 11 May 1997. 26. Ibid. 27. For instance, in Colombia, where security is at a premium because of guerrilla warfare, in 1997 8-10 percent of Occidental's budget was allocated to this service. In comparison, the industry average for the region has been estimated at only 1 percent. Control Risks Group, "No Hiding Place," p. 33. 28. The Taylor Report noted that the military's "standing and authority" in the province afforded it ample opportunity to participate in both legal and ille-

Notes to Pages 2 3 2 - 2 3 5

311

gal business activities. See Australian Embassy, Jakarta, "Taylor Report," sect. 2, p. 5, para. 13; and Robert F. Kennedy Center for Human Rights, "Rape and Other Human Rights Abuses by the Indonesian Military in Irian Jaya (West Papua) Indonesia," Executive Report, May 1999, pp. 7, 8. 29. As reported in British Embassy, Jakarta, "Confidential Report by Ian Morgan." 30. Chris Ballard, "The Signature of Terror: Violence, Memory, and Landscape at Freeport," in Inscribed Landscapes: Marking and Making Place, ed. David Bruno and Meredith Wilson (Honolulu: University of Hawai'i Press, in press), p. 30. 31. For a description of the marking of the landscape and Ballard's argument why the state has failed to totally "incorporate" the Amungme into this culture of fear, see ibid. 32. Greg Probst, letter, 21 July 1999. 33. "Who Needs Enemies!" IRIP News Service, p. 18. 34. Contract of Work between the Government of the Republik of Indonesia and PT Freeport Indonesia Company (1991); and Contract of Work between Indonesia and Freeport Indonesia, Incorporated—Decision of the Cabinet Presidium No. 82/EK/KEP/4/1967, 7 April 1967, Jakarta. 35. John McBeth, "Bull's-Eye: Global Activists Have a New Target, Freeport," Far Eastern Economic Review, 4 December 1997, pp. 22-23. 36. Confidential interview; and David Costello, "Papuans Victims of Brutal Repression," Courier Mail (Brisbane), 9 October 2001. 37. Background Briefing, 10 December 1995, p. 7. 38. As reported on Business Sunday. 39. Julian Evans, e-mail, 6 August 2000. 40. Background Briefing, p. 7. 41. McCulloch, "Trifungsi," p. 28, and e-mail, 12 September 2001; Brigham Golden, "The Corporation as a Social Institution," paper presented at Social Science Research Council Workshop 1, Berkeley, Calif, (undated), p. 2 . 42. Golden, "Corporation as a Social Institution." 43. LEMASA, In the Stomach of the Dragon: The Impact of Mining in Irian Jaya, video and transcript of video. Transcript via e-mail from Survival International , lOJune 1998. 44. LEMASA, "The Opinion of LEMASA concerning the Human Rights Situation and Prolonged Conflict in the Area of Operation of PT Freeport Indonesia, Mimika, Irian Jaya," letter to the National Human Rights Commission, before the commission visited Timika on 1 September 1997. E-mail "LEMASA statement to Komnas HAM" from Conference "reg.westpapua" 12 September 1997. 45. Shari and Prasso, "Can the Miners Make Peace with Critics of Its West Papuan Operations?" 46. Confidential interview. This story, minus the Freeport security guard's involvement, is also related in Ballard, "Signature of Terror."

312

Notes to Pages

236-241

47. Press, "Freeport-McMoRan at H o m e a n d Abroad," p. 127. 48. Mark Davis, "Blood on the Cross." Four Corners, ABC TV (Australia), 12 July 1999. As n o t e d by Freeport, its resources can be a p p r o p r i a t e d by t h e military at any time. 49. Flannery, Throwim Way Leg, pp. 284-291. 50. Beanal, interview. 51. Pressman, facsimile, 28 March 1996; a n d e-mail, 19 N o v e m b e r 1998. 52. Background Briefing, p. 6. 53. As witnessed by the author. 54. Abrash, "The A m u n g m e , Kamoro, a n d Freeport," p. 10. 55. Confidential interview, 7 J u n e 2001. 56. Murphy, interview. 57. International Action f o r West Papua (IAWP), "West P a p u a a Q u a g m i r e of Divergent Interests," 8 O c t o b e r 2000. E-mail "(wp) Inside Papua," f r o m J a m e s J o n e s t h r o u g h , 8 O c t o b e r 2000. T h e commercial rivalry between military a n d police groups is n o t c o n f i n e d to the Freeport concession. In J u n e 2001 five Brimob were killed in Wasior district n e a r a logging concession. Although the West P a p u a n police chief b l a m e d the OPM, it is widely accepted that t h e killings were orchestrated by Kopassus over e c o n o m i c interests. A m o n t h later troops a n d police engaged in a shoot-out over what was r e p o r t e d to be a m i n o r traffic incident; a soldier was killed. 58. J a m e s Jones, e-mail, 1 November 2000. 59. Confidential interview, 7 J u n e 2001. 60. Ibid. 61. Tom Green, interview, 2 O c t o b e r 1998. 62. Ibid. 63. T h e unofficial F r e e p o r t spin o n events is that the military h e a r d of t h e NGOs' plan to have t h e P a p u a n s d e m o n s t r a t e against F r e e p o r t a n d wrested control of events f r o m the NGOs. In July 2000 t h e d e f e n s e minister, J u w o n o Sudarsono, c o n f i r m e d the long-held suspicions that the military h a d instigated the riots to blackmail Freeport. 64. UABS, Amungme Baseline Study, a p p e n d i x 5, Timeline, 18 April 1996. 65. A r e p o r t written f o r t h e c o m p a n y in 1998 had, at the company's insistence, all references to the military deleted. Confidential interview. 66. McCulloch, "Trifungsi." 67. A p r o g r a m that Paul M u r p h y saw n o p r o b l e m with u n d e r the justification that Freeport's contract r e q u i r e d it to provide infrastructure for any gove r n m e n t agency. M u r p h y as q u o t e d in "Transcript," pp. 25-26; a n d C o r p o r a t e Watch, Mining Gold, Undermining Justice: Freeport and Human Rights Violations < h t t p : / / w w w . c o r p w a t c h . o r g / t r a c / f e a t u r e / f r e e p o r t / h r . h t m l > , p. 2. T h e building of a p o r t f o r the navy next to t h e already existing c o m p a n y p o r t of Amamapare is interesting. T h e p o r t is situated o n t h e opposite side of the island f r o m t h e provincial capital; n o t h i n g exists in the area f o r h u n d r e d s of kilometers but the F r e e p o r t mine. Moreover, t h e r e is only o n e main road; it runs directly f r o m

Notes to Pages 2 4 2 - 2 5 2

313

the port to the mine site in the highlands, and it is heavily guarded by the military a n d Freeport security—perhaps not the obvious positioning of a naval port. However, given that the Indonesian navy is an essential element in the smuggling trade, its need of a port in the Freeport concession area is perhaps made clearer. 68. Julian Evans, "Indonesia's Next East Timor?"; unedited version f o u n d at . 69. Egan as quoted in "Transcript," p. 26. 70. Green, interview. 71. TAPOL C o m m e n t , "ABRI Gives Itself a Facelift: Civic Mission, a Re-incarnation of the dwi-fungsi," 9 August 1998. E-mail "TAPOL: ABRI gives itself a facelift—reviving its civic mission," f r o m TAPOL through conference "act.indonesia" , 9 August 1998. In accordance with this new policy, soldiers bemused local residents in April 1999 when they began to clean the Wamena marketplace with shovels and brooms. Sander Thoenes, "Indonesia's Urge to Break Apart," Christian Science Monitor, 2 April 1999. 72. This is not an entirely new approach as masuk desa (armed forces e n t e r the village) has been attempted in other areas of the archipelago. Forum-Asia, Stability and Unity, p. 83. 73. Beanal, interview. 74. Green, interview. As absurd as it may initially appear, there is a degree of merit in this argument. T h e Amungme Baseline Study noted that tribal wars had became such an acceptable occurrence that they represented "the chronological markers of A m u n g m e history" where "other events are r e m e m b e r e d in terms of their occurrence before or after a specific war." UABS, Amungme Baseline Study, p. 3.3.3. Chapter 10: Conclusion 1. T h e local government in West Papua has called for a financial stake in the company, suggesting that it be given that held by Nusamba. 2. Perhaps Beanal's conversion after j o i n i n g the Freeport board can be measured by a statement h e is reputed to have m a d e during an interview with Tempo Magazine. When asked, "Hasn't PT Freeport also taken part in consuming Papua's wealth?" Beanal replied, "I d o n ' t want to say that environmental damage in Tembagapura is Freeport's mistake. It is the government who is to be rightly blamed. So, the government must be responsible for the damage in the A m u n g m e and Kamoro regions. This is because it was the government who ordered Freeport in and made a mining contract with them. Don't throw the blame at Freeport. That would be unfair." Tempo, "We Still Want to Take the Peaceful Route," 27 N o v e m b e r - 3 December 2001. E-mail Tempo interview with Tom Beanal: "We still want to take the peaceful route," f r o m Paul Barber , 28 November 2001.

314

Notes to Pages 3.

U.S.-ASIEN

Business

Council,

255-258 Mission

Statement

; and the US-ASIEN Business Council, " T h e ASEAN Region and Its I m p o r t a n c e to the U n i t e d States o f America: T h e Case f o r S t r e n g t h e n i n g American Involvement in S o u t h East Asia," February 2 0 0 1 , p. 3. T h e council is a U.S. organization representing private business interests in the ASEAN region whose mission s t a t e m e n t calls for the "removal o f all barriers to the expansion o f commercial relationships." . 4. T h e a r g u m e n t c o n t e n d s that most c o m p a n i e s would p r e f e r to know "up f r o n t " what their obligations a n d operating costs f o r e n v i r o n m e n t a l p r o t e c t i o n will be. U n i t e d Nations E c o n o m i c and Social Commission for Asia and the Pacific ( U n i t e d Nations D e v e l o p m e n t P r o g r a m m e ) , Mineral Investment Conditions in Selected Countries of the Asia-Pacific Region (New York: UNDP, 1 9 9 2 ) , p. 23. 5. Alyson Warhurst, Environmental Degradation from Mining and Mineral Processing in Developing Countries: Corporate Responses and National Policies, Development

Centre

Documents,

Organisation

for E c o n o m i c

Co-operation

and

D e v e l o p m e n t (NewYork: O E C D , 1 9 9 4 ) , p. 43. 6. Cox, "Global Restructuring," p. 50. 7. C o n t r o l Risks Group, " N o Hiding Place," p. 2. T h e r e would b e n o reason to assume that c o m p a n i e s from o t h e r regions would, on the whole, p r o d u c e widely differing survey results. 8. T h e fact that these initiatives are usually highly publicized by the m i n i n g industry is an often expressed c o n c e r n o f the NGOs, which argue that the mining c o m p a n i e s participate in d e b a t e m o r e f o r public relations than to e n g a g e in meaningful discussions. 9. Frank B o r e n as q u o t e d in B o b B u r t o n , " A f t e r ' E n g a g e m e n t '

Comes

Defeat, Says J o u r n a l i s t , " Mining Monitor (Sydney), 3.4 ( D e c e m b e r 1 9 9 8 ) : 7.

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