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THE STRATEGY OF OBTAINING CONSENTS FROM LOCAL PARTNER, LOCAL GOVERNMENT AND CENTRAL GOVERNMENT
Noke Kiroyan, Chief ConsultantAnang Noor, Principal Consultant
September 5, 2013 © 2013 KIROYAN PARTNERS. All rights reserved.
OUR TOPICS TODAY
� Indonesia – the Big Picture
� The Ideology� The Regulatory Framework and Some Issues
� Political Risk� Who are Our Stakeholders?
� Engaging Stakeholders to Obtain Their Consents� The Role of Community Development
� Engaging Various Levels of Government� Local Business Partners
� A Success Story
2
THE BIG PICTURE
4
THE WORLD’S LARGEST ARCHIPELAGO
SUMATRA
JAVA
KALIMANTAN
PAPUA
SULAWESI
BALI
WEST NUSA
TENGGARA
EAST NUSA
TENGGARA
MALUKU
NORTH MALUKU
SULAWESI Island
• Population 17 million
• GDRP US$2,900
• Land area 174,600 km2
JAVA Island
• Population 136million
• GDRP US$2,700
• Land area 128,300 km2
SUMATRA Island
• Population 50 million
• GDRP US$2,900
• Land area 473,000 km2KALIMANTAN Island
• Population 14 million
• GDRP US$4,000
• Land area 615,300 km2
PAPUA Island
• Population 3.6 million
• GDRP US$2,900/1,900
• Land area 420,540 km2
• Population: 237 million• 17,500 islands• Land area: 1.9 million km2 (the size of Mexico, almost 2/3 of India)
• 300 ethnic groups
All population figures based on 2010 census.
5
CENTER OF THE INDONESIAN UNIVERSE
• Home to 137 million people, thereof approx. 90 million Javanese (largest ethnic group in Southeast Asia).
• Size: 128,300 km2 (1/2 the size of New Zealand).
• 1000-km northern route (groote postweg - inset) constructed by Governor-General Herman Willem Daendels in 1808-1810 to prepare against British invasion to date is the main artery linking west to east. The main stretch between Jakarta-Surabaya, the two largest cities in Indonesia, currently accounts for almost 25% of Indonesia’s economy.
• Center of political power and economy since colonial times, Javanese culture is dominant, excessively so during President Soeharto’s 32-year reign.
THE ARCHIPELAGO ECONOMY: UNLEASHING INDONESIA’S POTENTIAL
Indonesia Today
• 16th-largest economy in the world
• 45 million members of the consuming class
• 53% of the population in cities producing 74% of GDP
• 55 million skilled workers in the Indonesian Economy
• US$0.5 trillion market opportunity in consumer services, agriculture and fisheries, resources, and education
…..and in 2030
• 7th-largest economy in the world
• 135 million members of the consuming class
• 71% of the population in cities producing 86% of GDP
• 113 million skilled workers needed
• US$1.8 trillion market opportunity in consumer services, agriculture and fisheries, resources, and education
6“The Archipelago Economy: Unleashing Indonesia’s Potential – Executive Summary”, McKinsey Global Institute, September 2012.
MISPERCEPTIONS ABOUT INDONESIAN ECONOMIC PERFORMANCE
The Indonesian economy has performed strongly over the past
decade and is more diverse and stable than many realize. Indonesia had the lowest volatility in economic growth
compared to OECD and BRIC countries.
Another misperception is that Indonesia’s economic growth centers on Jakarta. The fastest growing urban centers are large and mid-sized cities with more than 2 million people, incl.
Medan, Bandung, Bogor and Surabaya.
Indonesia is not an Asian manufacturing exporter driven by its growing workforce or a commodity
exporter driven by its natural resources. The main drivers of growth are
domestic consumption and services.
The majority of Indonesia’s productivity gain has come not from a shift of workers from lower-productivity agriculture into more productive
sectors, but from productivity improvement within sectors and not at
the expense of employment.
7“The Archipelago Economy: Unleashing Indonesia’s Potential – Executive Summary”, McKinsey Global Institute, September 2012.
THE IDEOLOGY
9
NATIONAL POLICY MAKING PROCESS
POLITICAL WILL
GOAL: GOOD OF
COMMUNITY
POLITICAL ATTITUDE
GOVERNMENTS
POLICIES AND STRATEGIES
“Negotiating Mining Agreements: Past, Present and Future Trends”, Danièle Barberis, 1998.
ARTICLE 33 OF INDONESIAN CONSTITUTION
The economy shall be organized as a common endeavor based upon the principles of the family system.
Sectors of production that are important for the country and affect the life of the People shall be controlled by the State.
The land, the waters and the natural riches contained therein shall be controlled by the State and exploited to the greatest benefit of the people.
10
YEAR ERA POLITICAL WILL
1945-1950 Revolution No, fighting a war
1950-1957 Proto-Democracy No, pressing concerns with nationhood
1957-1966 Guided Democracy No!
1966-1998 New Order Yes!
1998-2005 Reformation:Learning Democracy
Basically yes, but more important issues need to
be prioritized
2005-now Consolidation?Firming up Democracy
Trying to make up our collective minds
POLITICAL WILL TOWARD MINING
11
The National Policy-Making Process will remain unchanged, no matter who emerges as President in 2014
The Indonesian economy continues to grow, fueling domestic demand for natural resources
Government policy in future will direct even more coal and minerals toward domestic needs
WHAT THE FUTURE HOLDS
12
THE REGULATORY FRAMEWORK AND SOME CURRENT ISSUES
MINING REGULATORY FRAMEWORK
Government Regulation
MEMR Regulations
PerMen 28/2009 on Mining Services
PerMen 34/2009 on Domestic
Market Obligation
PerMen 17/2010 on Benchmark
Pricing
PerMen 12/2011 on Procedures for
Stipulating Mining Business
Area and Information
System of Mineral and Coal Mining
Area
PP 22/2010 on Mining Areas
PP 23/2010 on Mining Business
Operations
PP 55/2010 on Mining Direction and Supervision
PP 78/2010 on Mine Reclamation
and Closure
14
Law No. 4/2009 Jan 12, 2009 Minerals and Coal Mining
Minister of EMR Regulation No. 18/2009
Aug 19. 2009Procedures for Amendment of Investment
relating to CoWs and CCoWs
Minister of EMR Regulation No. 28/2009
Sep 30, 2009 Minerals and Coal Mining Services Business
Minister of EMR Regulation No. 34/2009
Dec 31, 2009Prioritization of Coal and Mineral Supply for
Domestic Interest
Government Regulation No. 22/2010
Feb 1, 2010 Mining Area Determination
DG of Minerals and Coal Regulation No. 376/2010
May 10, 2010 Affiliated Mining Services Providers
Government Regulation No. 23/2010
Feb 1, 2010 Minerals and Coal Mining Enterprise Activities
Government Regulation No. 55/2010
Jul 5, 2010Direction and Supervision of the Management
and Implementation of Mining Business
Adapted from “Mining Law & Regulatory Practice in Indonesia: A Primary Reference Source”, Bill Sullivan and Christian Teo Purwono & Partners, 2013.
PREVAILING LAWS AND REGULATIONS (1)
15
Minister of EMR Regulation No. 17/2010
Sep 23, 2010Procedures for Minerals and Coal Benchmark
Price Determination
Government Regulation No. 78/2010
Dec 20, 2010 Reclamation and Post-Mining Activities
Presidential Regulation No. 26/2010
Apr 23, 2010 Extractive Industry Income Transparency
Minister of EMR Decree No. 617/2011
Mar 3, 2011 Coal Prices for PLN-Operated Power Plants
DG of Minerals and Coal Regulation No. 999/2011
Aug 26, 2011Procedures for Determining Cost Adjustments
to Coal Benchmark Price
Presidential Decree No. 3/2012
Jan 10, 2012Establishment of Evaluation Team for
Renegotiation of Cows and CCoWs
Minister of EMR Regulation No. 7/2012
Feb 6, 2012 Local Processing and Refining of Minerals
PREVAILING LAWS AND REGULATIONS (2)
16Adapted from “Mining Law & Regulatory Practice in Indonesia: A Primary Reference Source”, Bill Sullivan and Christian Teo Purwono & Partners, 2013.
Government Regulation No. 24/2012
Feb 21, 2012Amendment of Government Regulation No.
23/2010
Minister of Trade Regulation No. 29/2012
May 7, 2012 Mining Product Export Requirements
Minister of Finance Regulation No. 75/2012
May 16, 2012 Export Tax on Export Goods
Minister of EMR Regulation No. 11/2012
May 16, 2012Amendment of Minister of EMR Regulation
No. 7/2012
Minister of EMR Decree No. 2934/2012
October 8, 2012 Domestic Coal Supply Quota for 2013
Presidential Instruction No. 3/2013
Feb 13, 2013Acceleration of Domestic Processing and
Refining
DG of Coal and MineralsRegulation No. 644/2013
Apr 23, 2013Amendment of DG of Minerals and Coal
Regulation No. 999/2011
Minister of EMR Decree No. 2901/2013
July 30, 2013 Domestic Coal Supply Quota for 2014
PREVAILING LAWS AND REGULATIONS (3)
17Adapted from “Mining Law & Regulatory Practice in Indonesia: A Primary Reference Source”, Bill Sullivan and Christian Teo Purwono & Partners, 2013.
KEY PRINCIPLES OF THE NEW MINING LAW
� Clarification of Central Government, provincial, and district authority.
� There will only be mining licenses (IUP), no more contracts between a company and the government (CoW system).
� Licenses will be issued through tender mechanism based on equality and transparency.
� Emphasis on reclamation and post-mining.
� Added value to Indonesia.
� Priority to domestic market needs.
18
MINING LICENSES –THE LATEST SNAPSHOT
� IUP (Izin Usaha Pertambangan/Mining Business License) replaced the CoW as legal basis for mining operations.
� The IUP is issued by local administration, mostly Regencies (Kabupaten).
� More than 10,000 IUPs have been issued all across Indonesia, the vast majority for coal.
� Many IUPs are problematic for various reasons, that the Central Government, through the DG for Minerals & Coal intervened and conducted a verification process.
� IUPs that are in compliance with regulations and do not overlap are issued a “Clean and Clear” certificate by the Director General.
� Until July 2013 the number of CnC certificates issued in nine stages reached 5,957 or almost 60%.
19
FORESTRY
• To preserve biodiversity and ecosystem
• Strictly off limits for non-conservation activities
• Accessible to mining operations after obtaining Borrow and Use Permit from Ministry of Forestry
• Underground mining allowed
• May be converted to Production Forest if certain conditions are fulfilled
20
FOREST CATEGORIES
MAIN ISSUES� Prohibition to conduct open pit mining in
protected forest hampers exploration and exploitation in mining
� Obtaining Borrow and Use Permit from Forestry Department takes years
REGULATION ON TRANSPARENCY ON STATE REVENUE FROM EXTRACTIVE INDUSTRY
Aims at management of extractive industries based on the principles of good governance and sustainable development, and to enhance competitiveness of the investment climate for extractive industries
Reflects the principles of the Extractive Industries Transparency Initiative (EITI) — in line with the domestic agenda to improve the investment climate in oil & gas and mining, and as an instrument to increase transparency in revenue sharing between the central government and the regions
Indonesia became an EITI candidate country in 2010 and hopes to deliver its first report on the implementation of EITI before end of 2011
21
BENEFITS OF TRANSPARENCY INITIATIVES
It ensures that financial flows are reported to a wide audience in a publicly accessible, comprehensive and easily understood manner
Transparency improves a country’s credibility among foreign investors and the international banking community
The positive political and economic effects of transparency can have many indirect social effects incl. lowering costs of government investment and poverty reduction
22“Beyond Corporate Social Responsibility – Oil Multinationals and Social Challenges”, Jedrezej George Frynas, 2009.
MANAGING POLITICAL RISK
NON-TECHNICAL RISK DOMINANT
Stakeholder acceptance is key to successful project delivery
73% of delays to capital projects relate to ‘non-technical’ risk – delays in permitting and community protests
Highly networked society with instant access to information and news, means that local action can result in global attention
24“Management Systems for Social Performance – The Shell Journey”, presented by Shell at the Regional Stakeholder Consultation on the Post-2015 Development Agenda in Nusa Dua, Bali, December 14, 2012.
MINING AND SOCIO-POLITICAL FACTORS
Socio-political factors are the single defining
complex of issues that determine the
success or failure of a mining operation
Mining is an industry that more than any sector of
the economy reflects and is
directly impacted by the political
and social conditions in a
country
Mining companies need to acquire
sufficient understanding of
the social and political situation
at national and local levels prior to
committing resources
25
Natural disasters Community relations
Community development Ethnic conflict
COMMON ISSUES IN INDONESIAN MINING (1)
26
Land ownership issues (resolved &
unresolved)
Environmental issues Industrial action Illegal mining
Infrastructure use Technical failure Poor governance/ ethics
Divestment of shares
COMMON ISSUES IN INDONESIAN MINING (2)
27
Intercommunity rivalry & jealousy
Intra-community rivalry & jealousy Employment Demands of local
government
CSR CRUCIAL TO MINING
28
Negative public opinion due to
environ-mental and social concerns
Targeted by local and inter-national
pressure groups
Challenge of maintaining ‘local
license to operate’ in the
face of resistance by local com-
munities
Mining companies
generally operate in remote areas
that are economically
under-developed and lack social
welfare
“Corporate Social Responsibility in the Mining Industries”, Natalia Yakovleva, 2005.
RESPONSIBLE MINING –A SOCIAL PERSPECTIVE
SOCIAL IMPACT ASSESSMENT
• Stakeholder Analysis and Engagement
• Community Needs Assessment
• Mine Closure Planning
STAKEHOLDER MANAGEMENT
• Community Development
• Capacity Building
• Good Governance
• Mine Closure Refinement and Adjustment
MINE CLOSURE
• Infrastructure
• Local Economy
• Good Governance
• Mine Closure Finalization and Monitoring
29
POST-MINE CLOSURE: THE ULTIMATE TEST
Livelihood of region and
communities secured
Strong social institutions in
place
No “ghost towns” left
behind
No serious reputational
issues
“Mining culture” firmly
established
30
SOCIAL RESPONSIBILITY IN ISO 26000
Responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behavior that
� Contributes to sustainable development, health and the welfare of society;
� Takes into account the expectations of stakeholders;
� Is in compliance with applicable law and consistent with international norms of behavior; and
� Is integrated throughout the organization and practiced in its relationships.
Adapted from “ISO 26000: Guidance on Social Responsibility”, 2010.
31
SU
ST
AIN
AB
LE
DE
VE
LO
PM
EN
T
SCHEMATIC OVERVIEW OF ISO 26000
32Adapted from “ISO 26000: Guidance on Social Responsibility”, International Organization for Standardization, 2010.
Clause 1: ScopeGuidance to all types of organization regardless of their size or location
Clause 2: DefinitionTerms, abbreviations and abbrev. terms
Clause 3: Understanding Social ResponsibilityHistory, Characteristics, Relationship between SR and SustainableDevelopment
Clause 4: Principles of Social Responsibility• Accountability• Transparency• Ethical Behavior• Respect for Stakeholder
Interests• Respect for Rule of Law• Respect for International
Norms of Behavior• Respect for Human Rights
Clause 5: Two Fundamental Practices of Social Responsibilities
Recognizing Social Responsibility
Stakeholder Identification and Engagement
Clause 6: Social Responsibility Core Subjects
Human rights Labor practices
The environment
Fair operating practices
Consumer issues
Community involvement/ development
ORGANIZATIONAL GOVERNANCE
Related actions and expectations
Clause 7: Integrating Social Responsibility throughout an Organization
Practices for integrating social responsibility
throughout an organization
Voluntary initiatives for social responsibility
Communication on social responsibility
Reviewing and improving an organization’s actions
and practices related to SR
Enhancing credibility regarding SR
Understanding the social responsibility of the
organization
The relationship of an organization’s
characteristics to SR
Bibliography: Authoritative sources and additional guidance
Annex: Examples of voluntary initiatives and tools for social responsibility
ISO 26000 APPLICATION AT COLLAHUASI MINE 33“Collahuasi and ISO 26000: Towards excellence in sustainability”, Regina Massai C. & Bernardita Fernandez B., presented at SR Mining 2011, October 2011 in Santiago, Chile.
Maximizing contribution to
sustainable development
ISO 26000 (expected behavior)
Practices in force at
Collahuasi
Collahuasi’s policies,
principles and values
Gap analysis comparing with expected SR behavior
Gap analysis with ISO 26000
principles
• Interviews with key stakeholders• Information relating to Collahuasi’s management system was
reviewed along with the recommendations established in Clause 7 of ISO 26000 (integrating SR throughout an organization
LAW No. 40/2007 ON CORPORATIONS (UU PT)
Chapter I Article 1 Paragraph 3 Social and environmental responsibility is the commitment of corporations to participate in sustainable economic development to improve the quality of life and the environment in ways that are beneficial to the corporation itself, the local communities as well as society at large.
34
LAW No. 40/2007 ON CORPORATIONS (UU PT)
Chapter V Article 74
35
1) Corporations in the business of and/or whose business relate to natural resources must conduct social and environmental responsibility.
2) Social and environmental responsibility as stipulated under paragraph 1) is a corporation’s obligation that is budgeted and treated as costs of the corporation and implemented with due consideration of propriety and reasonableness.
3) Corporations that neglect their obligation as stipulated under paragraph 1) will be sanctioned under the prevailing laws.
4) Further legislation on social and environmental responsibility will be established in a Government Regulation.
WHO ARE OUR STAKEHOLDERS?
STAKEHOLDER THEORY
Any group or individual who can affect or is affected by the achievement of the organization objectives
37“Strategic Management: A Stakeholder Approach”, R. Edward Freeman, 1984.
Who are our stakeholders?
What are their stakes?
Whatopportunities and
challenges are presented by our
stakeholders?
What corporate social
responsibilities do we have to our stakeholders?
What strategies, actions, or
decisions should we take to best deal with these responsibilities?
ELEMENTS OF STAKEHOLDER MANAGEMENT“The Pyramid of Corporate Social Responsibility –Toward the Moral Management of Organizational Stakeholders”, Carroll, A. B., Business Horizons No. 34, 1991. 38
STAKEHOLDER IDENTIFICATION
� To whom does the organization have legal obligations?
� Who might be positively or negatively be affected by the organizations activities or decisions?
� Who manifested concern about the issues or impacts?
� Who has been involved in the past when similar concerns need to be addressed?
� Who can help the organization address specific impacts?
� Who can adversely affect the organization’s ability to meet its important objectives?
� Who would be disadvantaged if they were excluded from the engagement?
� Who in the value chain is affected?
� Who may have an impact on the reputation of an organization?
� Who may influence the policy and regulatory environment in which the organization operates?
� Who may impact on the value of the organization?
39Adapted from “ISO 26000: Guidance on Social Responsibility”, 2010.
STAKEHOLDER ATTRIBUTES AND TYPOLOGY
40“The Primordial Stakeholder: Advancing the Conceptual Consideration of Stakeholder Status for Natural Environment”, Driscoll, C. and Starik, M. Journal of Business Ethics, Vol. 49, 2004
“The Natural Environment as a Primary Stakeholder: the Case of Climate Change”, Haigh, N. and Griffiths, A. Business Strategy and the Environment, Aug 2007
0 = Non-Stakeholder1 = Latent Stakeholder2 = Expectant Stakeholder3 = Definitive Stakeholder4 = Primary Stakeholder
3 3
3 3
121
2
1
2 4
21
StakeholderCate-gory Power Legiti-
macyUrgen-
cyProxi-mity
Main Score(/20)
Vulnera-bility
Real Impact
V+R Score(/10)
Bupati (Regent) pr 5 5 5 5 20 3 5 8
Regency Planning
Bureau (BAPPEDA)pr 4 5 5 5 19 2 2 4
Land Admin. Agency
(BPN)pr 4 5 5 5 19 3 5 8
Provincial EPA pr 3 5 5 5 18 3 5 8
Gunung Village de 2 4 5 3 14 5 5 10
Wira (informal leader) de 5 5 2 3 15 3 1 4
Clan-based
organization (Jakarta)la 1 1 1 2 5 1 1 2
Village youth
organizationde 4 5 1 5 15 0 1 1
EXAMPLE OF STAKEHOLDER ANALYSISAdapted from study conducted by Kiroyan Partners for a mining company to prepare a stakeholder engagement strategy. 41
ENGAGING STAKEHOLDERS TO OBTAIN
THEIR CONSENT
DEMOCRACY MULTIPLIED THE NUMBER OF STAKEHOLDERS, REGIONAL AUTONOMY ADDED UNKNOWN DIMENSIONS
43
Stakeholder relations management becomes
more complicated
Issues management emerging as crucial factor
that many are unequipped to handle
Relations must be maintained at all levels
Currently Indonesia has 34 provinces and almost 500 municipalities and
regencies
STARTING STRATEGICALLY
44
• Central Government
• Local Government
• Local Partners
• Local Communities
KEY STAKEHOLDERS IDENTIFICATION
Analyse priority based on stakeholders and relevant issues to be used as the basis for determining engagement strategy
ISSUES ANALYSIS & PRIORITIZATION
Strategy to create the best conditions obtaining the consent from key stakeholders so that organizational goals can be achieved
STAKEHOLDER ENGAGEMENT STRATEGY
SOCIAL LICENSE TO OPERATE
45“Earth Matters: Indigenous Peoples, The Extractive Industries and Corporate Social Responsibility”, Ciaran O’Faircheallaigh & Saleem Ali, 2008.
� Many companies recognize that their social obligations are no longer discharged simply by meeting legal duties
� Government mandates remain necessary, but alone are insufficient basis for corporate legitimacy – they need to earn and maintain a social license to operate
Good corporate community relations, stakeholder engagement and consultation and efforts to meet particular community demands are means by which companies seek to improve reputation among those with the ability to impact operations, and thereby obtain a social license to operate
STAKEHOLDER ENGAGEMENT
Stakeholder engagement involves dialogue between the organization and one or more of its stakeholders
Stakeholder engagement can take many forms – it can begin as a response by an organization to one or more stakeholders and can take place in informal or formal settings
Stakeholder engagement should be interactive and is intended to provide opportunities for stakeholders’ views to be heard – its essential feature is that it involves two-way communication
46Adapted from “ISO 26000: Guidance on Social Responsibility”, International Organization for Standardization, 2010.
KEY COMPONENTS OF STAKEHOLDER ENGAGEMENT
47
“Stakeholder Engagement: A Good Practice Handbook for Companies Doing
Business in Emerging Markets”, International Finance Corporation, 2007.
LEVELS AND METHODS OF STAKEHOLDER ENGAGEMENT 48
“AA1000 Stakeholder Engagement Standard 2011 – Final Exposure Draft”,AccountAbility, 2011.
CONSULTLimited two-way engagement: organization ask questions, stakeholders answer
� Surveys� Focus groups� Meetings with selected stakeholder/s� Public meetings� Workshops� Online feedback mechanisms� Advisory committees
NEGOTIATE � Collective bargaining with workers through their unions
INVOLVETwo-way or multi-way engagement: learning on all sides but stakeholders and organization act independently
� Multi-stakeholder forums� Advisory panels� Consensus building process� Participatory decision making process� Focus groups� Online feedback schemes
COLLABORATETwo-way or multi-way engagement : joint-learning, decision making and actions
� Joint projects� Joint ventures� Partnerships� Multi-stakeholder initiatives
EMPOWERNew forms of accountability; decisions delegated to stakeholders; stakeholders play a role in governance
� Integration of stakeholders into governance, strategy and operations management
TYPES OF COMMUNICATION
49“Unfolding Stakeholder Thinking: Theory, Responsibility and Engagement”, Jörg Andriof, Sandra Waddock, Bryan Husted, Sandra Sutherland Rahman, 2002.
Participatory/interactive
decision-making
Stakeholder engagement
Two-way communication
One-waycommunication
Ad hoc communication
Greater sharing ofinformation leading to
knowledge
Better understandingof stakeholders andtheir issues
High stakeholder involvement
Hig
h in
form
ati
on
exc
ha
ng
e
ENGAGING LOCAL COMMUNITIES
ENGAGEMENT STRATEGIES WITH LOCAL COMMUNITIES 51
Permanent Non-
Indigenous Peoples
Indigenous Peoples
Groups of Interest
Transient Communities
Less influence. Consultation, not consent. Can be approached simultaneously with development
Consent required. Influence can vary. Must be involved prior to project development
Consent not legally required, but preferred. Influence can be significant. Consultation should occur prior to project development
Can have strong influence, especially in media. Consent not required. Consultation prior to or during project development
The Ethical Funds Company, 2008.
OBTAINING CONSENT FROM LOCAL COMMUNITIES
52
� FPIC is a free and informed negotiation between investors, companies, governments and Indigenous Peoples (IPs) prior to development of mining operations on the customary lands
� The IPs have the right to give or withhold approval of proposed projects which may affect their own land, which they occupied or used
� FPIC is necessary to ensure the game at field level between indigenous peoples and governments or companies and, where it produces a negotiated agreement, about providing greater security and less risky investment
FREE PRIOR INFORMED CONSENT
Free from force, intimidation, coercion, or pressure by anyone (it can be a government, company or any organization).
Prior implies that consent has been sufficiently sought in advance of any authorization or commencement of any project.
Also, local communities must be given enough time to consider all the information and make a decision.
Informed means that the community must be given all the relevant information to make its decision about whether to the agree to the project or not.
Consent requires that the people involved in the project must allow indigenous communities to say “Yes” or “No” to the project.
This should be according to the decision-making process of their choice.
53“Putting Free, Prior, and Informed Consent into Practice in REDD+ Initiatives: A Training Manual”, Karen Edwards, Ronnakorn Triraganon, Chandra Silori & Jim Stephenson, 2012.
54FRAMEWORK FOR ANALYSIS OF CORPORATE-COMMUNITY RELATIONS
1. Inter- or intra- group fragmentation or division
2. Worsening quality of life (livelihood, security, disease, culture)
3. Sense of being disrespected
4. Rewarding violence or threats of violence
5. Substitution
6. Increasing likelihood of human rights abuses
NEGATIVE IMPACTS
1. Inter- or intra- group fragmentation or division
2. Worsening quality of life (livelihood, security, disease, culture)
3. Sense of being disrespected
4. Rewarding violence or threats of violence
5. Substitution
6. Increasing likelihood of human rights abuses
NEGATIVE IMPACTS
1. Inter- or intra- group cohesion or cooperation
2. Improved quality of life (livelihood, security, disease, culture)
3. Sense of being respected
4. Rewarding constructive action for mutual benefit
5. Increasing the capacity of government to provide services and security
6. Reducing human rights abuses
POSITIVE IMPACTS
1. Inter- or intra- group cohesion or cooperation
2. Improved quality of life (livelihood, security, disease, culture)
3. Sense of being respected
4. Rewarding constructive action for mutual benefit
5. Increasing the capacity of government to provide services and security
6. Reducing human rights abuses
POSITIVE IMPACTSPRINCIPLES FOR
GETTING IT RIGHTPRINCIPLES FOR
GETTING IT RIGHTPRINCIPLES FOR
GETTING IT WRONGPRINCIPLES FOR
GETTING IT WRONGPOLICIES AND
PRACTICESPOLICIES AND
PRACTICES
UnfairNon-transparent
DisrespectfulUncaring
Non-transparent
Narrow accountability
Non-transparent
FairTransparent
RespectfulCaring
Transparent
Broad accountability
Transparent
“Getting it Right: Making Corporate – Community Relations Work”, Luc Zandvliet & Mary B. Anderson, 2009.
SUSTAINABLE MINING THROUGH COMMUNITY DEVELOPMENT
� Priorities relating to different social, environmental and economic goals determined through participatory process.
� Relationship with stakeholders based on collaboration, trust and respect.
� No one to be made worse of.
� Ensuring the rights of marginalized individuals and groups.
� Economic benefits by mining to be shared equitably.
� Investment in trust funds, skills training, or social infrastructure.
� No unacceptable environmental and other negative legacies.
� Capacity to be developed at local level to manage revenues for development needs through public-private partnership.
55“Breaking New Ground: The Report of the Mining, Minerals and Sustainable Development Project”, MMSD, 2002.
FROM DEPENDENCY TO DEVELOPMENT
Company partners with communities,
NGO, and government to
determine community
needs
Company develops an exit strategy for the
project and works toward eventual exit
Company highlights roles
and responsibilities of community
and government in designing and
implementing the project
Company provides skill-training and
capacity-building
projects to the community
Company builds capacity of local
authorities to provide services
or acts as an advocate of the community to
the government
56“Getting it Right: Making Corporate – Community Relations Work”, Luc Zandvliet & Mary B. Anderson, 2009.
Company implements
projects itself
Company leaves project
in hands of government to
fund and run when they
leave footprint area
Company highlights its role in project
with large signs, company
logos etc.
Company builds
infrastructure (schools,
clinics, roads) projects for the
community
Company acts as a
replacement for government in the provision
of services to the community
EMPLOYMENT AND HIRING POLICIES IN THE COMMUNITIES
� Agree with local communities on who should be considered local� Publicly commit to hiring local community members for all jobs for which they are
qualified � Include requirements for local hiring for contractors� Maximize number of people that can benefit from unskilled employment
opportunities� Support the education system� Commit to local hiring targets of management staff� Help local people get certified for skills they already possess� Provide apprenticeships to youth� Require contractors to hire trainer for local employees� Include requirement that contractors take on apprentices at a ratio� Establish partnership with vocational training centers to train locals� Ensure the staff pool represents the diversity of the population to avoid bias and
accusation of bias
57“Getting it Right: Making Corporate – Community Relations Work”, Luc Zandvliet & Mary B. Anderson, 2009.
ENGAGING VARIOUS LEVELS OF GOVERNMENT
OBTAINING GOVERNMENT CONSENT
Research on Social,
Political, Economic & Regulatory
Aspects
Identify Key Government Institutions: understand their needs, concerns, and perceptions
Mapping and Prioritization
Prioritize government
institutions should be involved in the
process of obtaining consent
Engagement Strategy to
Foster Relationships
59
GOVERNMENT STAKEHOLDERS
Governor or Regent (Bupati)
Mining Agency
Local Environ-mental Agency
Forestry Agency
Local Revenue Agency
Manpower Agency
Regional Develop-
mentAgency
(BAPPEDA)
Trans-portation
Agency
Local Police
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Ministry of Energy & Mineral
ResourcesMinistry of
Environ-ment
Ministry of Forestry
Investment Coordi-
natingBoard
Ministry of Economy
Ministry of Finance
Land Adminis-
trationAgency
PRINCIPLE #1
� When dealing with other government agencies it can not be emphasized enough that the local Mining Agency (DinasPertambangan) is kept in the loop.
� All letters to any other institution must be copied to this agency.
� In matters of principle that touch upon the jurisdiction of central government (forestry, security), the Directorate General of Minerals and Coal must be informed as well.
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LOCAL BUSINESS PARTNERS
BUMD (business entity owned by
local government)
• Usually established to hold shares on behalf Of the local government
• Susceptible to change if with change of office holder in local government
Local businesses owned by
community members
• May play strategic role in obtaining social license to operate
• Capacity-building provides means to influence positively
Concession Owner
• License and/or land title as equity participation
• Investor has little leverage
TYPES OF LOCAL BUSINESS PARTNERS
Must be included in Stakeholder Analysis,and due diligence needs to be conducted before any
agreement is entered into.
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OBTAINING CONSENT FROM LOCAL PARTNERS
Identification Potential Partners
Search through formal and non-formal: personal relationships, information from official authorities, business associations, etc.
Due Diligence
Gather information on local partners background:
• Financial performance• Personal integrity• Reputation• Business ethics• Business and political
network• Environment and
social performance
Engagement Strategy
Building a reliable and profitable relationships
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A SUCCESS STORY
The first major mining operation
to come on-stream in Indonesia after Newmont’s Batu
Hijau mine in Sumbawa in 2000.
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� Sixth generation Contract of Work signed in 1997.
� Challenging social environment: 1 km off trans-Sumatra highway, asset changed hands 5 times.
� Construction completed in less than 3 years.
� On track to produce 280,000 oz. Au and 2 – 3 million oz. Ag p.a.
� World-class mine in every respect.
� US$ 800 million investment.
TO CONCLUDE: MAJOR MINING PROJECT COMPLETED
KEY SUCCESS FACTORS� Hong Kong capital, Australian mining know-how and strong Indonesian
socio-political expertise at top management level� Thorough analyses of community issues preceded construction� Continuous stakeholder analysis and engagement
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THANK YOU
Menara Karya, 10th Floor Suite HJl. HR Rasuna Said Blok X-5 Kav. 1-2
Jakarta 12950 – INDONESIAT/F +6221 5794 4694 / 5794 4696
info@kiroyan-partners.comwww.kiroyan-partners.com
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