2

POLITICAL WILL Governments

GOAL: GOOD OF

COMMUNITY

Political Attitude

Policies and Strategies

(“Negotiating Mining Agreements: Past, Present and Future Trends,” Danièle Barberis, 1998)

3

1. The economy shall be organized as a common

endeavor based upon the principles of the family

system

2. Sectors of production that are important for the country

and affect the life of the People shall be controlled by

the State

3. 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

4

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

5

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

6

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

Socio-political factors are the single defining

complex of issues that determine the success or failure

of a mining operation

Mining companies need

to acquire sufficient

understanding of the social and

political situation at national and

local levels prior to committing

resources

7

Highly networked society with instant access to information and news, means that local action

can result in global attention

73 % of delays to capital projects relate to ‘non-technical’ risk – delays in permitting and

community protests

Stakeholder acceptance is key to successful project delivery

“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

8

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

“Earth Matters: Indigenous Peoples, The Extractive Industries and Corporate Social Responsibility,” Ciaran O’Faircheallaigh & Saleem Ali, 2008

9

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

10

“Stakeholder Engagement: A Good Practice Handbook for Companies Doing Business in Emerging Markets,” International Finance Corporation, 2007

11

Level of Engagement Methods of Engagement Consult Limited 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

Involve Two-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

Collaborate Two-way or multi-way engagement : joint-learning, decision making and actions

§  Joint projects §  Joint ventures §  Partnerships §  Multi-stakeholder initiatives

Empower New forms of accountability; decisions delegated to stakeholders; stakeholders play a role in governance

§  Integration of stakeholders into governance, strategy and operations management

“AA1000 Stakeholder Engagement Standard 2011 – Final Exposure Draft,” – AccountAbility, 2011

12

Natural disasters Community relations

Community development Ethnic conflict

Land ownership issues (resolved &

unresolved) Environmental issues Industrial action Illegal mining

13

Infrastructure use Technical failure Poor governance/ethics

Divestment of shares

Intercommunity rivalry & jealousy

Intra-community rivalry & jealousy Employment Demands of local

government

14

The  first  major  mining  opera1on  to  come  on-­‐stream  in  Indonesia  a6er  Newmont’s  Batu  Hijau  mine  in  Sumbawa  in  2000.  

§  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.

ü  Hong Kong capital, Australian mining know-how and strong Indonesian socio-political expertise at top management level.

ü  Thorough analyses of community issues preceded construction.

ü  Continuous stakeholder analysis and engagement.

Key Success Factors

15

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