What Is the True Price of Freeport's Safety in Papua?

The Jakarta Globe November 5, 2011

by Nivell Rayda & Samantha Michaels

In the highlands of Mimika district in Papua, where temperatures can easily drop to a chilly 10 degrees Celsius, thousands of Freeport workers hold fast to their demands against the owner of one of the world’s largest open gold and copper mines.

Above the estimated 8,000 striking workers, some of whom wear nothing more than a traditional penis gourd and feather-covered head gear, Indonesia’s national flag is always waving.

It is a rare sight in this part of Indonesia, which has seen rising pro-independence sentiment among the indigenous people. But workers say the display of nationalism is deliberate — a way to convince security that their demonstration is a peaceful labor protest and not a separatist movement.

“We want to show that we love NKRI [the United Republic of Indonesia]. We don’t want to be seen as separatists,” said Virgo Solosa, an official from the All Indonesian Workers Union (SPSI).

“This is a labor issue. Our right to strike is guaranteed under Indonesian labor law.” 

Their worry stems in part from the relationship between security forces, which have been trying to stamp out a low-level insurgency in the province for decades, and Freeport Indonesia, which has provided $79.1 million to Indonesian police and military forces during the last 10 years.

“We do provide voluntary support for the security forces to secure our workplace. We have been doing it for years,” Freeport Indonesia spokesman Ramdani Sirait said in response to the National Police’s admission last week of the payments it called “lunch money.”

Freeport admitted as long ago as 2003 that it had been paying security forces since the 1970s and had established a formal arrangement in 1996.

Freeport spent $14 million to support government-provided security in 2010, according to Eric Kinneberg, spokesman for Freeport-McMoRan, the parent company of Freeport Indonesia.

The company detailed the disbursements in its annual “Working Toward Sustainable Development” report, which in past years showed expenditures of $10 million on government-provided security in 2009 and $8 million in 2008.


Added security

National Police spokesman Sr. Comr. Boy Rafly Amar has cited the insurgency issue to justify the need to provide added security.

“[Freeport] will never be able to defend themselves against these [armed rebel] threats just relying on their internal security team,” he said on Thursday.

“But at the same time, police cannot allocate such huge funds.” 

Indeed, many workers feel anything but safe.

“We don’t feel secure to work at Freeport or to travel between the mine and our homes,” said Juli Parorrongan, a spokesman for SPSI, which organized the strike. “Too many people have been killed, but we don’t know who’s shooting at us. We need policemen to guarantee our safety.”

A former employee of Freeport, who asked not to be identified, said that the 200,000-hectare mining area required at least 2,000 personnel, jointly provided by police, military and Freeport’s own security team.

“We operate in some of the most hostile environments in the world, not only in terms of remoteness but also security,” he said.

“Cars have been ambushed and shot at. Some of my friends have been killed. All officials are required to travel with armed police officers guarding.”

The attacks have been blamed on the separatist Free Papua Organization (OPM). The group has never admitted to attacking Freeport, though it claims shootings against the police and military.

The former employee also said police were ill-equipped to cope with the harsh environment.

“Their vehicles often broke down,” he said. “Freeport ended up providing them with four-wheel drive vehicles.”


Justified payments?

The National Police, Boy said, have an annual budget of Rp 4.2 trillion ($470 million) to support nationwide operations and pay the salaries of 400,000 officers.

“We cannot fully equip our members [assigned to guard Freeport] or provide patrol cars. But Freeport said they could and didn’t mind,” he said.

Former President Suharto’s administration did not fully fund the army’s budget, so soldiers were expected to set up their own local business ventures. But as they searched for ways to supplement their incomes, some exploited the local population and caused negative social, economic and environmental ripple effects.


“Such military activities would adversely impact [Freeport] employees and the surrounding community,” said Prakash Sethi, head of the New York-based International Center for Corporate Accountability, which led an audit of Freeport’s Indonesia mining operations between 2002 and 2007.

During the audit, Sethi visited the mine and spoke with workers, community members and management about Freeport’s performance in the areas of human rights, hiring, community development and other labor issues as well as the security payments.

“It is my interpretation that ... because the military did not have adequate facilities at the mine site, Freeport agreed to provide the military with ‘largely’ in-kind support in terms of housing and eating facilities,” Sethi wrote in an e-mail, adding that his audit did not examine how the military used those funds. “At the same time, some funding was provided for ‘miscellaneous expenses.’ ”

Freeport-McMoRan spokesman Kinneberg said 80 percent of the $14 million in security spending in 2010 was non-cash, in-kind support for meals, health care, facilities, housing, transportation and other support necessitated by the remote posting.


Questions arise

An April 19, 2011, letter sent by Papua Police chief of operations Sr. Comr. Rudolf A Rodja to the Commission for Missing Persons and Victims of Violence (Kontras), obtained by the Globe, states that security allowances were more than “incidental and administrative.”

“[Freeport’s] monthly contribution to the security task force members of the National Police and TNI amounts to Rp 1.25 million per person, directly provided to members of the security force by Freeport management,” Rudolf wrote.

The police spokesman defended the allowance.

“That’s only Rp 40,000 a day. Even if they want to spend it, the nearest shop is two and a half hours down the mountain,” Boy said.

Maj. Gen. Erfi Triasunu, chief of the Cendrawasih Military Command, which oversees operations in Papua, said military officers received the same amount in meals and snacks.

Those direct cash disbursements have left Freeport open to intense scrutiny by rights activists and the workers, who have been striking to request higher salaries, currently set at $1.50 to $3 per hour.

The workers are demanding a wage of $7.50 an hour, down from an initial demand for $30 to $200 per hour. The company has offered workers a 30 percent pay raise, up from 25 percent when the last set of talks began on Oct. 21.

“This is very unfair. The company pays the police much more than us,” Juli said.

“The company should care for us more than it cares for the outside forces.”

An even more pressing question is whether the payments affect the neutrality of the security forces.

Poengky Indarti, executive director of the Indonesian Human Rights Monitor (Imparsial), said the payments could create a conflict of interest for the police, who are supposed to be serving the state. But Boy said the payments had no effect on police neutrality in the labor dispute.

On Oct. 10, police opened fire on striking Freeport workers who tried to board Freeport buses from a nearby town, Timika, to demonstrate by the mine’s gate.

Police cited a 2004 presidential decree classifying mining areas, including the Grasberg mine, as “national vital objects” to argue that they were obliged to protect Freeport’s assets — the buses. One striker died from gunshot wounds amid the ensuing chaos.

Juli said it was not until that incident that the police took a more neutral, cautious approach to the strike.


Questionable legality

The other question is whether the funds are legal at all.

“This provision of support is consistent with our obligations under our agreements with the respective governments, our philosophy of responsible corporate citizenship and the Voluntary Principles on Security and Human Rights,” Kinneberg said.

Ratified in 2000 by the UK and US governments along with energy and mining companies, the principles stipulate that “in cases where there is a need to supplement security provided by host governments, companies may be required or expected to contribute to, or otherwise

reimburse, the costs of protecting Company facilities and personnel borne by public security.”

But the principles also say that companies should consider the human-rights records of public security forces. In Indonesia’s case, human rights abuses by its military and police have long been a public issue.

The payments have also raised questions about whether Freeport has violated the US’s Foreign Corrupt Practices Act.

The Pittsburgh-based United Steelworks Union sent a letter on Tuesday to the US Department of Justice, asking the government to look into whether Freeport violated the FCPA by “engaging in what we believe is likely bribery of security forces in Indonesia.”

However, the US Justice Department has already looked into Freeport’s payments, ending its inquiries a few years ago without any resulting prosecution under the FCPA. Since 2003, the company has filed accounts of the security payments in an annual report with the US Securities and Exchange Commission.

“If the payments are not secret, if they are totally transparent, then I don’t think they can be seen as a bribe,” said Sethi, who specializes in international business and corporate codes of conduct. “The practice may be unsavory and maybe it shouldn’t be done, but having said that, it’s not the same thing as a violation of the Foreign Corrupt Practices Act.”

Firdaus Ilyas, a researcher from the Indonesia Corruption Watch, maintains the payments violate Indonesian laws.

“There is not a single rule that allows this,” he said. “They have to have a legal basis and the payment should be made to an account the public can scrutinize.”

ICW also questioned the size of the payments. According to Freeport reports, it grew from $4.7 million in 2001 to $14 million in 2010.

“You don’t buy vehicles every year, you don’t build police housing and barracks every year. People in the field only get Rp 1.25 million each per month. So where does the rest of the money go?” Firdaus said.

National Police chief Gen. Timur Pradopo said on Friday that an internal investigation had been launched into how much police received from Freeport.

“We welcome all sides to audit,” he said. “It is better for independent parties like the KPK [Corruption Eradication Commission] and the BPK [Supreme Audit Agency] to audit it.”

Additional reporting by Igor O’Neill and Farouk Arnaz

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