noke kiroyan, chief consultant and anang noor, principal consultant from kiroyan partners - the...

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


SUMATRA Island


• GDRP US$2,900

• Land area 473,000 km2KALIMANTAN Island


• GDRP US$4,000


PAPUA Island

• Population 3.6 million

• GDRP US$2,900/1,900


• 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


Sep 30, 2009 Minerals and Coal Mining Services Business


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


Feb 1, 2010 Minerals and Coal Mining Enterprise Activities


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


Sep 23, 2010Procedures for Minerals and Coal Benchmark

Price Determination


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


Feb 6, 2012 Local Processing and Refining of Minerals


16Adapted from “Mining Law & Regulatory Practice in Indonesia: A Primary Reference Source”, Bill Sullivan and Christian Teo Purwono & Partners, 2013.


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


May 16, 2012Amendment of Minister of EMR Regulation

No. 7/2012


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


July 30, 2013 Domestic Coal Supply Quota for 2014


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

60

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.

61

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.

63

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

64

A SUCCESS STORY

The first major mining operation

to come on-stream in Indonesia after Newmont’s Batu

Hijau mine in Sumbawa in 2000.

66

� 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

67

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

[email protected]