U.S. Company Buys Security in Indonesia

While the State Department has urged Americans to avoid much of predominantly Muslim Indonesia amid demonstrations and threats by extremists protesting American military activity in Afghanistan, operations at the U.S. mining giant Freeport-McMoRan Copper & Gold there haven't been impacted.

The company's 60 American employees, involved in mining the world's largest gold and third largest copper reserves, at the Grasberg mine in the province of Irian Jaya, continue work as usual, company officials say.

"We have not evacuated anyone or received any threats aid directly at Freeport," Vice President for Communications William Collier recently told ABCNEWS.com.

Company officials say that is because of some unique circumstances in Iryan Jaya, including that only a small percentage of its inhabitants are Muslims who might oppose the military campaign out of a sense of religious kinship and that the province is more than 2,000 miles from the Jakarta protests. They also cite a unique relationship nurtured with local tribes, with whom the company shares some of its revenues.

But critics of the company also cite its special relationship with the Indonesian government and its police and military forces, which have a history of committing human rights abuses against the local population in Irian Jaya, also known as West Papua.

It's a complicated relationship, experts say, though not-uncommon in economically-recessed Indonesia, where the military, somewhat independent of government control, has for decades earned money through a variety legal and illegal activities while trying hold the enormous, multi-island country together.

Freeport depends on those forces for their protection. But it cannot control their activities, which the U.S. State Department in recent years says includes committing serious human rights violations.

"I think Freeport's situation is an exemplar of the types of problems [multinational corporations operating in volatile regions] are faced with where one group is pulling toward independence and the other is trying to keep the region inside a sort of central government cocoon," says Sheldon Simon, a political science professor and Southeast Asia security expert at Arizona State University.

"Freeport is caught in the middle and is engaging in a variety of tactics designed to appease everyone."

Freeport's Security Relationship

Since 1991, Freeport's subsidiary PT Freeport Indonesia has been making billions of dollars by extracting copper and gold out of Grasberg.

It has done so through a special contractual relationship with the Indonesian government. As is common in many countries, Freeport shares some of the revenue with the Indonesian government in Jakarta, which owns all oil and mineral rights in the country, through taxes, royalties and dividends. Jakarta in 2000 received $159 million of Freeport's $1.4 billion in gross revenues from the mine, according to the company. Costs were $923 million, it said.

Some of the profit also goes to an Indonesian investment group, which holds some ten percent of the subsidiary's shares, and is owned indirectly by charities headed by the family of former Indonesian president Suharto and associates.

Freeport is reputed to be Jakarta's largest single taxpayer in a time when the Indonesian faltering economy is in a multi-year recession.

In return, Indonesian military and police forces have been on hand in the province, and within the company's immense 6.42 million-acre work area, to provide security. Freeport does have its own security force for internal security, but Indonesian law forbids them to carry guns.

Controversially, Freeport makes its facilities available to Indonesian military forces in the remote province, including providing logistical support, food, shelter and transportation. And the company pays an undisclosed amount of money each year to Indonesian military and police forces that give it protection in the province, company officials say.

Concern About the Relationship

"It's our feeling that they shouldn't be using the Indonesian military to provide security there," says Kurt Biddle, Washington Coordinator for the Indonesian Human Rights Network.

Not just NGOs are concerned. The House of Representatives in May, passed legislation recommending Jakarta pull all "nonorganic" military forces out of the province and allow international human rights and environmental monitors access to Freeport's facilities. The Senate has not acted on the bill.

The House language expressed "deep concern over ongoing human rights violations committed by Indonesian military and police forces against civilians in West Papua?"

Amnesty International has criticized the repression of pro-independence groups there and elsewhere. "The Indonesian police and military are continuing to commit serious human rights violations, including torture and unlawful killings, particularly in the provinces of Aceh and Papua (Irian Jaya) where pro-independence movements are active," it said in a September statement.

History of Abuses

In the mid-1990s, Indonesian forces committed abuses in or near the Freeport facilities, according to NGO reports. An investigation by Irian Jaya-based churches found prior to 1998 Indonesian forces committed extra-judicial killings, and burned 13 churches and 166 homes and other structures.

A report by the Washington-based Robert F. Kennedy Memorial Center for Human Rights and the Institute for Human Rights Studies and Advocacy later documented claims of sexual slavery and other sexual violence against local women and girls by the Indonesian military in the same villages.

It also reported claims that two women were tortured by forces, with the use of Freeport mining company equipment and assistance from Freeport personnel.

Freeport, on its Web site, says it cooperated fully with all abuse investigations and not one of them determined it or any of its employees participated in any human rights violations. At least five investigations into alleged human rights abuses in Irian Jaya, it said, including by the Red Cross, and the U.S. and Australian embassies found no evidence of company or employee wrongdoing, the site says.

"In those instances involving PT-FI property or equipment, it was determined that they were not under PT-FI's control at the time," it says.

Violence Over Independence

Indonesian police and military forces, and militias organized by the military, also have been engaged in stomping down a persistent, sometimes violent Papuan independence movement.

Last year, three West Papuans were killed and up to 30 were arrested when police attempted to disburse a demonstration involving raising pro-independence flags. The arrested were charged with acts of rebellion and other crimes. Rights groups say the Papuans were brutally beaten and tortured.

More recently, in early October, pro-independence guerrillas temporarily occupied a town some 50 miles from Grasberg, and within Freeport's area of operations, according to wire reports. They reportedly were driven out by government forces.

Troubled relations with Jakarta and those forces, pollution from the mine, government-enforced displacement, and the extraction of vast local natural resources for foreign profit, are said to fuel the movement.

Also, native Papuans, mostly Christian, are ethnically and culturally different from most other Indonesians, which are mostly Muslim. A government "transmigration" program brought some 770,000 migrants, largely Javanese and Muslim, to the province in recent decades. Resentment also lingers over the alleged torture or murder of some 100,000 Papuans after the Indonesian government annexed with United Nations permission the former Dutch colony in 1969.

Bush administration officials, like their predecessors, say they support preserving Indonesia's territorial integrity. They also "have strongly urged the government of Indonesia to abandon a security approach in Irian Jaya in favor of a political dialogue and to uphold justice, human rights and rule of law," James Kelly, then-Assistant Secretary of State for East Asian and Pacific Affairs, said in June.

Officials also favor stepping up ties with the Indonesian military, mostly curtailed by Congress in response to military-fueled violence after East Timor's independence vote in 1999. Criteria were set for resuming ties, including prosecution of soldiers involved in human rights violations, which administration officials concede haven't been met.

Company Says Abuses Rare

Freeport officials say police and military practices near its facilities have improved in recent years. Rights groups do not allege recent abuses near the facilities.

While critics have alleged Freeport's more than 30-year presence in Irian Jaya is to blame for many of its problems, company officials say Freeport money and humanitarian assistance has helped make the situation better.

Freeport's construction of barracks and offices for Indonesian forces in the region in 1997 has helped improve their conduct, says PT Freeport Vice President for Communications Greg Probst: "Things really changed over the last few years."

Freeport payments to police and military forces also have been intended to improve the situation, according to Collier.

They payments are intended to "enhance professionalism and reduce the risks of conflict with the local population and human rights abuses," and "improve the quality of management of the military and police," he says in an email to ABCNEWS.com.

They also mitigate the costs and hardship facing troops posted in the remote province.

Collier says the payments are in accordance with a unique, joint-State Department-British Foreign Office-formulated pledge on conduct of human rights endorsed by Freeport and other companies last December.

He calls them a "legitimate response to its security needs, the limitations on the Indonesian government's ability to meet those needs, the unique role of the Indonesian military in social development, and the expectations imposed on companies carrying out business activities in remote areas like Irian Jaya."

Sharing with the Local Population

The company also has shared a small percentage, though not insignificant amount, of its revenues with two major tribes near its operations, effectively making stakeholders out of potential opponents.

Freeport says it voluntarily contributes one-percent of its gross revenues for village-based development, employs more than 2,000 Papuan workers, and has built roads, bridges, houses, churches, schools, health clinics, a tribe-run human rights promotion center. The company announced in September funding a trust for the tribes, beginning with $2.5 million and adding $500,000 annually.

Though Indonesia's most resource-rich province, Irian Jaya also is one of its least developed, with many scant and shoddy health facilities, relatively low incomes and generally poor access to clean water. A beneficiary is the primitive Amungme tribe, traditionally located closest to the mining operation, still hunts for food with bows and arrows, spears and blades.

The company says it has spent nearly $166 million on community programs since 1990, and $18 million last year, a small percentage of their annual revenues, but nonetheless significant for the impoverished area.

"Most developmental experts that visit the area, including from USAID, say it's got to be one of the biggest development projects in Indonesia," says Probst.

Still, some province leaders and NGOs argue the province isn't getting a fair cut of the enormous revenues from the mine under the government's contract with Freeport. And they complain the operations, insufficiently regulated, have damaged the local environment and destroyed the livelihoods of local peoples.

Asked whether he believes the contributions have helped quell opposition to Freeport operations, Collier say, "Absolutely, I think that's a good part of it."

Both the U.S. government and even Freeport, however, say the locals aren't getting a fair slice of the pie, and both support legislation before the Indonesian parliament would give Irian Jaya some autonomy, and a greater share of Jakarta's take.

A Common Arrangement

Freeport's arrangement with the military is not unusual in Indonesia, experts say. For many companies, it's considered a necessary part of doing business in a country where the military is not fully under civilian control and is widely known to make money through a variety of legal and illegal business operations in Indonesia's provinces.

"Indonesia's military remains systemically corrupt," wrote Indonesia expert Robert Maranto in an article published last year by the Heritage Foundation. Maranto and other analysts say Indonesian military forces often intentionally create the very threats they are hired to defend against, effectively drumming up business.

"Along with its brutal suppression of and disregard for human rights in Irian Jaya, the TNI (military) has created a pro-Jakarta militia to provoke riots and other security-related incidents, which in turn are used to justify its repressive tactics," wrote Maranto.

"The military and the police have everyone in Indonesia at the end of their guns, so to speak, you know, even the government," says Lesley McCulloch, a scholar at the University of Tasmania. "They see the foreign operations as particularly lucrative. Some companies have been resisting, but there are coming under heavy pressure. And their operations are often disrupted."

There has been a feeling among some U.S. officials that Freeport has been unfairly criticized for its relationship with the Indonesian military, then-U.S. Ambassador to Indonesia Robert Gelbard said last year, in rare comments by a U.S. government official on the matter.

"Companies were often put in very difficult situations in this country," he said. When companies are asked by military and police to provide use of its resources, he said, "It is very difficult for the company to say no, given the circumstances."