U.S. Company Buys Security in Indonesia

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."

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