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Noke Kiroyan, Chief Consultant, Kiroyan & Partners delivered the presentation at IMM’s 2014 Kalimantan Coal Conference. The IMM’s Kalimantan Coal Conference brings together 120+ senior executives, decision makers from government, mining, infrastructure, shipping and supply sectors to discuss new policies and strategies for tackling the current and emerging issues within the burgeoning Kalimantan coal sector. For more information about the event, please visit: http://www.immevents.com/kalicoalconference13
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POLITICAL WILL Governments
GOAL: GOOD OF
COMMUNITY
Political Attitude
Policies and Strategies
(“Negotiating Mining Agreements: Past, Present and Future Trends,” Danièle Barberis, 1998)
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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
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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
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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
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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
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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
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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
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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
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“Stakeholder Engagement: A Good Practice Handbook for Companies Doing Business in Emerging Markets,” International Finance Corporation, 2007
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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
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Natural disasters Community relations
Community development Ethnic conflict
Land ownership issues (resolved &
unresolved) Environmental issues Industrial action Illegal mining
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Infrastructure use Technical failure Poor governance/ethics
Divestment of shares
Intercommunity rivalry & jealousy
Intra-community rivalry & jealousy Employment Demands of local
government
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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
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Menara Karya, 10th Floor Suite H Jl. HR Rasuna Said Blok X-5 Kav. 1-2
Jakarta 12950 – INDONESIA T: +6221 5794 4694 F: +6221 5794 4696
[email protected] www.kiroyan-partners.com