Issues mining companies operating in Indonesia must be aware of.

1. Research & Advisory International
Challenges of the Energy and
Mining Sector

2. Ideology
POLITICAL
Governments
WILL
Public Opinion
Political Attitude
Perception of Good
of Community
GOAL:
Policies and
GOOD OF Strategies
Economic, Social COMMUNITY
and Political
Circumstances
2
(Danièle Barberis: “Negotiating Mining Agreements”)

3. Year Era Political Will
1945-1950 Revolution No, fighting a war
1950-1957 Early Democracy No, pressing concerns
with nationhood
1957-1966 Guided Democracy No!
1966-1998 New Order Yes!
1998-2005 Reformation Basically yes, but there
are more pressing
concerns
2005-now (?) We’re trying to make up
our mind
3

4. Mining in Indonesia is susceptible to crisis for various
reasons:
1. Identified with environmental destruction
2. Seen as symbol of capitalism
3. Almost invariably involved in clash of cultures
4. Extracting riches from the ground is emotional laden
5. Viewed as associated with the excesses of the “New
Order”
6. The public does not differentiate responsible mining
practice and illegal mining
7. Rapidly changing social and political environment
have direct impact on mining operations
8. Regions demand bigger share of wealth
4

5. Susceptibility to crises enhanced by characteristics of
many mining companies:
1. Not good at communicating
2. Response to accusations usually technical and
defensive
3. Insensitivity to cultural differences
4. Culture of superiority
5. Lack of empathy
6. Reality of regional autonomy slow to sink in
7. Mistaken view of the diminishing role of central
government
5

6. 1. Land compensation issues (resolved
and unresolved)
2. Environmental issues
3. Industrial action
4. Illegal mining
5. Natural disaster
6. Community relations
7. Community development
8. Ethnic conflict
6

7. 9. Intercommunity rivalry and jealousy
10. Intra-community rivalry and jealousy
11. Employment
12. Demands of local government
13. Infrastructure use
14. Technical failure
15. Poor governance/ethics
16. Divestment of shares (certain generations
of CoW/CCoW)
7

8. Origin Mediation/Amplification Organization Resolution
Opportunity to influence Difficult to influence
Period of increasing
 Formal
constraints
awareness
Media
Coverage
Pressure
Issue Management
Early issue identification
Potential Emerging Current Crisis Dormant
Development
“Risk Issues and Crisis Management: A Casebook of Best Practice” – Michael Regester & Judy Larkin, 2005 8

9. 6
WHY 1
does this WHAT
threaten the is the
organization’s problem?
ability to fulfill
5 its mission?
WHO 2
WHERE
is the target, is this
for whom problem occurring?
is it a
problem? 4 3
HOW WHEN
did this did this
become a become a
problem? problem?
(Adapted from “Strategic Public Relations Management: Planning and Managing Effective Communication Programs,” Weintraub Austin, E. &
Pinkleton, B.E., 2006) 9

10. Central
Government
Regional Government

(Province/ Kabupaten)
Business Association
NGO
Mass Media
10

11. Stakeholder Stakeholder Stakeholder
Identification Analysis Engagement
What corporate
Who are our What are their social
responsibilities do
stakeholders? stakes? we have to our
stakeholders?
What What strategies,
opportunities and actions, or
challenges are decisions should
presented by our we take to best deal
with these
stakeholders? responsibilities?
(“The Pyramid of Corporate Social Responsibility – Toward the Moral Management of Organizational Stakeholders,” - Carroll, A. B., Business
Horizons No. 34, 1991) 11

12. 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?
(Adapted from “ISO 26000: Guidance on social responsibility.” November 2010 ) 12

13. 1 2 1
3 3
0 = Non-Stakeholder
1 = Latent Stakeholder
2 4 2 2 = Expectant Stakeholder
3 3 3 = Definitive Stakeholder
4 = Primary Stakeholder
1 2 1
(“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) 28

14. 
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Jakarta 12950 – INDONESIA
T: +6221 5794 4694
F: +6221 5794 4696
info@kiroyan-partners.com
www.kiroyan-partners.com