News / Asia

Strike Threatens to Close Indonesian Gold, Copper Mine

Protesters from Freeport-McMoRan Copper & Gold Inc.'s Grasberg mine march during a demonstration in Timika of Indonesia's Papua province, October 10, 2011.
Protesters from Freeport-McMoRan Copper & Gold Inc.'s Grasberg mine march during a demonstration in Timika of Indonesia's Papua province, October 10, 2011.
Kate Lamb

Indonesia's economy is flourishing, largely because of its vast natural resource wealth. But tensions between mining companies and the communities in which they operate have flared up across the country this year. Analysts say inequality and ongoing strikes in West Papua could cause the closure of the one of the largest gold and copper mines in the world.

Eight thousand Freeport employees have waged a month-long strike at the giant gold and copper mine located in the isolated region of West Papua.

Tensions around the mine have been simmering all year, with one Freeport employee shot dead and six more injured in a violent clash between workers and police at a rally this week.

Despite the bloodshed, Freeport employees say they will continue to strike until their demands for wage increases are met.

On a minimum of $2.10 an hour, Freeport’s Papuan workers receive the lowest wages of any Freeport mining facility in the world.

The worker’s union is calling for an increase of up to $7.50 an hour, but negotiations with Freeport McMoran have not resulted in an agreement.

Ikrar Nusa Bakti, an analyst from the Indonesian Institute of Sciences, says the labor unrest is tied to longstanding sociopolitical problems in the politically sensitive province.

Ikrar says he is concerned the tensions could fuel political instability and encourage calls for independence. He says Papuans do not feel like masters of their own land, and if the government and Freeport do not work together, the ongoing problems could result in the closure of the mine, as was the case in neighboring Papua New Guinea.

Papua New Guinea’s Panguna copper mine was closed in 1989 after an armed uprising against the company and the government.

The Indonesian government has called for a swift resolution to the wage stand-off, but is also concerned about losses to state revenue.

Energy and Mineral Resources Minister Darwin Zahedy Saleh says the strike could cost the state $6.7 million in losses per day.

Freeport is the single-largest tax payer to the Indonesian government, contributing more than $1 billion alone in the first six months this year.

The commodities boom has seen the company book record profits this year, but Jakarta-based risk consultant Todd Elliot says this means little to native Papuans.

"Indonesia is experiencing a kind of mini economic boom and it is basically being driven by the exploitation of natural resources. A handful of people are benefiting but it is not the workers," he said. "Freeport has been posting record profits, but very little is trickling down to employees."

Among the fastest growing countries worldwide, Indonesia has been hailed as an economic success story, but more than 30 million people were living below the poverty line in 2010.

Many see Papua as a rich land with poor people. Todd Eliot says it is a dynamic that is fueling other resource-driven conflicts across the country.

"We see this everywhere, in Kalimantan also. There is a huge wealth gap and it is getting wider. Indonesia's growth is not evenly distributed. We have seen this in attacks on other mining operations where they had promised to employ a certain amount of people and build infrastructure but didn’t so the locals attacked the sites."

Ongoing strikes at the Grasberg Freeport mine in Papua have led some members of parliament to call for Freeport’s contract, made with former dictator Suharto, to be renegotiated.

As workers pledge to strike indefinitely, PT Freeport is outsourcing its labor to deal with its production shortfalls and says it is operating at 80 percent capacity.

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