Unrealized Contract of Work (CoW) Areas
1. Where are the operational areas mentioned in PT Inco’s
CoW?
A: At present, our mining activities are centered in Sorowako, East
Luwu regency, South Sulawesi. We commenced commercial production on
April 1, 1978, although the CoW with the Indonesian government was
signed on July 27, 1968. In 1996, an extension to the CoW allowing
the company to operate in this region until 2025 was signed by the
Government of Indonesia.
The CoW gave PT Inco mining rights in the provinces of South, Southeast
and Central Sulawesi, including the following areas:
• South Sulawesi Province including: Sorowako, Nuha, Malili
and Towuti Districts in East Luwu regency
• Southeast Sulawesi Province including Kolaka, Kendari and
Buton regencies
• Central Sulawesi Province including Morowali and Palu regencies
2. What is the size of your economic contribution to Indonesia
as a result of the CoW?
A: PT Inco has been in operation in Indonesia for almost 40 years
and remains committed to long-term investment in Indonesia and to
the promotion of the economic wellbeing of the nation. During 2003,
we contributed over US$240 million to the government via operating,
capital and community-related expenditures, nickel production royalty
and water levies and land rent as well as made a significant contribution
through the purchase of supplies, services and equipment from other
Indonesian companies.
3. Although PT Inco has an obligation to develop these areas,
why does the company only concentrate in areas in South Sulawesi?
Do you really think other areas are not profitable for you or worth
being developed?
A: PT Inco is committed to development of areas contained within its
CoWs which are located in three provinces in Sulawesi. The decision
to focus mining activities in these areas was a business decision
based on the result of feasibility studies. The company retains a
prudent approach to investment because long-term commitment requires
careful consideration as all investment must be economically and technically
feasible. At this stage there are no plans to expand to other provinces/islands.
4. Work has not begun in CoWs located in Central and Southeast
Sulawesi. However you are still obliged under the CoWs to carry out
community development in these areas. Could you describe the progress
achieved to date?
A: In February 2003, PT Inco signed an agreement with PT Aneka Tambang
to jointly develop PT Inco’s CoW in East Pomalaa. PT Inco expects
to commence delivery of ore from Pomalaa to PT Aneka Tambang’s
smelter by mid-2005. Although operations in Central Sulawesi are scheduled
to begin by 2010 if economically and technically feasible, we are
still obliged to allocate funds for community development (a total
of US$3 million for each province in Southeast and Central Sulawesi)
as well as pay all taxes, levies, and land rent.
5. Who owns the land under the CoW? Did the owner receive
compensation?
A: The land is owned by the government. When a CoW is signed, the
company, in this case PT Inco, will then pay a form of rent at US$1.00
per year per hectare to the government for the opportunity to work
the CoW.
6. But back in the 1970s, Sorowako residents say they never
received any compensation. What happened?
A: The issue was finally resolved through the mutual cooperation of
PT Inco, local government and residents when a new residential area
was constructed at Sumasang in October 2003
7. If the vacant land under the CoW is not being used by
Inco, can other parties such as the local government and other companies
use it?
A: PT Inco owns the rights to use the land via the CoW agreement.
This means other companies may not use the land without the expression
permission of PT Inco. This would also apply to use of land under
the CoW by other government/government agencies and related bodies.
8. However, it is claimed that PT Inco relinquished some
of the land in the unrealized CoW areas. This took place nine times
in the period 1968 to 1979. So why not now?
A: This is regulated in the CoW. After PT Inco commenced operations
in 1978, the company was no longer under an obligation to relinquish
the land.
9. There are claims that PT Inco bribed the previous government(s)
to obtain the CoW. Is this true?
A: This is absolutely untrue. We continue to abide by all relevant
Indonesian laws and regulations and international codes of conduct,
such as FCPA (Foreign Corruption Practices Act), Sarbanes-Oxley Act,
and apply good corporate governance.
Bahodopi
1. PT Inco was criticized by NGOs for not consulting with
the community about its expansion plan, which they say was approved
in absence of community consultation and published environmental or
social impact assessment. What is your response?
A: For issues relating to community, we work together with relevant
community and local government to seek amicable settlements, as we
are strongly committed to good community relations and consistently
strive to successfully resolve outstanding issues. We are committed
to partnering and assisting surrounding communities in their development
and empowerment as well as problem resolution. We try to resolve problems
with a “family values” approach based on a partnership
model that empowers the community to set priorities and take ownership
of development initiatives.
2. PT Inco have already begun drilling test pits in the area
even though village heads have rejected exploration on their land.
Have you consulted with or sought approval from village leaders before
undertaking exploration activity?
A: For issues relating to community, we work together with relevant
community and local government to seek amicable settlements, as we
are strongly committed to good community relations and taking effective,
proactive, and mutually beneficial long-term solutions. Whenever possible,
we will provide assistance to the community to help minimize the impact
of our operational activities.
3. What has PT Inco done to develop the area to meet your
CoW obligations?
A: PT Inco has been in operation in Indonesia for almost 40 years
and remains committed to long-term investment in Indonesia and the
promotion of the economic wellbeing of the nation, including development
of the surrounding community. Under the terms of the CoW, PT Inco
is obliged to develop the Bahodopi area, which will be realized by
2010, if technically and economically feasible. We are also working
with the regional government to allocate more funds from our community
development program to meet the needs of the Bahodopi communities,
which is channeled for projects related to agriculture, health and
forestry. Starting 2005, funds are channeled directly through NGOs
to ensure they reach the right target and effectively serve the communities’
needs.
4. Why does the Bahodopi reject the presence of PT Inco in
its tribal areas?
A: Under the terms of the CoW, PT Inco is obliged to develop the Bahodopi
area, which will be realized by 2010, if technically and economically
feasible. We are also working with the regional government to allocate
more funds from our community development program to meet the needs
of the Bahodopi communities, which is channeled for projects related
to agriculture, health and forestry.
Dongi
1. The Dongi people claim that their traditional lands have
been taken over and turned into PT Inco’s golf course. The company
has also mined their ancestral graveyard, and its operations have
deprived them of their traditional home and livelihood. How does PT
Inco plan to compensate the Dongi for this?
A: PT Inco works together informally with the Dongi community and
the local government of East Luwu to find mutually beneficial solutions.
A special task force was formed to resolve the historical land claim
issue and includes representatives of PT Inco, the Dongi community
and local government. PT Inco allocates funds from its community development
budget and provides job opportunities to help the Dongi establish
a sustainable community in their new environment.
2. The Dongi claim they have suffered repression at the hands
of the police force that is in the area largely as a result of PT
Inco presence. How do you respond?
A: This is absolutely untrue. We work together informally with the
Dongi community and the local government of East Luwu to find mutually
beneficial solutions. A special task force was formed to resolve the
historical land claim issue and includes representatives of PT Inco,
the Dongi community and local government. PT Inco allocates funds
from its community development budget and provides job opportunities
to help the Dongi establish a sustainable community in their new environment.
3. Is it true that you have forcibly evicted the Dongi from
their ancestral/tribal lands?
A: This is absolutely untrue. The Dongi left the land years before
the signing of the agreement with the government. A special task force
was formed to resolve the historical land claim issue and includes
representatives of PT Inco, the Dongi community and local government.
PT Inco allocates funds from its community development budget and
provides job opportunities to help the Dongi establish a sustainable
community in their new environment.
Local employment and contractors
1. According to the Free Earth Foundation (Yayasan Tanah
Merdeka), most of PT Inco’s employees are not from Sorowako
or the other villages that lie within the company’s concession
areas. They claim that of the 2,500 original inhabitants of the area,
only 143 work at PT Inco, and most of them are in low-paying manual
positions. How do you respond?
A: PT Inco recruits, trains, and subcontracts to local residents and
businesses. PT Inco’s recruitment policy is to give priority
to applicants domiciled in the surrounding regions. Based on domicile,
75% of our employees come from Sorowako, Malili and Towuti sub districts;
14% from other regions in South Sulawesi province; and 11% from outside
South Sulawesi. The figures are valid as at September, 2004. Further,
a number of people from the local ethnic groups have risen to top
management positions at PT Inco.
2. How can you prove that PT Inco has established strong
foundation in terms of community relations during the challenging
times of political, economic and social changes in Indonesia? I heard
that more NGOs were targeting PT Inco as the company was one of the
biggest contributors for the environmental damage ?
A: Whenever possible, PT Inco offers assistance to provide solution
to the communities’ problems, as we are committed to partnering
and assisting surrounding communities in their development and empowerment
as well as problem resolution. We try to resolve problems with a “family
values” approach based on a partnership model that empowers
the community to set priorities and take ownership of development
initiatives.
Expatriate Issues
1. Why did PT Inco hire an expatriate without all the proper
permits?
A: PT Inco is a professionally managed and operated company, and continues
to abide by all relevant Indonesian laws and regulations. We never
hire illegal expatriates. However, we acknowledge one incident when
one of our contractors hired an expatriate before receiving complete
permits, but we immediately took appropriate actions to address the
matter and to ensure that it won’t recur in the future.
2. Why does PT Inco import meat, produce, dairy items, and
other food for its expatriate staff and workers while local staff
and workers are forced to eat local food items?
A: All company needs are supplied by the local market, only a minor
percentage of food items are imported to cater the needs of our foreign
employees. As an international and professional company, Inco needs
to cater to the needs of its expatriate staff.
Corporate Social Responsibility
1. What percentage of your total earnings do you allocate
to community development/environmental protection programs?
A: We allocate US$1.5 million annually for our Community Development
program and other contributions. PT Inco has priority to commit in
empowering the community. Approximately 50% of funds are allocated
for education, 15% for health, and business development, and the rest
for physical development.
Since the beginning of its operational activities, PT Inco never
fails to support and assist the community, even in difficult times.
During the construction period (1974 – 1978) PT Inco commenced
its CD program and continued the program during the difficult period
in the first ten years (1978 – 1987).
2. Why do you concentrate on providing community assistance
in Makassar and Malino instead of Sorowako and surrounding areas,
which are far from Makassar and part of your operational areas?
A: This is not true. Our Community Development program focuses on
areas in the vicinity of Sorowako as well as other operational areas.
In addition to these areas, PT Inco provides non-CD contributions
in the form of schools such as sekolah unggulan
3. Why are some villages and communities within PT Inco’s
operational areas still below the poverty line?
A: PT Inco spends over US$1.5 million annually on its Community Development
program and contributions, including financial and technical support
to enhance the living standards of local community. The company works
in partnership with local communities to provide education, health
care, and agriculture counseling, including building fresh water and
irrigation systems. It remains committed to long-term investment in
Indonesia and the promotion of the economic wellbeing of the nation,
including development of the surrounding community.
Although poverty reduction is a government responsibility, we continue
to assist the local government in reducing poverty levels in the areas
surrounding our operations.
4. Why are there no representatives of local indigenous groups
on the Board of Directors?
A: PT Inco is a professionally managed and operated company and emphasizes
the domicile of an employee rather than ethnicity. Our previous President
Director was from Toraja, and one of our independent commissioners
comes from Makassar.
5. “Immoral practices” are reputedly taking place
at the operational sites of PT Inco. These include contract marriages
(kawin kontrak). This is clearly against the laws of Indonesia/cultural
norms. Why haven’t you fired the employees concerned? Or had
them deported?
A: This is not true and there is no evidence to support such claims.
PT Inco is a professionally managed and operated company and continues
to abide by all relevant Indonesian laws and regulations. We respect
the cultural norms and traditional law (adat) of surrounding communities
and continue to uphold the principles of family values in all our
operations. We have a policy to take firm action against employees
who are considered as violating existing cultural norms.
6. The gates to your operational site and the local airport
use a Toraja theme. Wouldn’t you say this is disrespectful to
the people of Sorowako because it’s a long way from Toraja?
A: We attempt to respect, develop and preserve the local culture through
our CD Program: we have supported the Pasitabe tribe in arranging
a cultural and musical festival, as well as provided assistance at
the Maupudi ceremony (catching fish).
7. How much in earnings does the regional government receive
from PT Inco?
A: For the past five years (1999-2003), PT Inco has contributed more
than US$64 million to both central and regional government. [Please
clarify how much from this amount that was given to central government]
8. PT Inco is a public-listed company. Why doesn’t
the company offer shares to the local government?
A: We have an obligation to sell 20% of the shares to the government,
but the government refused to buy them, so we offered the shares to
the public in 1990. Eighteen percent of the company’s shares
are owned by the public. We would welcome any application by the local
government to buy shares.
9. Why does PT Inco favor the central government over provincial
and regency governments?
A: We continue to abide by all relevant Indonesian laws and regulations.
Our operations take into account the administrative, legal, and fiscal
requirements of the central government while at the same time respecting
the principles of regional autonomy. According to the Regional Autonomy
laws and regulations, companies operating in more than one province
are required to deal with the central government.
