LESSONS AND LEARNS FROM

P.T KEM AND LKMTL

CONFLICT RESOLUTION PROCESS
By
Emmy Hafild
1



CONTEXT

1. P.T Kelian Equatorial Mining, is a gold mining company subsidiary of Rio Tinto,
operated in upper stream of Kelian River, East Kalimantan. It started to operate in
this area around 1988-1989. It will cease its operation in 1994.

2. LKMTL (Lembaga Ketahanan Masyarakat korban Tambang dan Lingkungan), is
an organization established by the people around Kelian rivers, affected by P.T
KEM mining operation. Its members around 7500, ethnically mixed, from native
Kelian, to Buginese, Bataks, Banjar, Java etc. The aim was to create the only
channel for the affected people to put forward their claims and grievances against
P.T KEM. The establishment was also requested by Rio Tinto repesentative in
Indonesia, so that they only deal with one community representatives, and not
many.

3. Claims and grievances are: land, building and houses, loss of cash crops and fruit
trees, human rights abuses and sex abuses for women, and lost of opportunities as
alluvial miners and environmental destrcution.

4. Negotiation started in 1998, and finished in September 12, 2001. The amount of
settlement are Rp. 64 billion rupiahs, human right abuses was settled through
National Commission on Human Rights, including sex abuses. Beside that, the
people also get social benefits from projects such as clean water, electricity, and
better road quality.

5. Payments are still in the process, the majority of claimants have received their
compensation, some problems still exist, but progress is made. Not every body is
happy, there are those opportunists who are not satisfied because they are not
receiving any thing. Over all, situation is better than before.







1
Former Director of WALHI/Friends of The Earth Indonesia, currently Secretary General Transparency
International Indonesia.
KEY SUPPORTING FACTORS

Company:

1. A strong commitment from top level (CEO) of Rio Tinto to resolve this conflict
through negotiation. This commitment include replacing P.T KEM President
Director when he failed to uphold previous negotiation commitments.

2. The willingness not to involved the government or to hide behind government as
what have been done by previous leaders of the company and by other companies.
They are willing to explore means beyond the obligation stated in their Contract
of Works.

3. The awareness that political situation has changed since Suhartos stepped down,
so the old protection they received from government is no longer there that they
are willing to cooperate with the new situation. This commitment and position has
made companys representative in Jakarta is free to negotiate for win-win
solution.

4. When negotiation broke and resulted in 40 days of blockade by the people, the
company invited a former Federal Judge of Australia to step in as mediator.

5. Willingness to acknowledge only one community representatives, LKMTL. This
was important especially when new group led by opportunist and supported by
local government claims to represent communities and opposing LKMTL, the
company stick to LKMTL.

PEOPLE/LKMTL

1. LKMTL establishment has empowered community to create one voice for
negotiation. The community selected their own representatives or negotiators.
Targets and demands were set during consultation. Power of attorney was given
to their representatives.

2. They have vast network with NGOs, nationally and internationally. Their
grievances have been aired not only by NGOs in Indonesia but also in U.K and
Australia. They actively participated at the share holdersmeeting in London, and
were invited to Australia to present their case. They actively met with National
Commission on Human Rights on the human rights case.

3. There is a willingness to accept lower compensation than what they demanded.
There is a flexibility of the people to accept reality.

4. LKMTL was also active in screening the rights claimants, organizing witness
statement, measuring the claimed property, and refusing claims from opportunists.

5. LKMTL was assisted and facilitated by WALHI/Friends of The Earth Indonesia
and JATAM (Mining Network) in pursuing their struggle. Continous support
from WALHI was important in keeping the focus and correcting mistakes before
it was too late. Internationally, their struggle was supported by CAA in Australia,
Down to Earth in U.K, and Project Underground in the U.S.


NGOs

1. A network of NGOs established for campaign against Rio Tinto, in Indonesia,
U.K and Australia. The network was pivotal in getting attention from Top Level
(CEO) of Rio Tinto in London and Australia. The network also successful in
financing LKMTL representatives to campaign in Australia and to attend Rio
Tinto share holders meeting in London.

2. WALHI/Friends of The Earth Indonesia continued to support LKMTL and
providing resources, funds and personnels to facilitate LKMTL and the
negotiation process. WALHI received a lot of cynical comments during the
process including being accused of selling out to company, but with a strong
leadership and approval from its boards was determined to finalize the
negotiation.

3. JATAM has provided with a strong campaign to bring the issues up front in the
media and at international level. WALHI and Jatam plays a very good
complimentary role in the process.

THE NEGOTIATION PROCEDURE

1. First negotiation process was without protocol. It was succeeded in getting
electricity for one community. Then the negotiation was stalled when the
President Director of P.T KEM was replaced and he did not commit to the
previous agreement that have been reached with LKMTL.

2. Some companys staff were not happy with the way company negotiated with
LKMTL and started moonlighting with splinters (opportunists). The new
President were not aware of this. He started to refuse previous commitment and
negotiate with the new group. This resulted in a deadlock during negotiation and a
40 days of road blockade that shut down the company operation for 40 days.

3. After a very strong campaign by WALHI and Down to Earth about the company
behavior, involving among others pulling out from the negotiation table unless the
company does some thing about their attitude, then the President Director was
changed into a more cooperative person.

4. A new President was assigned by London, at the same time a mediator was
appointed by Rio Tinto to help the negotiation process. A professional mediator
was also appointed to help with the process.

5. The mediator then contacted WALHI in order to proceed with the negotiation
process. WALHI requested to have a protocol agreed before new negotiation
round could be started. With this new protocol and proper record, both parties
cannot deny their previous commitment. WALHI then contacted one member of
Komnasham to be the mediator appointed by LKMTL.

6. The Protocol was pivotal in the success of negotiation. Some NGOs are not happy
with the protocol because it requires LKMTL and WALHI not to campaign when
the negotiation are in place. However, the protocol has made the company in
check and not entertaining other group that claims to represent the community,
because the protocol requested the company only to deal with one representative,
that is LKMTL. The protocol also put dead line and schedule for negotiation, so
that the company cannot play with timing and negotiation agenda.

7. The protocol include among others are:

Dispute agenda to be resolved
party in dispute
dead line for negotiation
behavior of each party
role of mediator
role of government

8. The ability of both parties to deal with local government intervention by asking
them as witness during negotiation process. This was done despite local
government of Kutai Barat insistence to intervene and to push company to deal
also with the group that the government supported.

9. The determination of all parties involved to seek solution when problems arised.
All parties were able to resolve several potential deadlock situation. When this
situation, the meeting was ceased and a new date of negotiation was agreed. The
mediator was important in keeping every body on track anf focus on solution.


WEAKNESSES

Company

1. Inability to control staffs that are trying to steal the negotiation process from
NGOs involvement. Staffs were involved in establishing a splinter group aimed at
undermining LKMTL which is supported by NGOs. This has caused a great loss
both to the company it self and to the community. Financial loss of 40 days
blockade and social cost to the divide and conquer strategy is so great that it is
almost unimpairable. The social cost can still be felt now, almost two years after
the negotiation was final.

2. The trust that negotiation can settle all disputes is low, the company still deploy
anthropologist to be their infiltrator within the community. This person befriended
community leaders and created confusion in the communities about his position
and whether he represents the company or him self. The persons task and
objective was not clear to communities and NGOs. In some cases, his friendship
with LKMTL leaders obstructed the negotiation process when he attended one of
the negotiation session. I, as representative of WALHI, had to ask P.T KEM
President to let him go from the meeting room, because it disturbed the
community negotiators attention.

3. Up to now, tehre is still dispute between members of LKMTL and the company
over implementation of agreement. The company has not been able to eliminate
its staffs resentment over the settlement.


Community

1. Weak leadership in LKMTL. As other communities in Indonesia, community
leadership is very weak due to 32 years of authoritarian political and government
system. Leaders made several wrong decision that weaken their position vis a vis
P.T KEM. Later, this weakness was overcome through involvement of several
leaders in decision making process.

2. Nature of the community is a miner attitude. This was a rich alluvial miners
community who loss their income when P.T KEM arrived with Contract of Work.
The commuity is used to huge amount of cash, therefore the driving forces for
negotiation is the possibility of receiving compensation for their loss. This is the
major issue in negotiation while human right abuses and environment came after
financial compensation was settled.

3. Because of their obsession with financial compensation, some of the member tend
to have an opportunistic behavior, joining groups that promised them with quick
and bigger compensation. This groups loyalty to LKMTL was not so strong. It
gave an opportunity for outsider , including company and local government to
implement a divide and conquer strategy. It caused a lot of efforts to maintain
social cohesiveness under this situation.

4. When settlement was paid, LKMTL management was not fully capable in dealing
with the amount of task of: managing the screening and verification process, the
distribution, and complaints from those who are not statisfied. Financial
management is another problem that have to addressed.

NGOs

1. NGOs in Indonesia do not fully trust the negotiation process. The difficulties with
problems at LKMTL and the negotiation process made some NGOs pulled out
from the process. WALHI was determined to proceed even if it is under the
suspicion treatment from its NGOs colleagues, accused of being sold out to
company.

2. Facilitation to LKMTL was not fully fulfilled by local NGOs. Due to tons of other
issues in the region, and bias towards the need to support or at least not to
confront an indigenous local government, local NGOs failed to rally support for
LKMTL at crucial times. Manytimes, LKMTL was left alone to solve its
numerous problems without any support from NGOs.

3. Full management facilitation support cannot be delivered due to shortage of
human resources and means to support this kind of works. WALHI as an
advocacy NGOs is not credible to provide with this support while other NGOs are
busy with their own programs and problems.


Negotiation process

1. The process has little impact to solve conflicts between communities and
Extractive Industry operate in other part of Indonesia. All parties involved are
down playing this success out of their fear of other party misused of the success.
WALHI for instance, is trying to conceal the success out of fear that Rio Tinto
will use it for their public relation purposes, while Rio Tinto has not solved
problem in other parts of Indonesia.

2. The Indonesian Mining Association and other companies operate in Indonesia do
not like the result out of fear that this will set precedence that they have to follow.
There are so many campaign organized against both Rio Tinto and WALHI for
pursuing this process. At one time, during parliamentary session, WALHI was
accused of conspiring with Rio Tinto in dragging other companies share price
down.

3. The minister of mining does not set the example to use this experience as
precedence to resolve conflicts in Indonesia. This is very sad, because the
experience of this conflict resolution is highly valuable to the Ministry in order to
manage the Indonesian mineral resources. Current and future conflicts can benefit
from this process.

4. Negotiation was focused on financial compensation, both for property and land
claims and for human rights abuses. Environmental issues were left to the mine
closure process, which is less participative. Even if the mine closure process is
facilitated by professional facilitators, it is more driven by the companies than the
communities and too technical. Due to lack of knowledge and information,
community participation and bargaining position is much weaker than the
negotiation process.

Note:

The conflict resolution process between P.T KEM and LKMTL was not perfect, many
things could be done better. Many things went wrong unncessarily.
Hence, it is one of few conflict resolution process that is successful in this part of the
world, particularly in Indonesia. As Director of WALHI, my personal involvement in the
negotiation process has given me invaluable experience in dealing with this kind of
conlfict. The experience should be looked in more detail and objectives by others so that
the lessons and learns can be used to benefit other communities.


Jakarta, April 27, 2003.