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Cablegate: Freeport in Papua: Community Development And

VZCZCXRO5217
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJA #3049/01 3051028
ZNR UUUUU ZZH
R 011028Z NOV 07
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 6887
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHBJ/AMEMBASSY BEIJING 4444
RUEHBY/AMEMBASSY CANBERRA 1474
RUEHPB/AMEMBASSY PORT MORESBY 3520
RUEHKO/AMEMBASSY TOKYO 1044
RUEHWL/AMEMBASSY WELLINGTON 1956
RUEAIIA/CIA WASHDC
RHHJJPI/USPACOM HONOLULU HI

UNCLAS SECTION 01 OF 02 JAKARTA 003049

SIPDIS

SIPDIS

DEPARTMENT FOR EAP, EAP/MTS, EAP/ANP, INR/EAP
PLEASE PASS TO USAID

E.O. 12958: N/A
TAGS: PGOV PREL PHUM EAID ID
SUBJECT: FREEPORT IN PAPUA: COMMUNITY DEVELOPMENT AND
TRAINING AND HIRING PAPUANS

REF: JAKARTA 2783

JAKARTA 00003049 001.2 OF 002


1. (SBU) This cable is Sensitive But Unclassified-please
handle accordingly. Not for distribution outside of USG
channels.

2. (SBU) SUMMARY: Freeport McMoRan is making efforts to
address the economic impact of its operations in Papua,
Indonesia. During the DCM's recent visit, the company
showcased efforts to compensate local populations affected by
the mine and to recruit and train Papuan employees. The
company's efforts are impressive but economic
underdevelopment remains a problem throughout Papua, not just
in the area of Freeport's operations. SUMMARY.

3. (SBU) Mission routinely receives complaints and questions
about elements of U.S.-based Freeport McMoRan's mining
operations in Papua. The complaints focus largely on three
areas: environmental impact; community development; and
commitment to train and hire a local Papuan workforce. The
underlying question is whether the Freeport's operation
benefits Papuans. Some members of the international press,
the NGO community and U.S. Congress share these concerns.

4. (SBU) Reftel described some of the company's environmental
protection efforts. This cable, based on the DCM's recent
trip to Timika, describes Freeport's community development
and personnel practices. Freeport's programs for the people
of Papua are structured around three concentric circles of
the population: the Kamoro and Amengme ethnic groups, most
directly affected by the mine; the seven ethnic groups
(including the Kamoro and Amengme) in the area surrounding
the mine; and, the other people of Papua. Beyond the Papuan
population, the company also has programs for non-Papuan
Indonesians.

COMMUNITY DEVELOPMENT

5. (SBU) Freeport funds two major community development
programs, amounting to tens of millions of dollars each year,
depending on world copper prices. Freeport's Land Rights
Recognition Program and Three Village Program focus entirely
on the Kamoro and Amengme people, is designed to compensate
them for the loss of traditional lands an other community
property as a result of the mine's establishment. The funds,
currently totaling over $20 million, are managed by local
foundations, one for each ethnic group. Priorities of these
foundations include housing, education, infrastructure and
health care. The program also provides grants for local
Papuans to start small businesses.

6. (SBU) Freeport also funds a larger community developent
effort via the "one percent fund," under which one percent of
the company's gross revenue goes to a foundation that goes by
the acronym LPMAK. Under current world gold and copper
prices, the company pays about $50 million annually to this
foundation. LPMAK's executive director John Nakiaya told the
DCM on October 7 that his foundation's top three priorities
are education, health and economic development. LPMAK's
programs are designed to assist all seven ethnic groups in
area of the mine, but the board of directors is dominated by
Kamoro and Amengme, which try to block projects for the other
five groups. (NOTE: Environmental projects, such as the
reclamation project described in reftel are funded by the
company separately, not using one percent funds.)

7. (SBU) LPMAK currently manages projects amounting to about
$20 million per year, which means that the foundation is
amassing huge funding surpluses that currently sit in rather
unproductive back accounts. L7q^QQ _LPMAK project is the
sole hospital in Timika, which provides medical care at no
cost to members of the seven ethnic groups and at modest
charge to others. The local government has completed the
construction of a new public hospital but this hospital has
not yet opened.

8. (SBU) Nakiaya also told the DCM that he supports recent

JAKARTA 00003049 002.2 OF 002


efforts by Freeport and USAID to develop a Public Private
Partnership. The current modest partnership focuses entirely
on cold storage and transportation of Papuan agricultural and
marine products, to the tune of about one million dollars per
year. He was less definitive, however, when asked how he
would view a major expansion of that Freeport-USAID
partnership to other community development projects.

TRAINING AND HIRING PAPUANS

9. (SBU) Freeport has also established the Nemangkawi Mining
Institute, an impressive training facility, managed by
another foundation, fully funded by the company with funding
separate from the "one percent program. This institute,
budgeted at $7-10 million per year, has trained or is
training about 1,500 Indonesians, 90% of whom are Papuans,
for skilled mining jobs. Graduates of the three-year
training program are free to seek employment anywhere (and a
number have gone to Australia). Although Freeport does not
guarantee their employment, the company has hired most of the
current 500 graduates in skilled positions such as machine
operators, welders, and office workers. This training does
not involve university graduates, such as engineers or
managers, where the number of Papuans hired by the company is
not so impressive.

10. (SBU) While Freeport still has image problems and
difficult relations with many Papuans, the company is clearly
committed to contributing to community development, and
training and hiring of the Papuan people, especially those in
areas surrounding the mine. Critics of the company should be
encouraged to see for themselves what the company is doing
before making a final judgment.

HUME

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