MAC: Mines and Communities

Inco in Indonesia

Published by MAC on 2001-05-01

Minewatch Asia Pacific


The destruction and the dilemmas


The world's leading nickel producer is the Canadian company INCO. Along with the privatised Russian conglomerate Norilsk, and another Canadian mining multinational, Falconbridge, these three companies supply nearly half of the global requirement for this strategic metal, which is a vital component for stainless steel and crucial to military hardware. Inco also prides itself on being among the world's lowest-cost miners of nickel - if not the lowest. This is due primarily to its operations at Soroako, in South Sulawesi, Indonesia, which is currently the world's fourth largest supplier of nickel in matte (an intermediate product which contains 75% nickel).

However, Inco is facing unprecedented challenges to its global position. The market price of nickel toppled drastically in 1998, its share price almost collapsed and its market rating that year was among the worst of North American mining corporations (although the market price has picked up modestly since, while the cost of production has also tended to go down). These setbacks closely followed Inco's acquisition of rights to Labrador's Voisey's Bay nickel deposit, allegedly the world's biggest. However, that "coup" was also problematic. It not only geared up Inco's borrowings (to the tune of $4.3 billion), but brought the company into conflict with Indigenous Peoples, particularly the Innu nation, a substantial proportion of whose land claims affects the Voisey's Bay region. Then, the provincial Newfoundland government ( whose writ covers Labrador) demanded that Inco should finance the local construction of a hydro power plant, in order to keep added value within the province: it is a demand which Inco has so far resisted. Meanwhile the workforce at Sudbury, Ontario - site of Inco's most important operations - has been cut back, and unions have been demanding that Voisey's Bay ore should be smelted and processed there.

Halfway across the world, in the south Pacific, further competition to Inco's pre-eminence has been increasing, with the rapid "development" of new nickel capacity in Australia and a potentially cheaper method of mining lateritic ores. Recent decisions taken in Cuba and Kanaky (New Caledonia - where Inco also has a major nickel project) also threaten Inco's future sales in far eastern markets as, to a lesser extent, do expansion plans by Indonesia's other nickel miner, PT Aneka Tambang. PT INCO (Inco's 58% owned and managed complex in Indonesia) has long been reliant on demand by Japan, to which it sells virtually all its ouput.

Finally, there is the growing prospect that, as democrasi and transformasi follow reformasi, in Indonesia, Inco's hold over vast, unexploited, deposits of lateritic ore will be challenged by both Indigenous communities and environmental organisations who, after thirty years of repression, are now beginning to assert their demands.

It is on these new challenges that this paper primarily focuses. Divided into three sections, it is based on a field trip carried out in March 1999 for Minewatch Asia-Pacific (MWAP) by the well-known researcher and mining critic, Roger Moody, of Nostromo Research. The first section examines the impacts of the Larona hydro-electric project, which supplies virtually all the power needs for the Soroako mining-smelting complex, and which is now undergoing a major expansion.

The second section assesses the impacts of twenty years exploitation in Soroako, on workers, other residents, and the environment.

Lastly, the paper records the grievances of the original, Indigenous inhabitants, who were dislocated by the Soroako project, and it spotlights the demands of those living in Bahomotefe-Bahutopi, site of the deposits which Inco has said it will soon mine, in order to sustain its operations at Soroako 25 years into the next century.

One important conclusion of this research is that, unless market conditions improve dramatically (currently a forlorn hope) Inco has to decide, well within the next two years, where it will concentrate its dwindling investment capacity. This sets up a major potential conflict between the job prospects of workforces in Sudbury and Soroako, the rights of Indigenous Peoples in Canada and Indonesia, and the demands of government (provincial and national) in both countries for increased income from that investment. In March this year, after a lengthy review process, a qualified go-ahead was given for the Voisey's Bay mine: one of the qualifications was that the Innu should resolve their land claims demands, before construction commences - a stipulation which, if implemented, would likely ensure Innu support for the project.

There is a therefore an urgent need for workers and residents in these two regions to be aware of Inco's global strategy and to consult with each other on shared and divergent interests, in order not to be used as "pawns" in either a corporate or a governmental game play.

This paper is offered in the first instance as backing for an urgent proposal, supported in both Canada and Indonesia, that residents of Soroako and Bahomotefe-Bahutopi should meet with the Innu nation in Labrador and workers at Sudbury, with the possiblity of a reciprocal investigative mission from Canada to Sulawesi.

Part 1: Power at a price

The Larona river falls a stupendous 1,000 feet from Lake Towuti, along a forty kilometre stretch into Usu Bay, in southern Sulawesi. Set almost dead centre in the island, it is the kind of stamping-ground for which today's eco-tour operators would give their eye-teeth. Twenty-four years ago, however, PT Inco - 58% - owned by the world's single biggest nickel producer, Inco of Toronto - got to Larona first. When the price of oil started soaring as a result of OPEC's global price hikes, the Canadian company switched to hydro, in order to power its nickel smelter complex at Soroako. It struck a deal with the now-disgraced Soeharto regime, which has given the company captive power ever since, in return for a small tax. "Inco and the government have always been in collusion," a long-term resident of Soroako told me. "Although it supplies its workforce with subsidised power, it sells a surplus to the national grid," claimed an employee. Soeharto opened the Soroako mine with great fanfare in 1977 (1). Mike Sopko, chair and CEO of Inco in Canada, embraced the ageing dictator in 1996, when Inco negotiated a major 25-year extension to its existing contract.

There's a whiff of corruption in such observations that are difficult to pin down. PT Inco strenuously denies any dirty dealings and its apologists point to an incident in 1976, three years after mine and other plant construction began. PT Inco managing director Philip C Jessop had tried to sack a grafting Jakarta lawyer - only to be hammered with a libel suit by the offended party. When the presiding judge solicited Inco for a bribe in return for dropping the charges, the company enlisted ambassadors from the US, Canada and Australia in its refusal to pay. The case eventually collapsed. (2)

However, it stretches credulity a little too far to believe that Inco has completely avoided kickbacks and sweeteners, during the three decades that it has built up the second biggest foreign mining enclave in the world's fourth most populous state. Only the vast Grasberg copper-gold mine in West Papua ("Irian Jaya"), controlled by Freeport of the US and Rio Tinto of Britain, can boast such high grades of ore and consistent long-term profits - although PT Inco's balance sheet only began showing profits from 1987. In the past twelve months, prompted by an international campaign and the mounting discontent of West Papua's Indigenous population, strong evidence is emerging of lucrative pay-offs by Freeport to Soeharto's cronies during the early nineties. In April 1999, further claims were made that oil companies had issued "blank" shares to Indonesian affiliates of the US oil companies, Arco and Mobil, in order to gain contracts (3).

Indonesians with whom I talked find it difficult to believe that PT Inco wasn't involved in similar payouts. And the respected legal rights organisation, ELSAM, with which I held discussions in Jakarta, is demanding that all "contracts of work" signed under the discredited regime with foreign mining companies, should now be unearthed, investigated and re-negotiated.

Whatever the truth about bribery and backhanders, it's less important than the glaring fact that Inco has sapped Larona's vital energies (4) through a secretive, backdoor, process (or rather lack of it) which wouldn't have passed first post back home in Canada. When, in 1994, Inco announced that, under a new contract with the government, output from Soroako would be increased by 50% before 1999, and two new hydro plants would be constructed on the river, there was no public review process, no published environmental or social impact assessment, and certainly no meaningful consultation between the company and local people. According to one researcher, the Larona dam initially flooded the ricefields, coconut plantations and a mosque, belonging to villagers who lived around lake Towuti; it also prevented the migration of native eels (5).

Then, in 1998, when the headwaters of the Larona ran precariously low, causing a drop in hydro-power and reducing this year's expected nickel output by about 4% on 1998's (6), Inco blamed the impacts on "El Nino" and promptly set about dredging the river bed (7). Whatever the long term deleterious ecological effects of such drastic action, once again they didn't get publicly scrutinised in Indonesia.

Now the company is constructing its second towering dam on the Larona, a few kilometres downstream from the first, and preparing the ground for yet a third. I couldn't get very close to either of the first two hydro schemes - requests for access made to Inco management, and supported by a local community representative, were flatly turned down: "We don't want journalists involved". (In fact, I'd been monitored by the company ever since my arrival in the area a week before. On stepping out of my vehicle to eat at a local restaurant, a snow-white Inco security jeep pulled up dramatically alongside, the florid, moustachioed driver fixing me with a distinctly unfriendly stare. And, within minutes of returning to my hotel, another security team arrived to position itself outside. The following morning, one of my travelling companions overheard an Indonesian in the hotel lobby calling someone - presumably Inco management - on a mobile phone, informing them that nosey journalists were in town).

But two colleagues from Yayasan Tanah Merdeka (YTM), a regional social and environmental action group based in Palu, and I did locate the site of the third phase of this massive assault on the Larona valley. Curiously, it was deserted at the time, and the access gate left unlocked. One of the Soroakons in our party remembered roaming this area as a child, but hadn't returned since - and was shocked: "I've never known the river so low, the current so erratic and the waters so discoloured". Hardly surprising, I remarked, since the company had offloaded thousands of tonnes of aggregates along one side of the densely wooded valley, and poured enough concrete to fill a football pitch, down a sheared-off cliff along the other bank. Dust, slurry, mud and cement from further upstream mixed in with the flow beneath our feet.

I couldn't find many settlers in the expansion area who seemed as concerned as my friends from Palu, about the long-term effects of messing with Larona. The majority of residents in PT Inco's quarter-million hectare concession zone work for, or are reliant on the company's largesse (and of course its electricity). No-one now needs to fish for survival in the local fresh waters. The few people I met at Karebbe, the only significant settlement between the new dams and Inco's port at Malili on Usu Bay, shrugged when I asked whether they'd noticed a difference in water quality: most of their needs were apparently being served by springs across the PT Inco road.

Ironically, Inco prides itself on the pristine nature of Lake Matano, which lies north of Towuti. Matano is smaller in surface area but, at depths of up to 2,000 feet, is Indonesia's deepest lake. Even here, I found silting near the banks while the recently built construction camp for Thiess, one of the expansion scheme's main sub-contractors, was perched right at the water's edge. Nonetheless, Inco seems to have done a fair job of preventing Soroako's population dumping its domestic wastes into Matano, which was an undoubted problem in the early years (8), and it is proud to be promoting Matano as a site for skiing, sailing and other water sports. But this is small compensation for loss of access to Larona and the permanent scarring of what once was one of southern Sulawesi's most magical locales.

It is in these terms, I suggest, that the final calculations of the benefits and deficits of Inco's incursions must be made. Twenty years ago, when only the hardiest travellers ventured to this area, the income to be gained from tourism must have seemed a bagatelle compared with the lateritic riches lying just beneath the soil.

Even at that time, thumbnail calculations based on Inco's contract with the Indonesian government showed that people at large would gain precious little from the massive venture, while the main beneficiaries of its early years - and again today - would be the overseas construction companies, like Bechtel, Dravo, Thiess and the Swiss giant ABB (9). PT Inco's nickel matte all goes offshore (mainly to Japan, one of whose biggest conglomerates, Sumitomo, has a 20% share in PT Inco) along with the added value of processing and manufacture. Jamie Swift of Toronto's Development Education Centre predicted in 1977 that "national revenues [from the project] after thirty years will be barely equal to the initial capital cost of the Soroako complex" (10) and his predictions have proved well-founded.

It's true that, in 1996, Inco was finally persuaded by the Indonesians to commit to spending an additional C$1,500 million in the country over the next dozen years, as a condition of remaining until 2025 (11). It is also true that PT Inco has been told to sell 20% of its stock on the Indonesian exchanges, as a gesture towards "Indonesianisation" of foreign-owned enterprises. However, much of this will end up in the hands of cronies of the old regime - like the Lippo Bank - closely associated with President Habibie, which is now rumoured to be buying Inco shares on behalf of a clique of South Korean businessmen (12).

In thirty years from now - and more likely a long time before - Soroako will probably be a ghost town, its wastes only partially re-contoured and vegetated, its workforce long disbanded, many of its local businesses collapsed, and the hydro scheme possibly fallen into disrepair. Perhaps then, a new generation will glance over what is left of the Larona valley and reflect that the opportunity to use it sustainably, and share its wonders with an increasingly footloose but eco-conscious world has been irretrievably lost.


(1) PT Inco publicity material, 1990 et seq. and Warta Ekonomi April 22 1991.

(2) Jamie Swift and the Development Education Centre "The Big Nickel: Inco at home and abroad" Between the Lines, Toronto 1977

(3) Asia Pulse, March 22 1999

(4) Lateritic ores, such as those at Soroako, Bahomotefe and Pomalaa - in PT Inco's contract area - are typically very moist, due to high tropical rainfall. They therefore require "huge amounts of energy to dry and refine compared with sulphide nickel deposits such as found in Sudbury Ontario, and at the Voisey's Bay nickel deposit in Labrador" (Allan Robinson "Nickel giants hunting for cheaper way to dig" Toronto Globe and Mail April 30 1998)

(5) George Adkitjondro "Can Soroako and Tembagapura become regional centres for development?" in Prisma, Jakarta, August 1982. Tembagapura is the mining town constructed by Freeport McMoran and Rio Tinto (main shareholders in Freeport Indonesia) in West Papua., to serve the massive Grasberg mine. At the time George Aditjkondro was writing, it serviced the Ertzberg mine in the same region.

(6) Inco shareholder information, obtained from internet, February 1999and Jakarta Post, February 13 1999

(7) Information from Mick Lowe, Sudbury, February 1999 (by e-mail)

(8) Swift, op cit.

(9) In October 1998, ABB (Asea Brown Boveri) received one of the heaviest fines (£50 million or US$ 80 million) ever meted out by the European Commission, for its role in a price-fixing cartel for the supply of steel heating pipes. The European Union competition commissioner, Karel van Miert, said it was "...difficult to imagine a worse cartel...The main producers tried to bankrupt the only producer who was prepared to take them on......they continued the violation nine months after Commission investigators caught them red-handed" (Financial Times, London, October 22 1998).It is not known whether this violation by ABB had any direct bearing on its role as a contractor to the Soroako Expansion project.

(10) Swift, op cit

(11) South East Asia Mining Letter, London January 26 1996

(12) The Lippo Bank was among those which the Indonesian government in February 1999 scheduled for "re-capitalisation" - a move which drew criticism, considering the connections between it and Habibie (Financial Times, London, February 3 1999)

Part two: Scars which will never heal

I remembered the words of Kathryn Robinson, who toured PT Inco's imperial domain in 1985. "Strip-mining....induced the clayey soil from the hills to wash into the lake when it rained. Streams that once ran clear had become yellow."(1) Then there was the damning article published six years later by the Jakarta Post, recording how dust from the nickel smelter was choking Soroako town. Yes, Inco had launched a US$60 million dust reduction programme, said the Post. But "that does not mean that the skies will be clean tomorrow" According to PT Inco's then-President, Roy Aitken, that would take "another five years" - by the end of 1996.(2)

I was one of the few independent observers to have ventured into Incoland since. The past two years had been a period of considerable expansion of Inco's mining, milling, smelting, and hydro capacities. Much of this had been underwritten by Inco's long-suffering "stakeholders" (US$240 million as against US$340 raised from international banks) (3). It had reaped few benefits for the people of Indonesia, despite the fact that Soroako's is the second cheapest source of nickel in the world. And cheap at what cost? That of labour? Of the environment? Those amorphous indicators clutched beneath the umbrella of "sustainability"? These were the questions confronting me as I entered Soroako this March. (I knew already that the cheapest nickel in the world is hewn from Russia's Kola Peninsula by the vast outfit, Norilsk. Its smelters, now largely privatised, are still the biggest spewer-out of sulphur dioxide in the world's most polluting state, and historically the largest single cause of acid rain in the forests of Scandinavia. The lives of thousands of Indigenous Peoples in the region have been wrecked by its operations, many of whom were used as slaves under Soviet domination. About half the land mass will probably never sustain agriculture) (4).

They weren't easy questions to answer. More than 10,000 workers had originally been employed to construct Nickel Town (that name still adorns the entrance arch to the town, though Soroako has sprawled so vastly since, it is rather like calling modern Rome "the Papal village"). Most of these had long departed. Hundreds more, attracted from as far afield as Bali and Java, were now being employed on short-term contracts to construct the second phase of the Larona hydro scheme and the fourth smelter line. I met a few of these contract workers, downing coke and cherry-flavoured Fanta, during a lunch break at one of Soroako's numerous "rumah makans" (road-side dining stalls). One told me he was earning the kind of wages which enabled him to join his family back home in Java, once or twice a year. I asked him if he had any complaints.

"Safety standards are terrible", he replied. "Workers often break their legs, lose a limb, or worse. It's their own fault, they just don't observe the rules". But, safety is a two-way street. (In England an ex-miner is currently suing the world's biggest mining company, Rio Tinto, after he contracted oesophagal cancer at the Rossing uranium mill in Namibia. The company claimed that protective masks had been available, but workers neglected to wear them. The plaintiff argues that this was irrelevant: the company owed a duty to its workforce, which it wasn't fulfilling)

These workers will almost all have soon disappeared from Soroako (that's presuming there are no more delays in completing the expansion). In contrast, many of PT Inco's 2,000-plus Indonesian miners, engineers, loaders, mill workers, screeners, hauliers, and professionals, have lived in Soraoko virtually all their working lives, and have no plans to move. They own homes which - at first sight - could have been lifted from an affluent trailer park on an Ontario lakeshore, and dropped wholesale on the banks of the Matano. (In fact they were constructed by Inco then sold to the workforce.) Although it took the company no less than six years to reach a wages and benefits package agreement with the workforce (5) Inco now claims that their living standards are among the highest in Indonesia. Average blue-collar wage is 1.9 million rupiahs (just under C$400 or £160) a month - nearly twice that earned by mine workers at the Rio Tinto-BP managed Kaltim Prima coal mine in Kalimantan (6). Such income is understandably the envy of other Indonesians. Elsewhere in Sulawesi, conservationists report that local people, driven by poverty enforced on them by the Soeharto regime, have resorted to the imprisonable offence of hunting rare species, for sale as "exotic" cuisine. Illegal logging has markedly increased (I was to see some of it going on unchecked within the Soroako concession itself), as income from exported commodities has veered downwards on international markets. Thousands rioted last year against the soaring price of rice in Jakarta (7).

Long-term prospects?

These stark realities seemed a far cry from the leisurely pace of life enjoyed by salaried PT Inco employees. But I could still detect their uneasiness about long-term prospects. The drastic devaluation of the rupiah was encouraging Soroakons to compare their lot with those of workers overseas ("We know we earn far less than others doing the same work in Canada," said one.) In late 1996, furnace number 3 had exploded, killing a worker nearby and putting the entire plant out of operation for several weeks (8) (nor was this the first fatality in the smelter complex) (9). The response to such disasters is muted. Inco introduced new safety rules in 1997, but nobody was fired or held responsible for what had happened the year before. PT Inco's workforce continues to be "represented" by the old government-controlled trade union centre, the FSPSI, which was set up to deter, rather than promote, workers' demands. Although a "reformasi" FSPSI is now establishing itself in Indonesia, it has yet to gain widespread recognition, either within or outside the country.

The faltering of power supplies in 1997 significantly reduced nickel output for 1998, even as world prices spiralled downwards: PT Inco's net profit was reported to have toppled by 74.5% between 1997 and 1998 (10). I told Soroakons about Inco's seesawing negotiations with the Innu nation and the Newfoundland provincial government in Canada, over exploitation of what the company claims is the world's largest nickel deposit, at Voisey's Bay in Labrador. Then there is the threatened development of low-cost nickel sources in Australia. This gave Soroakons pause for thought. Inco had committed one and a half billion Canadian dollars to boosting its Indonesian nickel operations over the next 25 years. But, if Voisey's really was the world's biggest source of nickel ore - along with other valuable mineral "credits"- might the Indonesian expansion get irretrievably stalled? Were the workers of Soroako about to be pawns in a corporate game-play over which they had no control - not even the support of a strong trade union?

If capital costs for Voisey's Bay (or any of Inco's other global plays) markedly increase, it is possible that allocations in Indonesia for HS&E (health, safety and environment) will be cut back further than they have been already. What I saw at Soroako did not give me much confidence for the future. In theory, the company has long been re-seeding mined-out areas. In practice much of this is a sham (hinted at by the corporate smallprint which promises the use of overburden stockpiles for reclamation only "wherever practicable")(11). The galloping exploitation of the past two years is clearly outstripping Inco's ability (or inclination) to rehabilitate land, which had a precarious fertility in the first place, and many of whose nutrients would have been washed away after the removal of forest cover.

The plantation programme may have had some success on gentler slopes, and where care has been taken to conserve the topsoil. But only a smattering of diminutive acacias perches forlornly on the older, steeper piles. In other areas, lateritic dumps have been allowed to harden into typical, gigantic rust-red ant-hills - suitable for motor-bike scrambling, but little else. I predict that the scars on Soroako's surrounds will never completely heal.

Dust to dust

Although the sulphur content of Soraoko's ore is well below that of Sudbury (Inco's nickel mining and smelting complex in Ontario, Canada), dust and particulates pose major problems. Inco admits that emission standards during Soroako's first fifteen years were below par - claiming they were based on those current in Canada at the time. However, the upgrade and monitoring programme approved in 1992 was geared to Indonesian, not Canadian, limits (12). The most important part of the revised environmental management and monitoring plan was the retrofitting of electrostatic precipitators (ESP) to the kiln exhausts, aimed at capturing emissions. The programme is officially "well advanced" - but not advanced enough by any stretch of its public relations talk. An employee who has responsibility for part of the plant made a little shrug when I asked him for the completion date. "None has been fixed", he replied.

The evidence of procrastination is plain to see. Set on the crest of the main Soroako site, the stacks belch out their plumes by day and night, in streams of weirdly shifting colours. Several of the chimneys seem to be staggering on their final legs, fated to topple over in a high wind. At the height of a conventional five-storey building, they spread most of their outfall within a few kilometres of the plant. But this is also the highest point in Soroako, which means that some of it is inevitably cast over a much wider field. A brief walk through the brush and across part of the reclamation area quickly revealed blankets of ash and dust upon what is left of the grasses and trees within the concession area. A local guide took me to a clove plantation 10 kilometres from the smelting complex, where I plainly detected the "crowns" on upper branches, the ragged mis-shaping of leaves, and sickly patches on the bark, familiar to those who observe the impacts of smelters on forests in the northern hemisphere.

I had several meetings with Soroakan residents, where I raised questions about the smelter pollution and its effects. None of them currently worked with Inco, and all had grievances against the company - primarily over lack of compensation for loss of their land twenty years before. Perhaps Inco would say they were biased and misinformed, but I found them sincere and direct. Had they noticed a deterioration in the quality of air, over the past few years? "Yes," one told me. "The roofs of our houses are decaying. Before Inco came we could use them for many years. Now, after five or six years, they go rusty and need replacing. We suffer continual bouts of flu, colds and asthma - particularly our children, But when we go to the (company-run) health centre, we're simply told 'its not a big problem:' and given some pills". It's difficult to prove causality for such claims, especially when an alarming number of Soroakons are addicted to kretek cigarettes (the deadliest of all, according to the World Health Organisation). Whatever the reason, there are clearly quite a few sickly people in Incoland, and an independent health study is an urgent necessity.


(1) Kathryn Robinson, Stepchildren of Progress: the political economy of development in an Indonesian mining town, State University of New York Press, 1986)

(2) Jakarta Post, November 26 1991

(3) South East Asia Mining Letter, London March 1 1996

(4) Milieudefensie, Taking Responsibility: Metal mining, people and the environment, Amsterdam, December 1997

(5) George Aditjondro "Can Soroako and Tembagapura become regional centres for development?" in Prisma, Jakarta, August 1982

(6) Report of the ICEM (International Chemical Energy and Mineworkers Union) mission to Kalimantan, 6-9 December 1998, Brussels

(7) Curtis Runyon "An Unfinished Revolution" in World Watch, January/February 1999, World Watch Institute, Washington DC

(8) South East Asia Mining Letter, London November 29 1996

(9) Six workers were killed and four later died from their injuries, as the result of an explosion at one of the furnaces in mid-1990 (Mining Journal, London September 7 1990). According to Carolyn Marr, in her book Digging Deep: the hidden costs of mining in Indonesia (Down to Earth and Minewatch, London 1993), most of the national press in Indonesia didn't report the tragedy, while the Jakarta Post only mentioned its impact on nickel production - not the fact that workers had been killed. She asks, "Was this self-censorship in a country where multinational companies cannot be seen to do wrong?" (Digging Deep, p.91)

(10) Jakarta Post February 12 1999

(11) PT Inco Twenty Five Years anniversary publication, Indonesia 1993

(12) Ibid

Part 3 A future without much future: Bahomotefe, One Putih Jaya, Soroako

Pull a favourite tropical postcard out of your imagination. It'll have waving palms, golden beaches, coral reefs and rolling, azure-covered hills. Not a bad representation of the east coast of Central Sulawesi, along the Tolo Bay. True, when you approach the particular territory of Bahomotefe (Ba - homma - teffi), the trees get patchy in places, heavy rocks have been dumped in one part of the ocean to make a rough and ready port, and there's a two-lane dirt track, driven through the forest with precious little regard for what grew in its way. It seems like Bahomotefe is at something of a crossroads - and it is. For this is part of PT INCO's quarter-million hectare contract of work (concession) which it started mapping in 1966 during its evaluation of the huge lateritic nickel potential of this part of Indonesia. Although PT Inco - subsidiary of Canada's "Big Nickel" company, Inco - eventually chose Soroako as the site for medium-term operations, Bahomotefe was always considered ripe for future exploitation.

In 1996, Inco concluded a new contract with the regime of President Soeharto, committing the company to further investment of C$1.5 billion, in order to expand the Larona hydro scheme, and increase nickel output by 50%. Although much of this will derive from Soroako, the contract extends Inco's sway over central and southern Sulawesi until 2025 (1). At current production rates, Bahomotefe (along with another major deposit at Pomalaa, to the south of Soroako) could be under the bulldozers within a few years.

Last March I spent three days in Bahomotefe and the surrounding country. I was the guest of an active community leader who, for many years, has been a crucial intermediary between his people, the Bungku, and the government and PT Inco. Equally important, he is widely respected by around 3,000 people who, in 1992, were evicted from their homes in Bali, Java and Nusa Tenggara, under ex-President Soeharto's notorious "transmigration" programme, and relocated in a settlement called One Putih Jaya (Onni Putee Jaya) a few kilometres from Bahomotefe village.

The Indigenous Bungku have long had their own adat (or land claims) system. It qualifies anyone clearing the forest for cultivation to assume ownership; those who plant trees on abandoned plots also gain title to the land (2). Bahomotefe residents cultivate rice, coconuts, and cashews, but also gather forest products (such as rattan) and haul in appreciable catches of fish. There is no doubt in my mind that they are strongly opposed to being thrown off their land and have little stomach for employment as mine labourers, even if Inco were to offer jobs. (A Jakarta newspaper in 1998 reported that the company would reserve 400 posts for local people: no-one I spoke with in Bahomotefe had even heard of the "offer").

During 20 years as a researcher into mining impacts, I have visited a number of communities around the world which have had to face up to the bullying and blandishments of "natural resource" companies. Some that I meet have little previous experience of the disruption and dislocation the industry brings in its wake. However, the Bungku at Bahomotefe know full well what may be in store for them, and have already reacted against it. Last year they compelled Inco to set up its exploration office outside the village, after consultations in Jakarta with Indonesia's National Human Rights Commission. The Bungku live only 80 kilometres from Soroako (as the crow flies - or more accurately, as the foot walks and the catamaran sails) and they have first hand experience of the devastation caused there. They have also had to swallow a hefty, thirty year, dose of the corporation's practices upon their own territory. Some 50,000 tonnes of ore has been ripped from "test pits" - a euphemism for excavations, the size of a motel, now fringed with twisted trees and trampled vegetation.

The unsuspecting traveller comes suddenly upon open bore-holes, 4 metres square, plunging to depths of 30 metres. I would have fallen down one of these, had my friends not forewarned me - it was located in the middle of an area where locals are trying to grow jambomente nuts. Last year, in response to community complaints, Inco said it would fill in the pits and fence off these holes - and that is the last the people have heard of it. But, even if Inco fulfils its promise, the local people still have to contend with logging companies (including Barito Pacific), which took advantage of Inco's exploration road, to plunder in its tracks.

For their part, the transmigrants seem more ambivalent about staying in the Bahomotefe region and fighting PT Inco. Six years back, they were allocated a miserly 1,000 hectares of land (just over 2 hectares for each of their 450 families) in order to grow rice - and they have every right to expect better. On the other hand, the land at One Putih Jaya is fairly fertile and - judging by the profusion of flowers planted around carefully kept lawns - many transmigrants now clearly identify the settlement as home. At a meeting of forty villagers, called for my benefit, I asked if there were circumstances under which they would voluntarily move. "Yes" replied one elder, "but we've laid down two conditions. Each of our families must receive 40 million rupiahs in compensation. And we must be guaranteed adequate cultivable land for the future". In 1997, the provincial government of Central Sulawesi told the transmigrants that Inco would give two billion rupiahs for their relocation - a fraction of the eighteen billion which the villagers are now demanding (3).


The community's eminently reasonable demand for adequate land poses greater problems. Last October, five representatives of One Putih Jaya, along with a Bahomotefe leader, had met the governor, who assured them that a new resettlement area at Soembawalati, 100 kilometres to the north, would suit their purposes admirably. (He also announced that he was holding the transmigrants' land certificates, but he wouldn't surrender them, since "you don't really need them!")

Unfortunately for the Governor's credibility, some of the delegates had already checked out Soembawali. I did so too, discovering - as they did - that it is principally a wide stretch of barren plains and commercial palm oil plantations. The only tract suitable for paddy rice is currently a vast swamp. An engineer on-site at the time informed me that this might be drained, but only if the nearby lake was also emptied. And that would put paid to fresh water supplies for the nearby district town of Tomata. The newly "constructed" camp, in which One Putih Jaya residents would be dumped, sits on the crest of a windswept hill. It immediately evoked for me those indelible 1970's images of Soweto and the apartheid bantustans of South Africa. Each hollow shell of a wooden house looked as if it had been erected in a day by a band of indifferent, ill-paid labourers. The moment I placed my feet inside the doors, the entire edifice shook, threatening to bring the roof and walls down about my head. It was an insult for the Governor to claim that these shacks were substitutes for the lovingly tended homes I had seen in One Putih Jaya a week before.

It's not just a three-cornered fight that's brewing around Bahomotefe. Inco also faces demands from provincial and district, governments for a significant new slice of the royalties cake that has so far gone only to Jakarta. Last year, the provincial governor of Southeast Sulawesi (site of PT Inco's putative 70,000 hectare Pomalaa extension project) reportedly told the company to clear off, unless it began negotiations over direct payments to the province (4). Under Soeharto's iron rule, such claims couldn't be entertained. Now, following "reformasi", they are escalating. This summer, Indonesia will see its first democratic elections for thirty years. If the army doesn't intervene to nullify the results (admittedly a big "if" considering it's currently threatening to quash self-determination for the peoples of West Papua, and has already backed paramilitaries against nationalists in East Timor and Aceh), all existing contracts of work, including Inco's., could be re-evaluated.

So far, like most other mining companies, Inco has argued that local benefits, including compensation payments, must be regulated by Jakarta. The corporation says it has paid millions of rupiahs already to the central government to settle existing claims.

Last year, however, the world's biggest mining company, Rio Tinto, was forced to re-negotiate a similar agreement, made in the early nineties to compensate Indigenous communities, for loss of land and natural resources to the Kelian gold mine of East Kalimantan. This followed a concerted national and international campaign for Indigenous participation in a new negotiating process, and the visit to Rio Tinto's 1998 annual general meeting in London, by a representative of the Dayak communities around Kelian.

Doing a Rio Tinto?

People in Bahomotefe were aware of this militant development, and the idea of "doing a Rio Tinto" on Inco in Canada certainly appealed to them. I found that it also excited Indigenous residents of Soroako. During my week in "Nickel Town" and its scarred surrounds, I was given chapter and verse on the betrayals that they considered they had endured. Before Inco arrived on their land, one thousand people had made a reasonable living from swidden agriculture, on soil which was already poor in yield, supported by the growing of fruits, palms and tubers, as well as the collection of rattan and resin from the forests (5). According to the chair of one local resident's association, Soroakons had first met Inco in 1969, in the person of then-manager Hitler (sic!) Singhwinatu. Hitler had promised that the company would "co-operate with all the local people" giving them free health care, education, electricity, clean water and priority in employment. Four years later, negotiations opened for the corporate acquisition of the peoples' land, as Inco began site preparation for stage one of its huge complex.

Said the Soroakon local resident's chairperson: "It was supposed to be a three way deal. Inco got what they wanted in return for giving us compensation and benefits. The government would set up a team to administer the funds. But the team hasn't functioned since. The only compensation offered was 300 rupiahs for each metre of requisitioned land. That was in fact the going market rate at the time. Half the community accepted the offer, but were only paid 15 rupiahs per metre. They signed a document which they didn't understand and of which they were never given copies. The other 69 heads of families didn't sign."

In 1974, some of these heads went to Palopo to talk with the government, and held a demonstration there. They were promptly arrested and imprisoned for a week without charge. Over the next decade, Inco acquired more and more Indigenous territory in and around Soroako. To house new workers and their families - mainly from Toraja, in South Sulawesi (6), two villages were constructed at Wapondula and Wasuponda, dislocating other people, some of whom were forced to move to the island of Luha , thirty kilometres away on Lake Towuti, in search of fertile land. (Despite its much vaunted post-mining rehabilitation programme, Inco has returned virtually none of the mined out areas to traditional farming). Meanwhile Inco established a health centre, schools and leisure facilities. Of particular - and symbolic -significance to the local people was the corporate seizure of their most productive rice paddy, for the laying of a golf course: a dubious enjoyment, from which most of the original inhabitants continue to be excluded.

Early this year, in the wake of Indonesian "reformasi", the Indigenous Soroakons felt emboldened enough to remind the company and government that undertakings given thirty years before had not been honoured. They were told by PT Inco that only 18 million rupiahs of the original "trust" fund remained - just a sliver of the US$95,000 which the company reportedly paid to acquire their land, and the additional US$80,000 supposedly made over as compensation for the loss of their crops (7). A copy of the 1973 agreement was found (apparently in company archives) dusted down and re-presented. On January 25th a local demonstration by Soroakons was met more sympathetically than its forerunner had been in 1974, The day afterwards, the Canadian ambassador turned up at Soroako, and Inco re-opened the long-stalled negotiating process.

Downwards spiral

But this was not to last long. Just as I was leaving Soroako at the end of March, a meeting between the company and residents was suddenly aborted by PT Inco. In the weeks since, no further meeting has been held or proposed.

My guess is that Inco will continue to stall, at least until this June's elections. It has nothing to lose by procrastination, and a lot to gain. The company clearly doesn't want to start negotiating a hefty benefits and compensation agreement - whether with Indigenous communities, transmigrants or workers - until it can gauge the determination of the new administrations. Even more important for Inco is to evaluate the costs and liabilities of proceeding with Voisey's Bay (including, of course the implementation of a benefits package with the Innu) before spending a single nickel more than necessary, to hang on in Indonesia. You do not require a degree in corporate finance to see that, even if Asian markets become buoyant again early in the new millennium (a considerable qualification), Inco may need to cut back on its outlays in Indonesia, to boost its parlous cash flows (8).

But the "Big Nickel" is trapped in a cleft stick. No future Indonesian government is likely to unilaterally rescind the company's Sulawesi contract of work. Nonetheless, political pressure to increase - and redistribute - royalties, along with new legislation mandating higher environmental standards and, above all, official recognition of the rights of Indigenous Peoples, are no longer the impossible pipe dreams they were a short year ago. For the present, I cannot predict the future of Soroako, or prospects for the rest of Inco's Indonesian domain. But, if the company's board in King Street, Toronto, or its underlings in Indonesia, think they can sail through the next 25 years, as unscathed, unhindered and as cheaply, as they have through the last, then they are baying at the moon.

And doing so as wistfully as the wild dogs which emerge every night from the forests, to pace Bahomotefe.

Acknowledgement: I am grateful to Yayasan Tanah Merdeka, Palu, Central Sulawesi - and residents of Bahomotefe - for background research quoted in the first part of this article.


1) In 1994, when Bahomotefe re-entered PT Inco's calculations as an expansion area, the company said it was not sure whether ore from the area would be trucked to Soroako, or form the basis of an independent operation - possibly a ferro-chrome plant. This would depend on "the grade and type of ore" [Metal Bulletin, London, December 5 1994]. Even if this were a serious option at the time, it can hardly be now: the costs of building and powering a ferro-chrome plant would far exceed those of building an all-weather road across the hills to the existing smelter and, of course, expansion in the past two years has concentrated almost wholly on Soroako and Larona.

(2) Background material from Yayasan Tanah Merdeka, Palu

(3) According to other sources, PT Inco was asked by the government to pay all the relocation costs, which were estimated to be Rp 10 billion - a figure mid-way between these two [Kompas November 2 1995 and Surya August 5 1996]

(4) ANTARA News Agency, Indonesia, November 6, 1998

(5) George Aditjondro "Can Soroako and Tembagapura become regional centres for development?" in Prisma, Jakarta, August 1992.

(6) ibid

(7) ibid

(8) In April 1999, PT Inco announced that it had sought (and gained) approval from its partners in Indonesia, to borrow US$200 million from its parent in Canada, in order to finish off the Soroako expansion [Mining Journal, London April 23 1999]. While not exactly a case of "robbing Peter to pay Paul", it suggests there has been a severe cost overrun in Sulawesi. Nor can it have re-assured Inco shareholders and Canadian workers, some of whom have criticised the company's reckless "adventures" in Indonesia for some time.

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