Mining, Corporate Social Responsibility and Pluralism in Papua New Guinea

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Mining, Corporate Social Responsibility and
Pluralism in Papua New Guinea

• Ben Y. Imbun
• School of Management
• University of Western Sydney
• 10th Annual Global Development Conference,
  Kuwait, February 2-5 2009.

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Outline

• The PNG Mining Context.
• Main themes the PNG literature.
• Emergence of pluralistic practice of CSR.
• Testimonies of expatriate mine managers.
• Emergence of pluralism in PNG mining.
• Evidence from three mines.
• Down side of pluralistic activity.
• Summary.

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The PNG Mining Context

• Few medium to large world standard mines.
• Handful of projects under construction.
• Robust exploration activity.
• PNG Worlds 11 largest gold producer (2007).
• 50 of income and 25 of GDP (2006).
• Enclave projects and mining policy viewed same
  (except environment).
• 9000 mine workforce, (6 of formal workforce).

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The Mining Map
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Main Themes -The PNG Literature

• Mining policy of maximizing government revenue
  and utilizing them for national development.
• Disgruntled and disenchanted rural communities of
  mining areas emerging and forming formidable
  political power base.
• Love-hate relationship between government,
  local communities, and mining companies.

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Main Themes

• Civil, political and environmental crisis of
  mines have promoted the emergence of landowners
  as the other stakeholder.
• Mining companies role in employment and skill
  formation activities.
• Idiosyncrasies of individual mines on varying
  topics.
• Mining and CSR led development in rural PNG

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Emergence of Pluralistic Practice of CRS in PNG

• Unique character of PNGs mining aided
  development system is not explained in general
  CSR theories.
• Conflict is a product of diverse groups and
  sources of loyalty.
• International research seldom acknowledge
  idiosyncratic aspects as varyingly influence CSR
  of (mining) companies.
• PNG government and society embody strong signs of
  pluralism.
• Pluralistic participation has become norm for
  large scale mineral exploitation in PNG.

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Negotiation Savvy Communities?

• I went to the best schools, taught by the best
  professors, but no body told me there was a
  Porgera in PNG ( V. Botts, Porgera mine manager,
  1992).
• I often say that having spent 10 years in Africa
  and another 10 in the Middle-East, I thought I
  was an expert in dealing with under-developed
  communities. But I threw the book away soon after
  I arrived here (G. Laudon, Lihir mine manager,
  1998).

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Emergence of Pluralism in PNG Mining

• Causal factors.
• Underdevelopment of rural areas.
• The Bougainville mine crisis.
• Progressively aggressive and proactive local
  communities.
• Weak governments.
• Relevant institutional policy framework.
• Proactive and (sometimes reluctantly) willing
  mining companies.
• 1990s Industry Initiatives towards Best Practice

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Fig1. The CSR Role of Mining Companies in PNG
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Pluralism in Action Evidence From Three PNG Mines

• Common characteristics
• i) Located in rural and isolated areas.
• ii) Communities obsession with cargo cult and
  prophetic legend of benevolent figure.
• iii) Common feelings of neglect by their
  governments, and people.
• iv) Determined and strong community leadership.
• v) . Only facilitating role for governments.

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Porgera Mine

• 1989 Porgera became first mine to go through
  pluralistic style mine development negotiation
  process.
• Resulted Porgera Forum, principle to be
  applicable to other existing mines and potential
  mines.
• Also resulted in altering the Fiscal Regime for
  Mining.

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Benefits to Governments and Communities in Rural
Areas

• Royalties.
• Special support grant.
• Compensation and relocation payments.
• Infrastructure Tax Credit Scheme.
• Equity participation.
• Prescribed infrastructure.
• Prepared Area Status, education, employment and
  business development assistance.
• Miscellaneous grants and support

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Ok Tedi Mine

• Environmentally disastrous mine since its
  establishment in 1984.
• Prompted restless and vigilant local
  communities.
• Porgera undertaking only legitimised Ok Tedis
  tacit policies.
• 1990 OK Tedi established Lower Tedi/Fly River
  Development Trust.

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Legal Debacle and Sustainability Development
Endeavour

• In 1994 BHP is sued in Australian High Court for
  environmental damage.
• Prohibition of Foreign Legal Proceedings Act,
  1995.
• 1996 BHP agreed to settlement.
• 2001 Ok Tedi Mine Continuation Act allowed
  provision for BHP to gift its equity to PNG
  Sustainable Development Program Company.

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Lihir Mine

• Lihir gold mine commenced in 1997.
• Prophetic to a cargo cult obsessed island.
• In 1995 Integrated Benefits Package (IBP) signed
  by National Government, Nimamar Development
  Authority and Lihir Gold.
• 6.76 equity in mine held by local community.
• IBP reviewed and renamed Lihir Sustainable
  Development Plan in 2005 with a long term focus.

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Down Side of Pluralist Activity

• Fragmentation of community power base and
  emergence of few super big men.
• Unequal distribution of resources and development
  and emergence of stratified communities and
  regions.
• Departure of CSR friendly and reputable
  companies (i.e. Rio Tinto, BHP, Chevron)
• Hot spots for development conflict, HIV/AIDs,
  etc.

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Summary

• Mining and CSR regime have developed embryonic
  pluralistic independent local community groups.
• Emergence of local communities as the other
  stakeholder in the trinity of mining development.
• Large scale mining developments can not operate
  on a daily basis without contributing tangibly to
  development pursuits.

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Summary

• The right to negotiate by local communities is
  not seen as a barrier to FDI.
• Integration of development role into the
  mainstream of mining operations.
• Thus mine operators are seen as their
  government in rural communities.
• Role of PNG state has become that of a mediator
  for competing interests.

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Porgera Mine Showing Outflow of Tailings
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Illegal Miners, Porgera
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Development Conflicts, Porgera
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Graves, Results of Conflict Over Compensation
Payouts, Porgera
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Porgera Mine Operator Challenged In Its Own Turf
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Ok Tedi Copper Mine
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CSR Project Areas of Ok Tedi Mine
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Environmental Degradation Along Fly River System
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Ok Mine Tailings and Sediment
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Ok Tedi Mine/Community Development Meeting, South
Fly
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Lihir Gold Mine
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Lihir Landowner Demonstration
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Community Road Upgrading Project, Lihir Island
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Acknowledgements

• GDN and ODN for facilitating the presentation of
  this paper at this conference.
• Photos, courtesy of Jerry K. Jacka, Porgera mine,
  Ok Tedi mine, and Lihir mine.
• Thank you all !