WHEN THE New York Times broke the story in September, 2004, it seemed like an open-and-shut case: Ever since Newmont Mining Corp., the world’s largest gold producer, had opened a mine in the Indonesian fishing village of Buyat Bay, villagers had complained of rashes, dizziness, and other mysterious symptoms. Finally, after Masna Stirman’s deformed six-month-old daughter died in July 2004, the Indonesian National Police released a report showing that Newmont’s method of waste disposal, known in the mining industry as submarine tailing, had polluted the waters of Buyat Bay with mercury and arsenic. On the surface, it was just another case of a multinational corporation taking advantage of the lax operating practices in a poor country.
Two-and-a-half years later, Richard Ness, the chief executive of Newmont’s Indonesian subsidiary, is awaiting a criminal negligence verdict from an Indonesian district court, expected to be delivered on April 24. He faces three years in prison and a fine of 500 million rupiah (roughly $55,000). If found guilty, Ness will be a poster-child; a cautionary tale to reckless mining corporations who believe they can operate with impunity in developing nations. Justice will have been served. Or will it?
A closer look at the allegations leveled against Newmont reveal a murkier picture. A few months after the first report in the Times, a Jakarta court ruled that the police investigation surrounding the case was illegal. Key witnesses have recanted their statements, and the prosecution’s case has been punctured by numerous studies that have found no connection between Newmont’s waste disposal and the health problems of people at Buyat Bay. The civil suit filed on behalf of Masna Stirman and other villagers was dropped in late 2004. Another civil suit, brought by the Indonesian government, was settled last year in a good-will agreement. But in spite of ample evidence that the charges are bogus, the criminal case against Richard Ness forges onward, fueled by the Yudhoyono administration’s public image campaign. Alphonse LaPorta, President of the United States-Indonesia Society, calls the case a political “manipulation of the Indonesian judicial system” to “embarrass and extract benefit” from Newmont.
A November 2004, editorial in the New York Times, “Pollution at Buyat Bay,” sheds some light on why the Indonesian government targeted Newmont: “Susilo Bambang Yudhoyono, a former general, became Indonesia’s first directly elected president last month partly on the promise of a cleaner, more open government, free of entanglements with special interests. He now has an opportunity to begin redeeming that pledge.” The editorial went on to say that the government had an “obligation” to “seek appropriate remedies from [Newmont].” In the years since, the Yudhoyono government has followed the Times’ prescription for action to a tee, refusing to allow pesky facts to hinder its crusade for justice for the little people. Carol Raulston of the National Mining Association says that, in her view, “the New York Times continued to place the government authorities in a more difficult spot. It backed them into a corner in terms of clearing Newmont.” Jane Perlez, the Times reporter who provided most of the paper’s coverage of the Newmont story, declined to comment for this article.
Submarine tailing disposal, which consists of piping mine waste toward the ocean floor, is potentially harmful, and accusations of contamination deserve to be taken seriously. The two main claims made against Newmont are that its mining practices made Buyat Bay residents ill, and that the company did not have the proper operating permits from the Indonesian government. Let’s see if either of those claims holds water:
1. Mercury and arsenic contamination sickened the villagers at Buyat Bay.
The police report confirms this, but it is the only study of the bay that does so. Not exactly a bastion of virtue, the Indonesian police somehow managed to come up with ten additional samples over the course of the investigation that were never accounted for among those taken in the field. Meanwhile, studies conducted by the World Health Organization, Australia’s Commonwealth Scientific and Industrial Research Organization, Japan’s Minimata Institute, and Indonesia’s own Ministry of Health all found Buyat Bay to be clean relative to “normal” Indonesian waters. Indonesia’s Ministry of the Environment claims that the problem isn’t with the water itself, but with toxins in the sediment on the ocean floor, which it says entered the food-chain through bottom-feeding organisms. Even working with this hypothesis, the WHO’s report concludes that “health effects due to methylmercury exposure were not observed among the Buyat Bay villagers.”
The WHO report contradicts Dr. Jane Pangemanan, who examined the villagers in 2004, and was quoted in the first Times story as saying that 80 percent of those she saw appeared to be suffering from mercury and arsenic poisoning. As it turns out, Pangemanan has since been contradicting herself. On the witness stand, she retracted her statement and admitted that she is not qualified to assess symptoms of mercury and arsenic poisoning.
The Newmont scandal has been a feeding frenzy for Indonesia’s environmental groups, who are eager to come to the aid of the native population, even if it means fabricating their symptoms. The most vociferous of the groups, the Buyat Bay Humanitarian Committee (KKTB), allegedly offered cash to villagers who were willing to speak out against Newmont. A March 2006, article in the Wall Street Journal Asia quotes three villagers who jointly told reporters: “There was a meeting and a man from KKTB said that to move, we would get a house and 100 million rupiah if we would stay relocated for three months NGO said to us that the villagers would have to keep making claims against Newmont in order to get money from Newmont.”
A study conducted by Sam Ratulangi University Medical School found that the health problems affecting the residents of Buyat Bay are common to people in low-income, rural areas of Indonesia: poor sanitation and sewage systems, which lead to contaminated drinking water, as well as malaria and other diseases. This is not to say that Newmont’s activities had no negative effects on the people of Buyat Bay; but the investigation into what exactly those effects might be has been tainted by a corrupt police force and an equally corrupt consortium of NGOs.
2. The Newmont mine was operating without required government permits.
The criminal indictment of Richard Ness states that the Indonesian government permit issued to Newmont in 2000 was a temporary one, valid for only six months. The company maintains it was never informed it was not in full compliance with the law. At Ness’ trial, no less than five current or former government officials testified that Newmont did in fact have the necessary permits. These witnesses included two successive ministers of environment and the former head of the Ministry of Mines regional office in Buyat Bay’s province of North Sulawesi.
The charges facing Ness are dubious, to say the least. While there may have been some legitimate cause for complaint against Newmont, the investigation and judicial proceedings have been botched so badly as to do a disservice to the purported victims in the case–the Indonesian people. If Ness is declared guilty on April 24, he and Newmont will collectively pay the notoriously corrupt Indonesian government 1.5 billion rupiah, of which impoverished Indonesian villagers will not see a dime. What’s more, a conviction would cement Indonesia’s reputation as an unfriendly environment for investors, scaring off businesses like Newmont, which sunk millions of dollars into health clinics, job-training programs, sanitation, and other infrastructure in the Buyat Bay area.
The resource-rich island nation could be cashing in right now on the high prices of gold, nickel, and other minerals. Instead, Indonesia’s corrupt bureaucracy and capricious legal climate have already frightened away potential investors. Foreign direct investment (FDI) to Indonesia is roughly half what it was before the late-1990s Asian financial crisis. The United Nations’ Inward FDI Performance index, which ranks the FDI of 141 countries relative to GDP, shows Indonesia falling from 80th place in 1997 to 112th in 2005, the last year for which data is available. This places Indonesia far behind its neighbors Thailand, Malaysia, and Singapore, who rank 96, 62, and 5, respectively. “U.S. investment has been anemic in Indonesia for a number of years,” says Murray Hiebert, the U.S. Chamber of Commerce’s senior director for Southeast Asia. “A new investment law was passed in Indonesia [in March], but a guilty verdict against Ness will negate any goodwill created by this new legislation.”
If Ness is convicted, it will be not only Newmont but also the Indonesian people who are getting a raw deal, while government officials get the payoff. Whether or not it is touted as a victory for “the little people,” corruption is corruption, plain and simple.
Abigail Lavin is a staff assistant at THE WEEKLY STANDARD.
