Labour costs and sacrifices

Labour costs and sacrifices

The KPC mine was to provide jobs and help with infrastructure (roads, electricity) and social facilities, specifically for transmigrants [information from a socio-economic and agricultural study on transmigration, carried out by the University of Samarinda, 1989]. The majority of KPC's Indonesian workforce has in-migrated from Java, Sulawesi and elsewhere in Kalimantan - mainly from the Pertamina oil fields in the Sangatta area - attracted by the relatively high wages offered by KPC. "Relative" is the key word: in mid 1997 the basic wage for a KPC worker was Rp 400,000 (just over US$100 at the time) per month - more than three times the provincial minimum wage. Following strike action in late 1997 (see below) - the basic wage rose to around one million rupiahs a month, according to a report by ICEM, the International Chemical, Energy and Mineworkers Union [Report of the ICEM mission to Kalimantan December 6-9 1998, Brussels].

However, much of the apparent gain was wiped out by the dramatic collapse of the rupiah during this period. In any case, KPC workers (as of March 1999) were collecting only just over half the wages paid by PT INCO for comparable work at its Soroako operations in South Sulawesi [see Minewatch Asia-Pacific case study on PT Inco, London and Baguio, May 1999.] (According to Australian research, in 1998 average labour costs at US coal mines were US$3,580 on month compared with only US$540 a month in Indonesian coal mines. This is clearly still considerably more than what the majority of Indonesian miners receive in take-home pay and is presumably calculated on gross expenditure on employment, including services, benefits; and for all classes of the workforce [see AME Mineral Economics, Coal Industry Operating Costs to 2003 Sydney 1998])

During my field trip to Kaltim Prima in March 1999, local (Kutai) residents complained that KPC management was actively discriminating in favour of migrant/settler workers, despite the fact that the company had originally promised them a specific allocation of jobs. Ostensibly this discrimination was based on their lack of secondary or higher education and engineering qualifications. However, one young man, who held a certificate in mechanical engineering, told me that, although he had appropriate training and been given a company test, KPC had rejected his application - in his view unfairly.

From the outset, the mine's management was intent on reducing unit costs, both of production and labour, even though the high value of the best of KPC's coal, as well as its easy accessibility, allowed the company to boast that it is among the cheapest on the world market. The AME Mineral Economics group in 1998 put Indonesia's production costs at the world's lowest, if measured in terms of tonnage (US$20/tonne) and second lowest in terms of energy output (US$0.79 per Giga Joule, as distinct from South Africa's US$0.77/GJ) [AME Mineral Economics, op cit]. In a candid statement in 1993 - just after the mine's first full year of production - KPC's managing director John Slater announced that expansion was solely dependent on "put[ting] in more trucks and shovels and maybe an extra crusher" - but not employing more staff. "We are not going to lift staff numbers for expansion. We expect to see expansion come through efficiency gains". And a key strategy for doing this would be by reducing the number of "costly" expatriates, replacing them with Indonesians (to be cut from 125 to 65 before 1995, with a local "production " workforce of 2,000 nationals) [Papua New Guinea Post Courier, March 22 1993]. In fact, according to ICEM, around one hundred expatriates are still directly employed by KPC, and another 100 in other functions: in April 1998 the company said it employed directly 2,411 Indonesians [Andrew Vickerman to Carolyn Marr, DTE, op cit].

(The role of expatriates and local training programmes is worth examining in more detail than this case study allows. KPC promised - as companies blithely do - to "Indonesianise" its staff as quickly as possible after the mine came on stream. Yet by 1997, David Klinger - then managing director of KPC - was complaining that the company would have to advertise for even more expatriates, since Indonesians weren't being attracted to work at the mine: presumably he meant to key management positions, rather than operating trucks and shovels. Expatriates at Kaltim Prima live in a purpose built township on the coast, 15 kms from the site, in conditions which the ICEM describe as "extremely good...significantly superior to that enjoyed by mineworkers in company mining towns in Australia" [ICEM report ibid]. It is hard not to avoid the impression that recruitment at the white collar level is virtually self-fulfilling: because the work is well paid, the benefits considerable, Australians in particular like working there and can be wooed from troublesome mine sites back home (see below). The costs involved in training Indonesians to effectively break this implicit racial zoning are not regarded by the company as a political necessity: the workforce has so far not mobilised sufficiently to demand an end to such "apartheid". And, at the bottom of the pile, languish the Indigenous inhabitants of the area - considered at best a small pool for the services sector, and at worst a bloody thorn in the company's side).