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Focusing on a tangled web of labor disputes, equity divestment and political subterfuge, the Forbes Magazine article “Cave In: Freeport-McRoRan Digs Up A Heap Of Trouble In Indonesia” reveals a company faced with the competing interests of potentially overwhelming profit versus outsized internal and external pressures. As an American-based corporation that relies primarily on Indonesian investment, international business practices play heavily into Freeport-McRoRan’s company model and current troubles. Freeport is also presently dealing with ethical issues ranging from its treatment of employees to potential environmental degradation.
Mining giant Freeport-McRoRan, an international corporation based in the United States, is struggling to meet ore-refining investment demands in Indonesia. The Forbes Magazine article “Cave In” outlines the company’s long and colorful history in the Papua New Guinea area of Indonesia, tracing its successful penetration into an area famous for a “mountain of ore” and linking it closely to the rise of the infamous Suharto regime. The litany of problems currently facing Freeport-McRoRan involve a recently resolved labor strike, accusations of political malfeasance undertaken in conjunction with the central government against Papuan natives, possible environmental violations, attacks on gold and copper transporting pipelines that may be the work of the central government, industry nationalization and divestment pressure, illegal competing mining operations and other miscellaneous security concerns.
International business practice obviously plays a large role in this article, as the organization is a New York and Phoenix based mining company that conducts nearly half of its investment in Indonesia. As such, Freeport must sign a contract with the Indonesian government in order to engage in business in the country and renew it every ten years. Currently, Freeport is under the government pressure to move more of its metal extraction operations into Indonesia, and is also addressing Indonesian pressure to undergo an equity divestment. It’s dealing with a delicate political situation that requires it to work closely with Indonesian military forces in order to counter a series of attacks on its workforce and pipelines. In addition, it must walk a tightrope when dealing with labor negotiations. While Freeport has an obligation to its investors when it comes to maximizing profit, it must balance that consideration with the fact that it must be seen to employ fair labor practices and, as an outside American investor, may need to hold itself to a higher standard than local regulations demand.
That leads into a deeper discussion of business ethics at play here. Freeport is dealing with a powder keg of ethnic tension in New Guinea, with locals claiming that they are the target of racial discrimination at the hands of migrant workers imported by Freeport. They recently demanded a 40% wage hike and an overall improvement in working conditions. While Freeport agreed to their demands, their ethical problems in New Guinea extend further, with claims of environmental despoilment. Freeport is also dealing with competing mining operations that illegally use the toxin mercury to extract copper and gold from mines. Freeport must shut down these illegal operations but it must also educate the local population on the dangers of mercury poisoning. Finally, Freeport has to deal with yet another balancing act by weighing the safety of its workers with its investment operation. The company has dealt with attacks not just on pipelines but on air and road transport convoys that sources say are linked to the central government itself, who they believe want to extract additional security revenue in order for protection services. Freeport must decide whether to cave to what it perceives are subtle government demands or whether continue to beef up its own security forces, despite the continued wave of attacks. Clearly, Freeport-McRoRan has a wave of international business and ethical issues to confront in order to achieve and maintain sustainability and profitability.