CHAPTER 4: Labour Market in PNG Mining
By: Benedict Y. Imbun - UPNG Press 2000.
| Mining Labour and Employment in Developing Countries | PNG labour market & employment | Employment Issues | Importation of Expatriate Labour | Preferential Employment Policy | Training | Table of contents |
This chapter examines the various courses of action taken by overseas mining ventures in PNG in their bid to structure the mining labour force, while taking into account that reliance upon an underdeveloped labour market might produce unacceptable economic risks. Any course of action to recruit sufficient workers, whether they be skilled expatriate or national workers is not without concerns, dilemmas, and issues relevant to both the developers and the host government and its people. One of the objectives of this chapter is to examine these complexities in the context of various PNG mines. In the discussion it will become obvious that in the PNG mining industry there are some exceptions to the model of human resource development as described by Kerr et al. (1960). PNG, as a newly independent country, has been slow in coming to terms with the broad changes to a predominantly subsistence economy. The previous colonial powers that had controlled the island since discovery from the 18th century till 1975 had done little in terms of developing a suitably skilled workforce to run the economy after political independence. The labour supply problem can be traced back to an indendured labour system used for a long time to tie villages into the colonial plantation economy in such a way as to ensure and maintain a supply of cheap labour (Fitzpatrick, 1978:102). As a result of this undeveloped labour market, an unprecedented demand for skilled labour in the resource sector has led overseas developers to scramble for the little there is available. Nowhere in the country is the demand for labour more conspicuous than in the mining sector. This situation has created a temporary stumbling block for the developers while at the same time it has allowed Papua New Guineans to redefine in their own terms who should and should not gain employment in the major private sector area of employment, the mining industry.
The mining industry in the developed countries is not a large employer compared with other sectors of those economies. The capital-intensive nature of the industry only requires a few workers to man the highly mechanised extracting machinery. But such is not the case in developing countries where mining often represents one of the few opportunities for formal employment. Often large numbers of dependents are supported by any single mining worker. From another perspective forward linkages into other parts of the economy are also important. The ILO estimated that there are 250,000 jobs in the state tin mines in Indonesia but up to 100,000 people in other industries depend on the tin-mining industries for contract work (ILO, 1990:93). In turn, because of the high levels of capital investment, recouping exploration, construction and start-up costs is a high priority. This invariably requires that skilled personnel be recruited from where ever they are available internationally.
Unfortunately, the supply of mining professionals in the developing countries has been limited and does not meet the requirements of the unprecedented rapid development of mines that is occurring in some regions. Katz (1994) stated that in ASEAN (Association of South East Asian Nations) nations (including PNG) there is the 'greatest demand' for technologically capable graduates to meet the needs of an increasingly sophisticated mining industry. The demand has increased progressively since 1975 because these industries have experienced high growth, averaging 5-7 per cent a year. On the supply side facilities and programs for training in mining varies from country to country but are a long way off from achieving an ideal situation where the supply and demand for mining professionals is in balance (Katz, 1994: 59). In general, there exists persistent short falls in the supply of mining professionals in developing countries.
Often faced with the uncertainty of finding the requisite number of workers of the right quality in the prevailing labour market mining enterprises have imported some of the core workers for their operations. This move may not be in line with the host government's policies, but given the commitments on the part of the mine management in respect of cost, quality and schedules, reliance upon the indigenous labour market may result in not just inefficiency but unacceptable hazards (UNDP/ILO, 1993). In the ASEAN countries, 'much of the slack', as Katz (1994:59) confirms, 'is still taken up with a considerable number of expatriate mining professionals'.
However, while professionally skilled expatriates have been employed to cover deficiencies in the host country labour supply in the mines, many countries have implemented training programs specifically to enable indigenous labour to replace them. On the whole, expatriates may not represent a large proportion of the mining workforce, but they dominate the skilled and managerial position in parts of the Third World. However, in some countries there has been a progressive decline in the demand for expatriates in mine jobs. According to the ILO the proportion of expatriates working in the mining industry of Botswana fell from 8 per cent in 1982 to 6.7 per cent in 1987. In Zambia about 1400 or 2.5 per cent of the total workforce were expatriates in 1990 (ILO, 1990:93). For reasons which will become apparent, PNG is an example where training and localisation is progressing smoothly in some established mines, but ironically the new mines have had problems recruiting skilled national technical workers, let alone national managers and professional workers. Thus, they continue to rely on expatriate labour.
Developing new mining projects in PNG has been a challenge for the companies involved. The country's previously inaccessible topography has been successfully opened up by state of the art engineering feats. However looking for the right kind of skilled labour in a constrained labour market is a problem for the mining enterprises.
To discern the picture let us look at the PNG labour market. A proper discussion of the salient features of the labour market is always extremely difficult because employment statistics are either incomplete or sometimes nonexistent in some areas. The nature of the problem has been stated in several works (Lodewijks, 1988; McGavin, 1991; Fairbairn, 1993) which argue that although the employment statistics cover a major part of the major-wage earning employment, they often omit a range of wage earners and self-employed persons in the informal sector. This is often complicated by the application of defining and measuring concepts which are straightforward in developed countries but of less use in a developing country context. Despite the cloudy impact that several of the features of the labour market might have of conventional notions of citizen employment, the formal figures are nonetheless worth stating:
Large-scale modern mining operations in PNG have been fraught with employment problems. At the beginning of each mine's operation, employment and recruitment have been problematic. As the mines settled, issues of training and localisation have come to the fore. In general the demand for labour was more intensive some eighteen years ago than today. When CRA began the country's first mining operation on the island of Bougainville in the early 1970s, there was no pool of trained personnel to draw on. The earlier exploratory phase of the project (like other mines to come) employed 600 locals, mainly unskilled labourers (Bedford and Mamak, 1976:118). However when the mine entered the construction phase there was an urgent need for a stable workforce that forced the company to make a major shift in recruitment policy. Initially it recruited locals, but as more skilled positions quickly became available, CRA was compelled to look elsewhere. The island had very little pre-existing economic activity. The company could not draw on massive numbers of sub-contractors. The mine looked to other parts of the country for its workforce.
A significant portion (30 per cent) of the Bougainville mine's labour force had to be brought in from other parts of PNG between 1971 and 1972. They came as sub-contractors who arrived along with their entire labour force. A relatively core number of mostly skilled Australian workers were present throughout the mine's construction and more visibly during its commissioning in 1972. But it was the inflow of other Papua New Guineans that the local residents resented above all. Subsequently this dramatic increase was followed by a fall in demand for labour as the mine neared production.
When Ok Tedi, the country's second largest open-cut copper and gold mine was about to begin construction in one of PNG's remotest border areas along the Western Province in the early 1980s, employment problems again severely impinged on the mine's development. Feasibility studies commissioned by Ok Tedi Mining Limited (OTML), the mine developer and the government reached the same conclusions. A lack of skilled labour was the 'biggest single constraint' to expansion of local capacity in all sectors of the project (Fluor Mining and Metals International, 1980; Jackson, Emerson, and Welsh, 1980; Jackson, 1993:154). This was despite a significant increase in skilled labour supply since the period of Bougainville construction in early the 1970s. Fluor, the construction consultant company with worldwide construction experience in different types of projects drew up a master plan that classified the annual workforce projections by skill (see Table 1). This classification was to be used to estimate which skills could be developed through training programs. However given the extent of the deficiencies in skilled labour supply and the modest nature of the mine developer's own training proposals, there existed the strong possibility that the project would recruit its labour force at the expense of other construction activities in PNG by offering higher wages.
Table 1 presents Fluor's forecast of skill and training estimates. Although it was admittedly optimistic, it served the useful planning role of defining a maximum construction sector scenario within which workforce planning options could be considered. What is also contained in the forecast is the aggregate demand for new construction projects through the 1980s. Fulor assumed that three major mining projects, in addition to Ok Tedi, might be developed over the decade.
The PNG government's own socio-economic study saw that because of the relatively small size of the PNG skilled workforce, Ok Tedi could have an adverse impact on the country's economy. There was particular concern expressed regarding the effect the project would have on the very small skilled labour market. Even without Ok Tedi it was predicted that there was going to be a shortage of skilled labour at least during the 1980s. Moreover, advisers feared that wage pressure in PNG caused to by an excess demand for skilled labour would push up the wage rates for this labour, thus increasing national wage differentials within the economy. There was the possibility that Ok Tedi would act as a pace setter for national wages (Jackson, Emerson and Welsch, 1980). In the event much pressure was put on the developer to realise the potentially disruptive effects that a higher wage would have on government wage policy.
On the other hand Fluor's view on training and localisation argued that since most PNG citizen recruitment would be for training positions, the Ok Tedi project would neither affect nor be affected by the national employment outlook. This view was based on the assumption that the demand for labour was only going to be for the construction period (as was the case with BCL) and recruitment of trained personnel was minimal as most people would be trained by the company. Fluor was optimistic that the estimated 1877 employees would eventually be made up of mostly (80 per cent) citizen workers eventually as the project settled down. However, the reality of the country's labour market situation was that local labour deficiencies were to be rescued by importation of expatriate labour if the project was to go a head.
The obvious solution, aired in the employment debates, was to import expatriate labour which Kerr et al.'s (1960) model predicted. This created a few problems which were not, however, envisaged by him and his associates. One problem was that in many developing countries there are laws reserving employment to citizens. In PNG the Employment of Non-Citizens Act required that some of the jobs which were exclusively for nationals (i.e. brick laying, painting) were to remain as such. But with the very low supply of skilled labour in most technical areas in the country, recruitment of expatriate labour became a necessity. Another problem was that the recruitment of expatriate labour was inconsistent with the optimistic localisation targets proposed by Fluor. However, government advisers deviated from their earlier position and supported expatriate employment to meet the deficiencies. In the event, employment of expatriates became a complicated issue.
In contrast to the Bougainville mine which employed a core of Australian construction workers, Ok Tedi was expected to draw its labour mainly from Asia. The employment of Asians was favoured by mine management on the grounds that they were to be paid lower wages than Australian workers, and were expected to be more disciplined, and less-unionised. But the government planners approached the Asian proposals with some trepidation. One of the concerns planners had with employing Asians was the fact that Ok Tedi's location was close to the Indonesian province of Irian Jaya. This meant that the local Ok Tedi workers at the project's location would have half their tribal culture group on the other side of the border, and Asian workers might be met with hostility resulting from the insurgency in the West Irian frontier region. Such fears were never investigated nor substantiated, but did raise government anxieties. The government eventually accepted that the employment of Asians would be in the interests of completing the project on time and within budget (Pintz, 1984:159)
Table 2 presents IOTPR (Impact of the Ok Tedi Project Report) forecasted that a 3000 workforce was needed for the construction period from 1980-83. In many respects IOTPR forecasts were on target but only awry in one respect - employment of non-Asian expatriates was in significantly greater numbers than had been anticipated.
The urgent need for extra skilled labour was generally resolved with the importation of expatriate labour. As Table 2 shows, surprisingly, employment of non-Asian expatriates (mainly Australians) was in significantly greater numbers than had been anticipated. But attempts to fill the large quota for local skilled and semi-skilled jobs were confronted with the acute issue of whether to employ residents or immigrant labour from other parts of PNG. The experience in all PNG mine sites has invariably been local pressure from tribal land owners (of project sites) to have locals hired where ever possible so as to maximise the benefits of the mine to those whose lives and culture are disrupted by the mining activity. Additionally, the isolation of the site and high costs of the employment packages and repatriation, provided an incentive to employers to recruit local labour. As will be seen, responsiveness to the aspirations of the landowners has become a priority for the mining companies (Jackson, 1991). At the same time the managements of these developments experience considerable tension between maintaining a viable mine and responding to the expectations of the landowners. Consequently, mine operators are compelled to develop unique employment policies in order to cater for local landowner aspirations, often at the expense of other Papua New Guineans. The systematic recruitment of workers starting with the local area (adjacent to the mine), then moving to the provincial or regional level, has become a matter of priority. The central government has acknowledged the concerns of the local people and has not hindered such recruitment and employment policies.
The issue of who should get first preference for employment opportunities became evident early on for some mines, while for others it became evident during the operational stage. In Ok Tedi's case, a regional labour market comprising the Western and West Sepik provinces in close proximity to the mine did not really exist. The 'green' labour force in the area was considered to be 'not suitable material' for the operation of the mine because it had little formal education, was mostly illiterate, lacked technical and clerical skills, and was unsuitable for reasons of health. The virtual nonexistence of a suitable local labour force led almost all parties (government and OTML, women's groups and locals) to fear an influx of mostly 'outsiders' from other parts of PNG. In particular such fears focused on the populated Highlands which was expected to provide the main supply of labour. The hope, was if possible, to avoid employing the highlanders and in turn avoid such social problems as the development of squatter settlements near the project site and social friction between immigrant workers and locals. The government tailored its policy to more local participation in opposition to outside recruitment of labour. The concept of 'Preferred Area Employees' (PAE) became an influential criteria for the recruitment of labour for the mine (Jackson, 1993:59). Although it was difficult to apply and monitor, the issues of equity and discrimination in employment which were implicit in the concept of PAE were never argued in the public arena nor advocated by any of the groups, including the highlanders. Everyone took it for granted that it was proper for the landowners to get preferential employment.
In Bougainville the demand for greater recognition for the host community in employment opportunities became acute only as a steady stream of outsiders from the PNG mainland went to Bougainville. As the mine operations progressed Bougainvilleans' dissatisfaction with increasing social disorder resulting out of rapid growth of the male migrant workforce and stiff competition for jobs between the 'outsiders' and locals became obvious. Frustration was generated by the drop in demand for unskilled labour, rising competition for jobs, and a growing vagrancy problem (the result of cessation of employment of some departing contractors) led to the formation of the Panguna Mungkas Association whose demands included an increase in the proportion of Bougainvilleans in the mine workforce (Bedford and Mamak, 1976).
As a direct response to this pressure BCL and its subsidiaries began to increase the Bougainvillean proportion in their workforce. At that time there was no statutory guidelines or government policy directives on the employment of Bougainvilleans as distinct from other PNG nationals. The matter was left to the company's discretion. This was the beginning of a preferential treatment of the locals in recruitment for jobs which other mines were to follow. As the mine continued production there was a recruiting bias in favour of applicants from the island (see Table 3). The company made sure that at least half of its entire workforce was Bougainvilleans and just before the forced closure in 1988, locals made up 48 per cent of the total workforce of 3560 (Quodling, 1991:38).
Table 4. Bougainvillean participation in the mine workforce in 1988 (last full working year)
Subsequently, Misima mine eagerly embraced the preferential employment policy for locals in its recruitment. A medium sized gold mine which commenced operation in 1989 and was managed by a subsidiary of the Canadian Placer Pacific mining giant, it had been very cautious regarding who it employed. Pressurised by landowners and their local government which vocally advocated a 'Misima for Misimans only' and also in an effort to maintain the island's absolute cultural and ethnic homogeneity, the mine's management made a concerted effort to employ those who were Misimans either by birth or through qualification of marriage. The near thousand strong workforce in 1994 were mostly Misimans with only 125 expatriates. A further ten national workers were there because of their marital connection with the island which the PAE policy permitted.
It is not surprising that the training of workers has become a major responsibility for mining enterprises in PNG given the small labour market. Further, when the mines are invariably in remote locations, accompanied by imposing and advanced technological equipment and when a significant number of the workforce has just commenced working and has no previous industrial work experience, then there is no choice but to give training a high priority. Management has been under considerable pressure to train, especially to train a significant portion of its green workforce. In fact, training has become an integral part of management's functions in the context of mining for minerals in PNG. Depending on the size and other features of the mine there are usually more than thirty employees engaged in various capacities (as training supervisors and training instructors) in the training department in the mines.
The concern for more company based training becomes a necessity for various additional reasons apart from the commitment to train new intakes. First, because of the high capital cost invested in exploration, construction and operation, recouping of those costs becomes a priority only to be facilitated by having an efficient and reliable training scheme to maximise utilisation of the best available labour. There has been massive capital investment in the PNG mines, much of it resulting from the mines' formidable locations. Ok Tedi had to wait for eight years to achieve a profit on the near two billion dollars invested in the construction and operation of the mine. Secondly, in PNG, company-based training has become particularly necessary due to perceptions of poor outcomes of formal training programs (especially middle level technical training) offered by government sponsored institutions which are generally suffering decreased enrolments every year. The training problem in government institutions has been exacerbated by inadequate funding and the lack of competent trainers, reflecting one of the standard problems of training in formal educational institutions: the lack of flexibility to respond quickly to changing workplace needs (UNDP/ILO, 1993:202).
Benedict Y. Imbun - UPNG Press 2000.
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