Petroleum and Mining in Southeast Asia: Managing the Environmental and Social Impacts

Summary

A host of new upstream oil and gas and mining projects is under way in Southeast Asia as a result of increased demand from both within the region and worldwide. This presents governments with an array of issues. Policy concerns go beyond immediate industry matters and may encompass macroeconomic, budgetary, tax, and exchange rate issues, as well as environmental protection and land access and ownership questions. Crucially, given that most projects are in areas distant from the urban centres, they also must address relations between the central and local governments and regional development planning. Petroleum and mining development has many dimensions. Especially critical is the impact of production on local communities and the surrounding environment.

Controversy often surrounds petroleum extraction and mining. Instead of bringing development and higher living standards to local areas, they may be criticized for damaging the environment and disrupting the lives of local communities. The projects may be seen by local people as providing wealth to distant central governments and big companies, but providing little real local benefit. These feelings may be compounded where operations are run by large multinational companies, as is still commonly the case in the region, giving rise to allegations that foreigners are taking a country's natural resources bounty.

Petroleum and mining development is thus fundamentally intertwined with relations between central governments and regions and policies for development of local communities and protection of their surrounding environment. Both governments and companies must address this. For governments, poisoned relations with local regions may take many years to heal. At worst, they could encourage separatist movements harnessing this grudge against the centre. For companies, at stake is the long-run success of the particular operation, and, increasingly, other activities elsewhere in the world. A bad record in one country may harm a company's prospects elsewhere, through, for example, its ability to finance other projects from major banks, themselves conscious of risks to their international reputation.

These issues are not restricted, of course, to Southeast Asia. Nor are they just the concern of developing countries.