Mitigating Southeast Asia natural resource risk
![]() Natural resource projects in many parts of the world are inherently fraught with complex risks: exposure to corruption, political and regulatory shifts, local partner risks and environmental concerns, to name only a few. Southeast Asia is no exception, and is home to some of the most culturally varied and politically volatile sub-regions in the world. While complex, the mitigation of such risks is possible through carefully gathered – and heeded – on-the-ground intelligence and an understanding of the local context. Kroll continually encounters situations where a sophisticated understanding of the local operating environment can help responsible businesses avoid problems in the first instance, and help disentangle the issues once they have arisen. In Indonesia The reasons for the unusual complexity vary by region, but a primary driver is the continuing decentralisation of political authority in the country. While the process began in the country’s Reformasi period, the consolidation of political power in local governments continues today, and nowhere is this more evident than in the conflict between national and regency level authorities over concession rights and land permits. Dissonance between the viewpoints of stakeholders in the country’s Javanese centre and peripheral regions is common, and can be difficult to perceive, and the interests of local indigenous and environmental rights groups are critical to consider. As seasoned market players know, in any project – whether it is a geothermal project in Sulawesi or a gas infrastructure project off of Java – agreement from both national authorities as well as regency-level leaders is a requirement and must be monitored. In Myanmar However, in Myanmar, the key difference is the presence of military actors – both national forces and regional ethnic armed groups – in stakeholder networks. This is a concern for a variety of reasons. Any company concerned with US sanctions issues must avoid any business relationships with the military, including the large military holding companies that are active land-holders across the country. Proxy relationships with sanctioned former generals and even sitting military officials is also common, so determining who it is you are actually dealing with is critical. Because of these factors, reputational risk is perhaps highest in the region, as there remain multiple ongoing low-level conflicts across the country, and international scrutiny of the economy remains high. Land rights issues are a constant concern, and highly emotive – especially in ethnic minority-controlled areas. Human rights issues around some of the country’s largest extractive projects are well-documented, but they exist around lesser-known projects as well. As the country continues through its reform process and control shifts to reformist groups, new instances of such issues will continue to attract international attention. Remain aware |
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