Did Paul Lahti, the director of the Minahasa Raya mine, make the correct decision in the closing of Newmont Mining Corporation's Minahasa Raya mine?

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Scott Reisman                                                                        12-18-04

International Business                                                                Prof. Milton

                                Newmont Mining Term Paper

BACKGROUND:

Indonesia is a country full of civil unrest, political reforms, economic struggle, and government turmoil. Paul Lahti, the director of the Minahasa Raya mine for Newmont Mining Corp. choose to do business in this country. After Japanese rule a man by the name of Ahmed Sukarno took power and Indonesia claimed their independence on August 17, 1945. He was the first president and tried getting rid of all the communist presence that was left there by killing them. After a financial crisis in 1997 hit, the economy was sent spiraling out of control, and citizens demanded that Sukarno give up his reign. In 1999, Abdurrahman Wahid was elected president, and was expected to restore an already fragile economy. Newmont Mining faced many new challenges in Indonesia. There was the change of political power, illegal mining, environmental protestors, and declining gold prices. The change in political power directly effected Newmont Mining. Newmont dealt primarily with the central government, rather then dealing with local governments. Newmont was hit hard by the new court system and local protestors fighting against the mining in their region. In the old regime under Sukarno they didn’t have to pay taxes to the government. But the local laws that were passed said local companies had to pay taxes. Newmont ended up paying $3 million for taxes and employee programs and community development projects. With such uncertainty in one country, it is hard to do business, and Newmont had to pull out for good.

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ISSUE:

Did Paul Lahti, the director of the Minahasa Raya mine, make the correct decision in the closing of Newmont Mining Corporation’s Minahasa Raya mine?

ANALYSIS:

I believe that Paul Lahti made the correct decision in the closing of the Minahasa Raya mine for a number of reasons. First, Indonesia is not currently the best place or atmosphere for a business to be relying on the government for rules and regulations. The government itself is not completely stable which is a huge problem. Foreign investors try to find a place where the government seems to be a stable ...

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