Analysis of District Government Governance in Busang Post the Bre-X Gold Mine Scandal Using the McKinsey 7S Framework
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The Bre-X gold mining scandal (1993–1997) represents one of the most catastrophic failures of natural resource governance in modern history, resulting in investor losses exceeding US$4.5 billion (approximately Rp147 trillion in current value) and exposing systemic institutional deficiencies within Indonesia's mining regulatory framework during the late Orde Baru (New Order) era. This study analyzes Busang District government governance using the McKinsey 7S Framework (Strategy, Structure, Systems, Shared Values, Skills, Style, and Staff). Through documentary analysis of government records, parliamentary investigations, and academic literature, the research identifies institutional misalignments that enabled four years of undetected fraud despite multiple oversight agencies. Key findings reveal strategic prioritization of revenue generation over regulatory compliance, structural fragmentation dispersing accountability across national, provincial, and district levels, systemic absence of independent assay verification and monitoring protocols, cultural normalization of patronage-based decision-making, technical skill deficiencies preventing fraud detection, leadership responsiveness to political pressure rather than technical judgment, and inadequate human resource development for mining oversight. These compounded failures created an environment of "regulatory capture" wherein mining operators exercised dominant influence over supposedly independent regulatory institutions. The analysis demonstrates that Bre-X's success in perpetuating fraud resulted not from individual corruption but from systemic institutional misalignment across all seven organizational dimensions. This research contributes to governance literature by applying the McKinsey 7S Framework to analyze natural resource regulation in developing economies, offering actionable recommendations for contemporary mining governance reforms, including the establishment of independent regulatory agencies and technical capacity building.
Copyright (c) 2026 Muhammad Satya Satria, Alda Ramadani
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