FUTURE OF FREEPORT INDONESIA'S CONTRACT IN LIMBO by Fardah

Jakarta, Dec 9, 2015 (Antara) - PT Freeport Indonesia (FI), one of the three biggest gold and copper mines on the planet, is seemingly eager to have its work contract, set to expire in 2021, extended early.        Indonesia's existing law, however, says that a contract can be extended only two years before its expiry date. So, in this case, it can be extended only in 2019.           PT Freeport Indonesia is into the business of exploration, mining, processing and marketing of minerals, such as copper, gold, and silver worldwide. It has been operating the Grasberg mine in Papua, Indonesia's eastern most province, since 1967.         A subsidiary of the US Freeport-McMoRan Copper & Gold Inc, this company was founded in 1972 and is based in Jakarta.          Freeport McMoRan's copper-concentrate exports from Indonesia are expected to reach 756,300 tons with an estimated value of $1.56 billion by the end of the year.         According to its vice president of corporation communication, Riza Pratama,  the company paid  a total of US$15.8 billion or Rp 204.23 trillion at the current exchange rate to the Indonesian government between 1992 and 2014, Tempo online reported in October 2015.         In addition, the company distributed direct benefits worth Rp30 billion for hospital development, free education, housing and public facilities, he claimed.        On July 25, 2014, PT Freeport Indonesia entered into a Memorandum of Understanding (MOU) with the Directorate General of Mineral and Coal and the Ministry of Energy and Mineral Resources under which the Government of Indonesia and PT-FI have agreed to negotiate an amended Contract of Work (COW).          With the MOU becoming effective, PT FI agreed to pay export duties as per a new regulation issued by the Government of Indonesia on July 25, 2014 to provide a US$115 million assurance bond to support its commitment for smelter development, and to increase royalties to 4.0 percent for copper and 3.75 percent for gold from the current rates of 3.5 percent for copper and 1.0 percent for gold.         Minister of Energy and Mineral Resources Sudirman Said had recently said the Indonesian government was encountering difficulty in negotiations with Freeport Indonesia due to the MOU, which enabled Freeport to extend the contract before expiry.         "A memorandum of understanding signed between the government and Freeport in 2014 carried a clause that the contract could be extended at any time, which is now making it difficult for the government to conduct negotiations with Freeport," he stated on Dec. 1.         PT Freeport is currently awaiting a reply from the government on the extension of the contract, according to Sudirman Said, affirming that the government has not given a green light to Freeport to extend the contract.         President Joko Widodo (Jokowi) has stressed that the government will continue to accord priority to the national interest in the matter of the PT Freeport Indonesia contract agreement.         "Some of the aspects involving national interest in connection with the contract agreement with PT Freeport are royalties, divestment, smelter construction and Papua regional development," Cabinet Secretary Pramono Anung said recently.          He added that the Freeport company must pay better royalties to the central government and to the Papuan government for regional development.         "The second obligation is divestment, which can be implemented immediately. In this regard, the regulation and working agreement regulate that Freeport must divest," Pramono said.        The issue of renewing the US mining company's work contract has become a matter of public controversy.        Fahmy Radhi, a researcher at the Center of People's Economy Studies at the University of Gajahmada (UGM), is of the view that there is no reason for the government to renew the contract.          Indonesia could take over full operation of the huge copper and gold mines from PT Freeport Indonesia in Papua, he said while speaking during a discussion on  "Freeport tape-recording scandal."     "Divestment of 20 percent by the company is too little since the government has been holding only 9.36 percent stake for decades," he said.           With such a small and minority share, the government has no control over the minerals being exploited  and shipped abroad from Papua, he said.         The US company, which has been in control of the Indonesian natural  wealth since 1967, has reaped huge profits from the copper and gold mines, he said.          "Explorations and exploitation are all controlled by Freeport McMoRan," he said.          Indonesia could take over full operation of the mines, he said, adding, "We already have trained  and experienced human resources after years of working with Freeport."     The technology could be bought from the market, for example from Japan, and funds could be borrowed from international financial agencies.         "If we are serious, we could do it. With such large and valuable assets, many financial agencies would be eager to offer loans," he said.         The government should seriously consider full takeover of the mines, he added.         The revenues from the mines would guarantee repayment of the loans and other state debts, he added.         "The gold reserve in our control would even jack up the rupiah's value against the U.S. dollar," he said.         Furthermore, political communication expert Hendri Satrio from the Jakarta-based University of Paramadina, said Indonesia is just too big to fall for the U.S. mining company PT Freeport Indonesia's bluff of a threat of international arbitration if the contract was not extended.         "What is there to be afraid of? It is not a big thing. A mere company cannot jolt a nation. We are a big nation and we are not fools," he said.     Indonesia  and the United States would not be going to war because of Freeport, he said, adding that the government could refuse to extend the contract beyond 2021 if it is not deemed fair for the  country, but do not terminate it before its expiry date.        In the meantime, Chairman of the Papua Legislative Assembly Yunus Wonda said PT Freeport Indonesia should stop justifying the means it deployed for lobbying with the government to renew its mining contract.         "We ask Freeport not to use any means to have its contract renewed. It is clear  that President Joko Widodo has indicated that decision (to terminate or renew the contract) will be made two years before the present contract  expires," Yunus Wonda said recently.         He said Indonesia, like any other country in the world, has its norms and regulations to be complied with, including by PT Freeport Indonesia.         "Please stop doing all this. Freeport must abide by the country's regulation," he said, adding, "We must not allow ourselves to be set against each other due to foreign interest."     The Head of the Environmental Research Center of the University of Papua (Unipa), Professor Charly Heatubun, believes that the working contract of PT Freeport Indonesia should be continued since the company should be first made to pay the cost for gross environmental damages it has wreaked at the mining sites.        The mining, conducted by PT Freeport in Papua over several years, has severely affected the local ecology, he stated in Manokwari, West Papua Province, on December 8, 2015.        The ecological damage would be felt by the local people for the next 200 years, he added.         Since PT Freeport's operation will eventually come to an end, the company should be urged to invest part of its earnings for post-mining rehabilitation and restoration activities.         "They should spend this particularly for rehabilitation and restoration of the ecosystem and the area's ecology in the Freeport mining location," he remarked.         He said Freeport is a national issue that concerns Indonesia as a nation, in general, and the people in Papua in Timika District, in particular.         It is in the hands of the central government to renew the contract of the US gold and copper mining company, and any decision will have positive and negative consequences, he pointed out.         He hoped that the government would take a decision that is best for Papua.         The professor called on the central government to involve the authorities and traditional leaders of Papua in negotiations about the contract renewal.         PT Freeport has not only exploited the natural resources of Papua but has also altered its landscape, he stated.         "This is related to the traditions as well as the spiritual and cultural values of the local people," he noted.         He said it would be appropriate if PT Freeport pays a bigger royalty to Indonesia. ***2*** (f001/INE) 09-12-2015 23:46:10