Friday, January 31, 2014

1) RI-PNG agree currency use on border

1) RI-PNG agree currency use  on border
2) Freeport facing uphill  struggle to lobby government

1) RI-PNG agree currency use  on border

Bambang Muryanto, The Jakarta Post, Yogyakarta | World | Sat, February 01 2014, 11:01 AM

The governments of Indonesia and Papua New Guinea (PNG) have signed a memorandum of understanding (MoU) on the use of the Indonesian rupiah and PNG kina in the two countries’ border areas.

The MoU was signed in Yogyakarta on Thursday by Bank Indonesia’s (BI) deputy governor for payment systems, Ronald Waas, and Bank of PNG Deputy Governor Benny Popoitai.

“The MoU is aimed at increasing economic activities in areas along the border between the two countries,” Ronald said after the signing ceremony.

The MoU will, among other things, regulate the exchange mechanism between the rupiah and the kina.

Indonesian and PNG citizens living along the border often cross the divide to buy their daily provisions. “If [the two currencies] are compared, the rupiah is dominant,” Ronald said, adding that by far the most transactions took place in the border villages of Sota and Sekouw.

Ronald expressed his hope that the signing of the MoU would increase the growth of the banking industry in border areas and increase the number of money changers, thus enabling people in both countries to exchange their currencies.

So far, he said, there were only two official money changers along the Indonesia-PNG border.

The first such MoU between the two countries was introduced in 1996 and it has been amended through the years to reflect new developments. “The MoU we have signed today will be in force for five years,” he said.

Executive director of BI’s money management department, Lambok Antonius Siahaan, said payment
systems in border areas were needed to improve the economy of those areas.

People’s daily needs could also be met if the financial system ran smoothly as both the kina and rupiah were easily obtainable, he said.

“That way, the economy will automatically develop along with a growth in small and medium enterprises,” Lambok added.

Separately, Popoitai said the MoU was very important for the central banks of both Indonesia and PNG as it would help them deal with finance-sector problems in border areas. The MoU would also allow people in both countries to enjoy a good exchange mechanism and facilities.

“We have to create and support an environment on both sides of the border that will enhance the flourishing trade in the area,” Popoitai said.

He added that many PNG residents traveled to Jayapura in Papua to buy food, clothes, machines and other necessities. The same was also true of Indonesians traveling to PNG to buy their daily needs, such as coffee.

“When they [PNG nationals] do business, they take the kina to Indonesia. Now, Indonesians can change that money into rupiah in our banks,” Popoitai said.
2) Freeport facing uphill  struggle to lobby government 
Satria Sambijantoro and Raras Cahyafitri, The Jakarta Post, Jakarta | Business | Sat, February 01 2014, 11:26 AM

Richard C. Adkerson, the CEO and president of Freeport McMoRan Copper & Gold Inc., took time out of his busy schedule to fly thousands of miles to Indonesia to get first-hand information from the government following the introduction of the new export tax for mineral commodities, which he said “was a surprise” for his company.

Adkerson, who was ranked 18th in the 2012 Forbes list of the highest paid CEOs in the US with an annual salary of US$39.5 million, visited four ministerial offices in Jakarta including the Office of the Coordinating Economic Minister, Industry Ministry, Finance Ministry and the Energy and Mineral Resources Ministry during his visit last week, in an attempt to seek an exemption from the export duty.

However, the lobbying by the 66-year-old Adkerson to gain further leniency on Indonesia’s new mining export tax may be to no avail.

“At this point, there is no change in our stance,” Coordinating Economic Minister Hatta Rajasa told reporters late Thursday, when asked the result of his meeting with Adkerson.

“What I conveyed [to him] was that we wanted to fully implement the law and its related ministerial regulations,” Hatta went on. “All the ministers share the same view.”

As part of the implementation of the new Mining Law, the government effectively banned the export of raw (unprocessed) ore such as bauxite and nickel among others, as of Jan. 12, in its efforts to promote the country’s downstream industry in the mining sector.

However, President Susilo Bambang Yudhoyono agreed a special exemption for copper ore, allowing US-based mining giants Freeport and Newmont Mining Corp., which control 97 percent of total domestic copper production, to continue exporting semi-finished copper concentrate until the end of 2016.

However, the export duty imposed on the exports of semi-finished minerals as part of the relaxation of the export ban, has been deemed unrealistically high. The new tax regulation requires companies exporting mineral products to pay export taxes of between 20 and 25 percent. The export tax rate will gradually increase every six months until it reaches 60 percent in 2016.

Freeport was concerned about the “new tax regulation that we did not anticipate and was a surprise to us”, Adkerson said during a conference call with analysts last week, as quoted by international mining publication Mineweb. The 25 percent export tax for copper would be “a very large amount that would be incremental” for tax payments that Freeport made to the Indonesian government, he added.

But, apparently none of the ministers bowed to the demands of Adkerson, who reportedly is now considering seeking international arbitration to settle the case, as the company argued that the new export tax might infringe on Freeport’s contracts of work with the government.

Cabinet members may frequently disagree on many issues, especially on cases that are seen as politically sensitive, but not on Freeport.

Speaking after their separate meetings with Adkerson, Industry Minister MS Hidayat and Finance Minister Chatib Basri both showed no signs of giving leniency to the US mining giant, sharing Hatta’s view.

“This is a fiscal instrument to force companies to build smelters — it isn’t a policy to increase tax revenue, not at all,” Chatib said.

“Our past experience over the last few years showed that there had been no pressure on mining firms to build smelters,” he stated. “We could not afford to repeat the same mistakes again.”

Potential hurt in earnings from the Indonesian export tax has hurt the shares of Freeport (FCX), which has plunged 15 percent this month alone to touch $32.01 as of 10:45 p.m. on Thursday, Jakarta time. Freeport has warned that the export tax may hurt their business in Indonesia and could prompt massive layoffs, with thousands of Indonesians potentially losing their jobs.

In another development, Freeport said Thursday it still discussed the prospect of building more processing facilities in Indonesia in partnership with the government as the company tries to resolve a dispute that has halted exports from its largest mine.

“Freeport’s commitment would involve a joint undertaking with the government of Indonesia in a public-private partnership,” the Phoenix-based company said in an emailed statement Thursday. Such an arrangement would also include the development of port facilities, power availability and “other basic infrastructure together with government incentives to assure the viability of the project,” Freeport said.

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