1) NZ Govt - no complaints from Jakarta over Papua policing plan
2) Mixed Messages Over Freeport’s Mining Contract
3) First Ever Coal Shipment from Sorong
1) NZ Govt - no complaints from Jakarta over Papua policing plan
The New Zealand government says reported concerns about New Zealand's political motives in funding police training in the troubled Indonesian province of Papua have not been raised with its officials.
The five million US dollar project was due to start this year but cancelled last month after Indonesia pulled out.
According to the Jakarta Globe newspaper, the Indonesia Government pulled out over fears New Zealand had a hidden motive.
However, a spokesperson for the Ministry says the reported concerns have not been raised with the New Zealand Embassy in Jakarta.
Jakarta. Indonesian officials keep sending mixed messages regarding the contract renegotiation with Freeport Indonesia — with a minister saying it is imperative to give the local unit of US mining giant Freeport-McMoran Copper & Gold some sense of security, while an official said the matter was the authority of the next government.
Although the country’s mining law and derivative regulations rule that a proposal for an extension of a mining contract can only be submitted two years before the contract expires — in Freeport’s case it is in 2021, the miner is known to have requested a renewal and extension of its contract until 2041.
“We’re still discussing [renegotiations]. We haven’t reach a final decision yet but the most important thing is that we all want a win-win solution for this matter,” Freeport Indonesia spokeswoman Daisy Primayanti told the Jakarta Globe on Tuesday. “We are intensively trying to ensure that Freeport will get to operate normally again.”
Freeport has previously stated that it is planning to invest a total of $17 billion to develop underground pits of its Grasberg mine in Papua through 2041 — as the open pits have almost been entirely exploited. Freeport signed the work contract with the government in 1967, shortly after then president Suharto took office.
Energy and Mineral Resources Minister Jero Wacik said on Wednesday that he understood Freeport’s need for assurances, saying the government would collect inputs to see if it would be possible to renew the contract now despite the two-year rule — that means Freeport was supposed to only request for an extension in 2019.
“There is indeed a dilemma with the contract extension. There can be a problem if it is issued now,” Jero said on Wednesday.
“But the company wants to invest more than $12 billion; how can this proceed when there is no indication that [the contract] can be extended?” he said. “We have to find a way to avoid declaring an extension but at the same time allowing Freeport to feel comfortable. We’re still waiting for inputs from experts.”
Jero’s statement offers a possibility that Freeport may secure the contract extension — a more toned-down version than the statement issued last week by his subordinate Sukhyar, the director general for minerals and coal.
Sukhyar was as quoted as saying that the government agreed to extend the contract until 2041, and President Susilo Bambang Yudhoyono was expected to sign a related memorandum of understanding before the end of his term in office in October.
The MoU contains six points: a value-added obligation, contractual period, size of operation, local content obligation, government revenue and divestment.
Among the points reportedly already agreed in the MoU are that Freeport would divest 20.64 percent of its shares to the state to meet the 30 percent divestment requirement. For now, Indonesia only owns 9.36 percent of Freeport shares.
Coordinating Minister for the Economy Chairul Tanjung reaffirmed that the extension of work contract with Freeport was the authority of the next government. He didn’t deny, though, that representatives of the government and Freeport were working on the MoU to offer the miner some form of assurance.
The MoU will be legally binding on the next government, and will be signed in 2019, he said.
But presidential advisor for economic affairs, Firmanzah, holds a different view, asserting that the president would not sign any vital policies, including Freeport’s contract extension, in the last few months of his term in office.
“The president has repeatedly said there no strategic policies will be implemented, including concerning the MoU with Free port,” Firmanzah said on Monday, as quoted by news portal tempo.co.
He emphasized that such “strategic policies” would only be taken care of by the new government elected in the upcoming July 9 presidential election.
Intensive discussions with Freeport concerning the work contract, Firmanzah added, are merely aimed at collecting suggestions for the next government regarding policies on the nation’s mineral resources.
Marwan Batubara, the director of energy think tank Indonesian Resources Studies, considered the result of the renegotiation a setback saying the 30 percent share promised to the Indonesian government was smaller than the minimum 51 percent mandated by existing regulations.
The government, though, is reportedly revising the regulations, with a foreign miner operating underground pits in this country obliged to divest only 30 percent of its share to the government.
“It’s a win-lose deal. We are losing so much with the deal,” Marwan said.
Gunawan, executive director of the Indonesian Human Rights Committee for Social Justice (IHCS), said the country suffered huge losses during at least the 2003-2010 period due to unfair negotiations between Freeport and the government.
“Based on IHCS’s calculation, state losses amount to Rp 2.56 trillion [$217.6 million] because Freeport pays only 1 percent of gold mining royalties to the government,” Gunawan said on Monday, according to metrotvnews.com.
He added, citing data obtained from the Corruption Eradication Commission (KPK), that Indonesia loses $169 million per year because of delayed renegotiation of Freeport contract.
Marwan continued that the Indonesian government needed to carefully deal with the MoU.
Royalties, investment, local products, smelting, divestment and land operation indeed need to be reconsidered, because so far the contract with Freeport only gives Indonesia a little profit, Marwan said.
Although, he added, it is reasonable for Freeport to want to have a certainty due to the large number, they would invest in the underground operations at the Grasberg mine and the plan to build new smelter at Gresik, East Java, worth of $2,5 billion.
“But the most important is Indonesia’s interest in the investment sector should not be disturbed,” Marwan said. “We only got 3.75 percent in royalties [in the MoU]. It is 1.25 points smaller than what the government demanded previously.”
As much as 95.21 percent of Freeport’s gold reserves are in Papua, while around 30 percent of its the copper is located in the province, he said.
“If Freeport wants to extend its contract operation in Papua, it needs to increase the royalties [for the Indonesian government],” he added.
Marwan said the government needed to stay firm on such decisions, adding it would not scare foreign investors away because they were the ones who would lose most if they backed away from investing in Indonesia.
Pri Agung Rakhmanto, executive director of the ReforMiner Institute, another energy think tank, echoed the sentiment, saying there would not be any harmful consequences if Yudhoyono decided against signing any contract.
“Freeport’s contract will end in 2021, so why in hurry drafting a ‘new’ one?” he says. “There is no rule requiring the government to sign the contract now. Speaking of interest, it is Freeport who has an interest here.”
Marwan said compared to Yudhoyono, the two presidential candidates, Joko Widodo and Prabowo Subianto, are likely to have a stricter stance concerning the management of Indonesia’s natural resources — although the Prabowo camp has also sent mixed messages regarding the matter.
“For instance, Prabowo has often talked about nationalization,” Marwan said. “But his running mate, Hatta Rajasa, later clarified that nationalization was not on the cards — implying that the Prabowo camp has yet to be clear on its stance on our natural resources management.”
This week, the Prabowo-Hatta camp stated that there had been an unfair agreement concerning Freeport in the past.
But Hashim Djojohadikusumo, who is Prabowo’s brother and also deputy chief patron of the presidential candidate’s Great Indonesia Party (Gerindra), promised in what constitutes a contradiction, that Prabowo would not increase Freeport’s tax obligation if he was elected president.
In a video that recently circulated on the Internet website YouTube, Hashim was seen addressing US businesspeople during a gathering in Washington last year.
He said in his speech that Freeport should not worry about a tax increase because if Prabowo was elected, he would instead choose to increase income tax on individuals.
As for the Joko-Kalla camp, Marwan said, they would probably be less vague with their nationalistic stance.
“Joko has Kalla, who in the past showed a consistent commitment on state control over national assets,” he said.
Marwan cited the Inalum case when the government took over the company. It was Kalla who was clear to reject the extension of Japanese company’s contract.
Another case was when ExxonMobil wanted to extend its contract operation in East Natuna in the Riau Islands.
In 2008, when he was still Indonesia’s vice president, Kalla rejected the extension proposal and officially said ExxonMobil’s contract was terminated.
“If the next government decides not to extend the contract with Freeport, I’m sure Indonesia could handle its own resources regardless of technological shortcomings,” Marwan said.
“But it is like learning to ride a bicycle. At first, we may fall, but through that process of learning, we’ll eventually get it right,” he said. “Ninety-five percent of the human resources at Freeport is already our people. Although we do need foreign human resources whom we could hire.”
Rangga Prakoso contributed to the report.