The Garsberg mine operated by PT Freeport Indonesia. (Photo source: Kompas/Agus Susanto)
Setting up an informal deal before approaching top decision-makers is not unheard of in Indonesia’s money politics.
In Indonesia’s highly competitive money politics, a large stake in Freeport is the ultimate prize for the successful political party and faction to gain slush funds. The Freeport scandal can best be understood as a contest between two political gangs.
Indonesia has been rocked by extraordinary revelations about top-level negotiations with one of the world’s most profitable mining companies, Freeport-McMoRan, which operates in the high mountains of West Papua province. A leaked recording of an informal meeting has exposed the then chair of Indonesia’s national parliament, Setya Novanto, and oil tycoon Riza Chalid attempting to secure by gift a $US4 billion ($6.1bn), 20 per cent stake in Freeport’s mines, plus a proposed hydro-electric power plant.
The scandal, denounced as the worst to hit Indonesia, has incited demands for a thorough public investigation. At the heart of the row is Freeport’s desire to quickly secure an extension of its contract — which expires in 2021 — for control of one of the biggest gold and copper mines in the world. With most of its global gold production coming from Indonesian mines — containing reserves estimated to be worth at least $US40bn — Freeport-McMoRan has deployed such powerful allies as former deputy head of national intelligence Maroef Sjamsoeddin as local executive director to help Freeport navigate through Indonesia’s corrupt politico-business environment and negotiate contract renewal.
In Indonesia’s highly competitive money politics, a large stake in Freeport is the ultimate prize for the successful political party and faction to gain slush funds. The Freeport scandal can best be understood as a contest between two political gangs. Vice-President Jusuf Kalla’s faction, which includes Energy Minister Sudirman Said, has been courting Freeport in a competition against the faction of Aburizal Bakrie — chairman of political party Golkar — and his ally Novanto. The contest over Freeport has also been exacerbated by conflict over control of Indonesia’s oil imports between Ari Soemarno, the former head of state oil company Pertamina, who is close to Sudirman, and Riza, who is linked to Novanto.
In October, Energy Minister Sudirman gave Freeport an official “assurance” for long-term investments in Indonesia. However, the 2014 mining rule prohibiting negotiations and contract renewal prior to 2019 constituted a stumbling block for Sudirman, who needed to revise it before Kalla’s faction could benefit. Bakrie’s faction also engaged in the contest — partly because of Bakrie’s corporate woes and partly to maintain his leadership of Golkar, which holds significant political sway over parliament. Novanto collaborated with Riza to redefine the terms of negotiation with Freeport. However, Maroef, also closely aligned to the Vice-President, covertly recorded the meeting with Novanto and Riza on June 8 in Jakarta and handed it over to Kalla’s faction. The latter held on to the audio recording until it was politically expedient for release.
Setting up an informal deal before approaching top decision-makers is not unheard of in Indonesia’s money politics. Nevertheless, with Kalla’s endorsement, Sudirman then lodged an official grievance about Novanto’s conduct with the parliament’s ethical standards tribunal.
In the recording, Riza explained his formidable track record in money politics and how he brokered a temporary truce between the two opposing political coalitions. The negotiators also emphasised that, through Co-ordinating Minister of Politics, Law and Security Affairs Luhut Pandjaitan, access to President Joko Widodo could help them organise Freeport’s contract renewal and, for a successful deal, fair distribution of the Freeport spoils needed to be given to key players: Riza and Novanto wanted a stake in a new power plant and thought it was reasonable to organise a stake in Freeport Indonesia for Luhut and Kalla to make sure everybody was happy. Big egos and contested terms of negotiation, however, led to deal exposure.
The scandal has undermined the negotiated peace between Indonesia’s opposing political coalitions at the national level. The row has a way to play out. With a weak President unable to manage elite factionalism, Kalla’s supporters, benefiting from mounting media scrutiny and public discontent against their opponents, have taken the first scalp.
To avoid an official breach in parliamentary ethical standards, Novanto was forced to resign as the national parliament’s chairman on December 16. Criminal investigations are unlikely to bring down any powerful figures, but heightened economic nationalism may mean that Freeport must concede a greater level of royalties and ownership to the Indonesian government and the strongest elite faction than previously anticipated.
This article was originally published by The Australian and entitled ‘Mining millions and corrupt politicians in Indonesia scandal’
The West Papua Warriors rugby league team. Photo: Facebook / West Papua Warriors
A rugby league team formed in Papua New Guinea to raise awareness about the on-going human rights abuses in West Papua, say they won't be taking a backward step on the field.
The West Papua Warriors is made up of players from PNG's Digicel Cup domestic competition and also features two players from Indonesia's West Papua province.
The Warriors will take on the Philippines development side in Sydney in February.
Team captain Tala Kami says the team was formed to champion a cause but they're also in it to win it.
"Everybody in the team they're competitive rugby league players and everybody wants to win. Yes we do want to promote the cause, yes we do want to promote the issue but we also understand that at the end of the day press and media and people love winners. People like teams that win and you're always going to get noticed if you play well and you win games so I think winning is definitely important but it doesn't overshadow the bigger picture, which is promoting West Papua".