Monday, February 27, 2017

1) Freeport needs to stand up to Indonesia over the CoW issue

2) Papua religious leaders calls on government to consider locals` interest
3) Showdown in Indonesia Brings World’s Biggest Gold Mine to Standstill
4) PNG group unfairly held by Indonesia last year
5) Minister: Gov’t Discusses to Take Over Freeport Mines  

1) Freeport needs to stand up to Indonesia over the CoW issue

Will Hickey Associate professor for the School of Government and Public Policy in Jakarta
Jakarta | Mon, February 27, 2017 | 05:28 pm

A copy of draft revision to Government Regulation No. 23/2010 on the management of mineral and coal businesses obtained by The Jakarta Post late on Thursday. (The Jakarta Post/Rendi A. Witular)
Normally, a 50-year mining project like Freeport’s Grassberg mine would deign it high time to turn its operations over to the local government, which would also be expedient politically.
However, in this case, Freeport is correct to stand its ground against Indonesia in insisting its contract of work (CoW) be honored, extended and not converted into a licensing agreement that has the potential to seriously disrupt operations.
Vincent Lingga in his Feb. 23 commentary in The Jakarta Post is wrong to paint this as an “arbitration ploy” by Freeport to block mining reform. Indonesia mining will certainly not reform with local owners bereft of legal enforcement. Why is this? Freeport is actually doing quite a good job with its localization initiatives in Papua, compared to that alternative, no localization. In other words, the operation is benefitting Indonesia not just with taxes, but also with human resource development.
It is commonly held knowledge in the Indonesian mining industry that Freeport and Theiss have the best mining training programs in Indonesia, followed by Newmont and BUMI Resources (courtesy of their legacy Rio Tinto and BHP operations). Western standards do in fact matter.
Freeport employs 32,000 people, many of them are well trained in best-practice mining standards and techniques, with good safety inculcated in their processes. This situation could/should be replicated in all Indonesian mining activities, not just Papua.
The real fear is that if this mine is nationalized (effectively what the divestment is), training and localization in Papua will suffer inversely. Localized owners will not carry the same safety and training mandates that Freeport does. They will also probably want to cut any “non-essential” (read: safety and environmental) staff to the bone.
If a licensing agreement (IUPK) is forced, local partners, via divestment, may insist on another avenue of production, with a lower environmental and safety risk profile, you can bet on that!
Finance Minister Sri Mulyani Indrawati is wrong to interject in this that a “management tweaking” is necessary. After her many run in with the Bakrie company she should know the reality.
These potential suitors (namely insider oligarchs favored by the Indonesian government) are playing the Indonesian nationalization card. That is simply a means to an end for them to gain control of operations either directly (Freeport divestment) or indirectly (licensing regime).
Once control is gained, any environmental promises or social obligations will quickly fly out the window because the Indonesian regulatory framework has weak enforcement power.
One needs only look further than substandard mining operations in Kalimantan that have cratered the earth with black, water filled holes for coal, or strip mined vast areas of pristine jungle for iron ore strip mining, in both cases, driving out many native and endangered species.
It is real and it has happened and will probably happen again. Freeport, as a US company, simply cannot play this game. If someone gets hurt, or standards are violated, they first of all will have to answer to the US Security and Exchange Commission (SEC) for any mal-activity that impacts shareholders.
Second, they would be subject to proceedings in a US court for personal injury, where awards damages may be unlimited.
An Indonesian company will be under no such qualms. The legal system on its own is far weaker here. If any doubt, consider the issue of uncontrolled peat burning in Sumatra, despite all the “laws” the all powerful palm oil industries continue to create haze unabated each year. Similarly, there will be no oversight authority looking out for the long-term welfare of Papuans.
Building a smelter is critical, but the focus cannot be based on hardware alone. Freeport is obviously opposed to building a smelter as the Indonesian government has proven wishy-washy on this critical investment issue for political, not economic, necessity, by allowing some concentrate to be exported.
If Indonesia is serious they need to have educational incentives in place that will enhance local know-how to actually run the smelter, lest they become giant turnkeys ran by foreign operators, mostly Chinese.
Ores or concentrate or finished product? What’s it going to be presents a “moving target”. Only the Chinese via their non-capitalism driven state-owned companies can afford to play this game of potentially unrealized “pseudo-investment” of smelter building. Of the 32 new smelters built in Indonesia since 2012, most are Chinese made.
Western companies that are responsible for quarterly profit statements to shareholders cannot take this risk.
Therefore, equating Chinese state-owned companies that operate on a realpolitik level, and not a “profit statement” like Western ones, is comparing apples to oranges. Chinese are interested in long-term resource access and they will give and take as is politically expedient.
Localization is the real key to the development of Papua, not more gimmicks like cheap fuel or cash transfers to locals.
Those things can be manipulated by insiders and rent seeking government officials, however a strong jobs program can turn the outlaid rupiah up to seven times in a community. That is what is really needed for this country.
By the time this goes to press it is unknown if Freeport will have either caved into Indonesia’s licensing demand and forfeit their longstanding contract or not. The Indonesian government should lay off Freeport until they in fact can offer a better jobs program for Papua locals than Freeport can. Right now, they can’t.
The Indonesia companies, if they gain control, that want a piece of this divestment, will not feel obligated, environmentally or socially for this same ideal in Papua, but rather in spiriting profits out as quickly as possible. Papuans will suffer with local ownership and no enforceable regulatory regime in place. That’s the bottom line.
The writer is associate professor at the School of Government and Public Policy, Jakarta and the author of Energy and Human Resource Development in Developing Countries: Towards Effective Localization, Macmillan, 2017.


2) Papua religious leaders calls on government to consider locals` interest

6 hours ago
Jakarta (ANTARA News) - Papua religious leaders have called on the government not to put aside the interest of the local community, amidst the dispute with the US mining firm PT Freeport Indonesia (FI).

"We have called for Papuans rights to be placed as significant as the current controversy between the government and PT Freeport and the minister has agreed on that," Timika bishop John Philip Saklil said, after meeting Energy and Mineral Resources Minister Ignasius Jonan to discuss the issue here, on Monday.

He has also called on the company to stop laying-off its workers.

"Whether it would continue the operation or not, the environment should be recovered. In addition, other rights, such as the fund for local community, were still unclear," John stated.

Negotiations between the government and Freeport are yet to create a positive impact to local people, he pointed out.

Previously, activists from the Mining Advocacy Network (Jatam) had called on the government and PT Freeport to consider the environmental impact for Papua rather than its business contract.

"Billions of tons of waste are spilled by PT Freeport into Papuas rivers. The environment around the mining has been deteriorated. There should be a special attention here," Melky Nahar noted.

Melky also noted that the ministerial decree on mining export would also harm local Papuans.

"I think the situation of Papuans living here is not considered seriously," he added.

Freeport has often used issues such as lay-off, refusal to close mining operation from tribal chiefs, and threats to bring the case to international arbitration.

However, the parent company Freeport McMoran Inc. has asserted that it would continue its operation in Indonesia despite possible failure to reach agreement on the contractual dispute with the government.

(Reported by Afut Syafril/Uu.S022/INE/KR-BSR/A014)

3) Showdown in Indonesia Brings World’s Biggest Gold Mine to Standstill

Last Updated: February 27, 2017 10:00 AM
 Krithika Varagur
JAKARTA-The American mining company Freeport-McMoRan has brought the world’s biggest gold mine, in the Indonesian province of West Papua, to a standstill. The corporation is butting heads with the Indonesian government over protectionist mining regulations. And now that Freeport has started to dismiss tens of thousands of workers, the local economy is poised to take a huge hit. In Mimika Regency, the West Papua province containing the Grasberg gold mine, 91 percent of the Gross Domestic Product (GDP) is attributed to Freeport.
Freeport Indonesia abruptly stopped production on February 10 and laid off 10 percent of its foreign workers. It employs 32,000 people in Indonesia, about 12,000 of whom are full-time employees. The freeze was a reaction to a shakeup in Freeport’s 30-year contract with the Indonesian government, signed in 1991. Indonesia has tried to levy additional obligations from Freeport in an attempt to increase domestic revenue from its natural resources. Freeport retaliated last week by threatening to pursue arbitration and sue the government for damages.
The Indonesian Ministry of Energy and Mineral Resources could not be reached for comment on the issue.
Observers on the ground in Papua and from afar in Jakarta worry the shakeup will decimate the local economy and lead to violence in the historically unstable region. West Papua has long been a troubled territory in Indonesia and its independence movement has long been met with brutal military action.
Activist concerns
“I don’t think the government comprehended the social impact of the Freeport freeze in Mimika,” said Octovianus Danunan, editor of the Radar Timika, a local newspaper. “Freeport runs two hospitals here, gives hundreds of scholarships to local students, and of course, provides jobs to thousands of Papuans. With these layoffs, people are extremely worried; their lines of credit are vanishing as we speak.”
“These layoffs have eliminated the livelihoods of a lot of people,” said John Gobai, a member of the Papua parliament. “We have heard from indigenous people here in Timika [the site of Freeport facilities] that people are becoming sick from stress. They are falling into an abyss of stress.”
According to an internal Freeport report from 2015, about 36 percent of its full-time employees are native Papuans.
“I suspect that, because they may lose their jobs, many employees will want to stage demonstrations… but then, ironically, they will be laid off because that’s the state policy. I think this whole situation is a human rights violation,” said Gobai.
“Violence is a very big possibility,” said Andreas Harsono, a Human Rights Watch researcher. “Timika is the wild, wild east of West Papua. It's the location of more than 3,500 security officers stationed along the 90-mile mining road, not to say Papuan guerrillas and hundreds of military deserters, all looking for a slice of the gold and copper mine. Shooting along the road is a regularity rather than an irregularity. I cannot imagine the situation if Freeport goes ahead with dismissing all 30,000 mining workers there.”
Gobai said there have already been some protests on Freeport headquarters and he expects there will be more going forward.
Freeport’s CEO Richard Adkerson told Reuters that the company was committed to staying in Indonesia, not least because about one-third of West Papua’s economy comes from the Grasberg mine.
Freeport’s history in Indonesia
On February 12, Adkerson issued a hard 120-day ultimatum to the Indonesian government to back down on its new demands or else face arbitration from the mining giant.
Freeport’s involvement in Indonesia dates back to the Suharto military dictatorship, which signed over 250,000 acres of West Papuan territory in 1967.
Freeport was the first foreign company to sign a contract with the new Indonesian government and, due in part to this history, it is now the single largest employer in all of Indonesia.
The company enjoyed a complicated special relationship as a “quasi-state organization for Jakarta,” as Inside Indonesia details, throughout the Suharto era, but the relationship has cooled under subsequent, democratically elected presidents.

The friction that led to this month’s impasse is a 2009 mining law that would require Freeport to build a $2.9 billion smelter (in order to move resource exports higher up in the value chain from just raw materials) and divest the majority of its shares to Indonesian ownership within 10 years.
Freeport maintains that, since its current contract runs through 2021, it doesn’t need to act on the regulations yet. But Indonesian officials, led by Mines and Energy Minister Ignasius Jonan, have ramped up pressure for Freeport to convert its contract per the 2009 law to a “Special Business License,” which precipitated today’s standoff.
Situation in flux
Both Indonesia and Freeport are likely to see monetary losses from the clash, but Indonesia seems committed to asserting its terms for collaboration. The global commodities market for ore and other natural resources has also dipped in the last year, with a particular slowdown from China.
The ground situation is likely to be in constant flux over the coming months as the Indonesian government gears up for a fight. On Monday, the government announced it is grooming a state-owned aluminum enterprise to take over the Grasberg mine if it wins arbitration with Freeport.
“What the government really needs to think about is what compensation they can give to layoff victims in the present,” said Gobai. “These people are employees, but they are also citizens.”

4) PNG group unfairly held by Indonesia last year

A Papua New Guinea man says he and several countrymen were subject to unfair incarceration in West Papua by Indonesian authorities.
23 minutes ago 
The incident occurred early last year when a small group from PNG's Western Province travelled by boat to the Indonesian port of Merauke to sell traditional items to a local buyer.
He said as was usual procedure, they first checked in with Indonesian soldiers manning the border post at Torassi, before sailing on to Merauke.
Here they were arrested by intelligence officers, questioned and then kept under house arrest for two months, while their boat and products remained confiscated.
One of the group, going by the name David John, said that among other spurious claims, they were charged with failing to get border clearance.
"But we told them, no this is all lies. Big fat lies. We've never done that. We've proved it. I've all the photos here. I took shots at the Torassi border post, of the soldiers checking our outboard motor and dinghy, clearing us to leave for Merauke."
While he and most of the group who had been held up by Indonesian authorities in Merauke were eventually able to return to PNG, without charge, they never retrieved their boat and goods.
The leader of their group however remained incarcerated in Indonesia until this month - they are hoping he can return home soon.
David John said they hadn't been compensated for their losses, adding that their families back home were very worried, not knowing what had happened to them.
He said while PNG citizens crossing the border are routinely expected to provide permits, border authorities appear to turn a blind eye to the many Indonesian traders hawking their wares in PNG coastal villages.
MONDAY, 27 FEBRUARY, 2017 | 15:10 WIB
5) Minister: Gov’t Discusses to Take Over Freeport Mines  
TEMPO.COJakarta - Coordinating Minister for Maritime Affairs Luhut Binsar Pandjaitan, said that the proposal to have state-owned enterprises manage Freeport Indonesia's mines was delivered by State-Owned Minister Rini Soemarno. However, Luhut said that the government is currently discussing the mechanism to take over the mines.
"That was the proposal of the State-Owned Minister, we’ll see in the future," Luhut said on Monday, February 27, 2017.
Luhut explained that there is a possibility where state-owned enterprises would establish cooperation with the private sector to operate Freeport's mines. Luhut added that the issue is still open for many possibilities. "Well we could [pair] PT Indonesia Asahan Aluminium [Inalum] with PT Aneka Tambang [Antam], or it could be Inalum, Antam, and the private sector," Luhut explained.
Luhut however, cannot explain whether the government will decide to take over the mines by purchasing the company's divested shares, or wait until its contract of work expires.
"We'll see what's best, the options are clear, there are regulations, and there are agreements," Luhut stated.
Nevertheless, Luhut said that the government will continue to attempt to conduct negotiations with Freeport Indonesia in an attempt to find a win-win solution, without neglecting national interests.
Luhut argued that the government will strive to find the best solution to avoid international arbitration. "No one should went to international arbitration, it would be a zero sum game," Luhut stated.

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