Govt 'broke rules' over Freeport's obligations<\/p>\n
JAKARTA (JP): Former mines and energy minister Subroto said on
\nWednesday the government contravened accepted practices by not
\ninforming legislators that it had relieved copper and gold mining
\ncompany PT Freeport Indonesia of its divestment obligation.<\/p>\n
\"Since the contract involved consultation with the House of
\nRepresentatives (before being signed by the government and
\nFreeport), the House should at least be informed,\" Subroto said.<\/p>\n
\"That's the rule of the game.\"<\/p>\n
The former secretary-general of the Organization of Petroleum
\nExporting Countries (OPEC) was commenting on media reports that
\nformer minister of investment\/chairman of the investment
\ncoordinating board (BKPM), Sanyoto Sastrowardoyo, relieved
\nFreeport of its contractual obligation to divest up to 51 percent
\nof its shares to the Indonesian government and local companies.<\/p>\n
In a letter reportedly sent to Freeport, Sanyoto confirmed
\nthat the mining company was no longer required to meet the
\ndivestment requirement in accordance with the new government
\nregulation on foreign companies.<\/p>\n
Legislators have insisted that any change in the contract
\nshould have involved prior consultation with them.<\/p>\n
Under the contract of work (COW) signed by the government and
\nFreeport in December 1991, Freeport was obliged to divest up to
\n51 percent within 20 years.<\/p>\n
Freeport Indonesia, which is developing the world's largest
\ncopper and gold reserve in the Grasberg area of the Irian Jaya
\nprovince, is 85.7 percent owned by New Orleans-based Freeport
\nMcMoRan. The remaining shares are held by the Indonesian
\ngovernment and PT Nusamba Minerals.<\/p>\n
Scandal has enveloped Freeport since American scholar Jeffrey
\nA. Winters alleged early last week that corrupt motives had
\ninfluenced the renewal of its contract in 1991. He implicated
\nCoordinating Minister for Economy, Finance and Industry Ginandjar
\nKartasasmita, who was mines and energy minister when the deal was
\nmade.<\/p>\n
With the spotlight on the company, the local media also
\nexposed alleged irregularities in Freeport's divestment program.<\/p>\n
Freeport's president Adrianto Machribie said earlier that
\nSanyoto's letter did not change Freeport's contract. He argued
\nthat it only confirmed the application of the escape clause in
\nthe contract following the introduction of governmental
\nregulation No. 20 of 1994, which allows the establishment of
\nwholly owned foreign companies.<\/p>\n
The escape clause states that if the government subsequently
\nintroduces regulation or policies which impose less burdensome
\ndivestiture obligations, the less burdensome requirements shall
\nbe applicable.<\/p>\n
Breach<\/p>\n
Meanwhile, Director General of Mining Rozik B. Soetjipto said
\non Wednesday that Sanyoto did not breach any regulation.<\/p>\n
\"The 1994 governmental regulation No. 20 automatically annuls
\nFreeport's divestment obligation. The government did not need to
\nconsult with the House about it because they had earlier agreed
\non the escape clause,\" Rozik said on the sidelines of a seminar
\non COWs organized by Swasembada magazine, Spotcom communication
\ncompany and the Indonesian Mining Association (IMA).<\/p>\n
Rozik said the government would not renegotiate Freeport's COW
\nbut would seek to increase its royalty through negotiations
\nacceptable to Freeport. He did not disclose how much the
\ngovernment was seeking.<\/p>\n
Legislator Priyo Budi Santoso of the ruling Golkar political
\ngrouping, who also made a presentation at the seminar, insisted
\nthe government should have consulted with the House on its
\ndecision to end the divestment obligation.<\/p>\n
\"I really regret that BKPM secretly issued the letter (to
\nrelieve Freeport of its divestment obligation). I hope similar
\nthings will not happen again in the future.\"<\/p>\n
He called on the government to take measures to ensure that it
\nwould control 51 percent of Freeport's shares by 2011.<\/p>\n
Subroto said he observed several irregularities in Sanyoto
\nissuing the letter.<\/p>\n
\"Did BKPM have the right to make a policy regarding divestment
\nin mining companies? Or did the BKPM letter carry a decision from
\nthe president (Soeharto)?\" Subroto asked.<\/p>\n
Subroto said the mining sector was under the supervision of
\nthe Ministry of Mines and Energy in coordination with several
\nministries, including the Ministry of Finance and BKPM<\/p>\n
\"Formerly, no minister was allowed to make his own decision
\nwith regard to mining. Instead, we coordinated among each other
\nand the ministry which served as coordinator made the decision,\"
\nSubroto said. (jsk)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-broke-rules-over-freeports-obligations-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}