House to question Freeport<\/p>\n
JAKARTA (JP): The House of Representatives will push giant
\ncopper and gold mining company PT Freeport Indonesia to disclose
\nits divestment program, to remove controversy over the Indonesian
\nownership in the mining company.<\/p>\n
Legislator FX Soejitno of the Armed Forces (ABRI) faction told
\nThe Jakarta Post on Saturday that Freeport had to clearly divulge
\nto the public the amount of shares it had to sell to the
\nIndonesians in line with its contract of works (COW) and how it
\nwould conduct the divestment program.<\/p>\n
\"The public needs to be informed fully on the divestment
\nprogram,\" said Soejitno, a member of the House Commission V for
\nindustry, mining, trade and manpower, which will hold a hearing
\nwith Freeport on Monday.<\/p>\n
Freeport was at the epicenter of heated debates last week
\nafter American scholar Jeffrey A. Winters alleged corruption and
\ncollusion in the renewal of its contract in 1991 and implicated
\nCoordinating Minister for Economy, Finance and Industry Minister
\nGinandjar Kartasasmita in the scandals.<\/p>\n
Freeport, a subsidiary of the United States giant copper and
\ngold producer Freeport McMoRan Copper & Gold, which is listed in
\nNew York, received its first COW in 1967 for the development of
\ncopper reserves in Irian Jaya. It renewed the COW in December
\n1991 after finding the world's largest copper and gold reserves
\nin the province's Grasberg area.<\/p>\n
However, the content of Freeport's COW remained obscure to the
\npublic until Coordinating Minister of Economy, Finance and
\nIndustry Ginandjar Kartasasmita revealed in a statement last week
\nthat Freeport, under the contract, is obliged to divest up to 51
\npercent of its shares to national companies or individuals
\nwithin in 20 years.<\/p>\n
If Freeport sells 20 percent of its shares on the Jakarta
\nStock Exchange, the contract stipulates, the company is only
\nobliged to divest 45 percent of its shares. The remaining 25
\npercent can be sold to national companies and individuals through
\ndirect placement.<\/p>\n
Freeport McMoRan currently owns 81.28 percent of the company.
\nThe Indonesian government owns 9.36 percent and the remaining
\n9.36 percent is held by PT Indocopper Investama Corp. (IIC).<\/p>\n
IIC, which was formerly controlled by the Bakrie Group, is 49
\npercent owned by Freeport McMoRan, 49 percent by PT Nusamba
\nMinerals Industry and 1 percent by the investing public.<\/p>\n
An informed source, however, told the Post that following the
\nintroduction of a new regulation on foreign investment in 1994,
\nFreeport was no longer required to divest up to 51 percent of its
\nshares to local partners.<\/p>\n
The regulation allows, among other things, the establishment
\nof a wholly owned foreign company and eases the mandatory
\ndivestment requirement.<\/p>\n
The source said that after issuing the foreign investment
\nregulation, which is officially called Government Regulation No.
\n20 of 1994, Freeport's then-president, Hoediatmo Hoed, had
\nrequested the then-minister of investment\/chairman of investment
\ncoordinating board, Sanyoto Sastrowardoyo, to free it from the
\ndivestment obligation under the 1991 contract.<\/p>\n
Freeport's COW contains an escape clause stating that the
\ndivestment terms on the contract can be modified if there is a
\nfavorable regulation to do so.<\/p>\n
Consultation<\/p>\n
But Sanyoto, backed by \"someone at the top\", approved the
\nrequest without consultation with the House, as required by the
\nexisting mining law, the source said.<\/p>\n
Under the existing mining law, a COW is to be signed by
\nminister of mines and energy after consulting with the House and
\ngetting approval from the President.<\/p>\n
Former legislator Tadjuddin Nur Said, who was a member of the
\nHouse's commission in charge of mining affairs from late 1980s to
\n1995, confirmed that the change in the divestment obligation had
\nnot yet been consulted with the House.<\/p>\n
\"If the information (that the contract has been changed) is
\ntrue, it is a real violation of law. Any change to the contract
\nshould be consulted with the House,\" Tadjuddin said, noting that
\na COW is a lex specialis (special law), slightly lower than a law
\nin stature but higher than a government regulation in the
\ncountry's legal system.<\/p>\n
Freeport's senior manager of public affairs department, Yuli
\nIsmartono, refused on Saturday to comment on the subject, while
\nHoediatmo, who currently serves as Freeport's commissioner, was
\nnot available when contacted by telephone at home.<\/p>\n
\"He is out of town,\" said a woman who identified herself as
\nHoediatmo's wife.<\/p>\n
Analysts say the 1994 governmental regulation No. 20 does not
\nautomatically annul Freeport's divestment obligation under
\ncontract, referring to the case of the country's largest mining
\ncompany, PT Kaltim Prima Coal (KPC), which develops huge coal
\nreserves in Sangatta, East Kalimantan.<\/p>\n
KPC, which started production in 1992, is required under
\ncontract to divest up to 51 percent of its shares to Indonesians
\nbetween the fifth and 10th of year of its commercial production.
\n(jsk)<\/p>",
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