Freeport: Dirty water won't wash away graft

Freeport: Dirty water won't wash away graft

By Donna K. Woodward

BANDUNG (JP): The furor over the extension of the contract
between the government and PT Freeport Indonesia, and the
compulsory divestment of shares by the latter, attest to a
general pattern of unequal relationships between a developing
country and a Multinational Corporation (MNC).

Developing countries tend to be on the losing side whenever a
contract on the exploitation of natural resources is made between
the two parties. After all, efficient exploration of copper and
gold in an area as remote as Grasberg, Irian Jaya, can only be
conducted by a giant MNC with worldwide experience such as
Freeport Indonesia.

However, as the owner of the natural resources, Indonesia
deserves its "fair" share from the exploitation. Certain
irregularities in the extension of the contract have led many to
believe that government officials failed to defend the public
interest in negotiations with foreign parties.

Many regret the fact that negotiations with Freeport Indonesia
were not transparent and members of House of Representatives were
not thoroughly consulted.

It should come as no surprise that when Jeffrey Winters, an
expert on political economy from Northwestern University in
Chicago, mentioned the possibility of corruption in the extension
of the contract, Indonesian government officials shifted
frantically into self-defense mode. Had Winters not made his
criticism, the public would have been kept in the dark to the
irregularities which occurred.

There are several important lessons to be learned from this
case. First, our desperate need for foreign investment does not
mean we have to satisfy all the demands of foreign investors.
Once a big MNC holds a contract, it will try to do anything to
quicken and maximize its investment returns.

MNCs are shrewd enough to play on the frailties of government
bureaucracy in developing countries through manipulating the
interpretation of "ambiguous" clauses in contracts.

Second, the Indonesian public has the right to know not only
the mechanism of making or extending contracts with foreign
companies, but also their content. Thus, a transparent decision-
making process is a must to ensure public accountability.

In this regard, legislators should be more active and
aggressive in monitoring and supervising the implementation of
contracts with foreign partners.

Third, the Indonesian government, especially during Soeharto's
rule, tends to be suspicious of the role of non-governmental
organizations (NGOs) which, in the public interest, often
criticize environmentally damaging operations of some foreign
companies.

The tendency should not be allowed to persist if Indonesia
wants to be a democratic country.

With their extensive networks, NGOs can countervail the power
of MNCs. The government will only make unnecessary trouble if
they treat them as enemies.

Fourth, if there is evidence of the involvement of one or more
of the present Cabinet members in corruption, collusion and
nepotism in the extension of the contract with Freeport
Indonesia, then the urgency of an entirely new government is
patently evident. After all, how can we clean a soiled white
cloth with dirty water?

If we fail to do so, Indonesia loses a golden opportunity to
establish a clean government.

Last but not least, there should be a rearrangement of profit
sharing in the exploitation of natural resources between the
central and local government. While the people of Irian Jaya have
not received what they legitimately deserve from the exploitation
of natural resources in their region, foreign companies continue
to clean up huge amounts of capital.

The great irony is that the central government is so
benevolent to foreigners while behaving with indifference to the
suffering of its own citizens. It is little wonder the
marginalized people find it increasingly difficult to identify
with the rest of the nation.

The writer is the head of the School of International
Relations at the University of Parahyangan, Bandung, and a
researcher at the institution's Parahyangan Center for
International Studies.