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.