Mon, 06 Mar 2000

Government will not amend Freeport contract: Alwi

JAKARTA (JP): Minister of Foreign Affairs Alwi Shihab said on Saturday the government had rejected calls for the amendment of the contract of giant copper and gold mining company PT Freeport Indonesia, reiterating the government's pledge to honor its deals with foreign investors.

Alwi said forcing Freeport to change its contract would undermine the country's legal certainty and discourage foreign investors from entering Indonesia.

He made the remarks amid growing criticism over Freeport's operation and mounting pressure on the government from various parties, including ministers, to amend Freeport's contract.

Outgoing Irian Jaya Governor Rear Adm. Freddy Numberi, who is also state minister of state administrative reforms, demanded last week Freeport's contract be amended, asking the company to donate a 20 percent stake to the people of Irian Jaya.

Alwi, however, said the government would not amend the contract but it would ask Freeport to give a concession to the local people, including a stake in the company.

"But, that doesn't mean changing the contract," he said.

Alwi stressed the concession should aim at improving the welfare of the local people, by, among others things, providing them with more job opportunities.

PT Freeport Indonesia is 81.28 percent owned by United States mining company Freeport McMoRan Copper & Gold. The Indonesian government holds a 9.36 percent stake in the company, as does the PT Indocopper Investama Corporation.

Indocopper is 49 percent owned by Freeport McMoran and 50.48 percent by Nusamba Mineral Industries, a company linked to former president Soeharto, while the investing public holds a 0.52 percent stake.

Executive director of the Indonesian Mining Association (IMA) P.L. Coutrier said the request of the local people for a stake in the company was reasonable.

"I can understand the request. It was in the interest of Freeport to relinquish some shares to the locals, as it would make the latter care more for Freeport," Coutrier told The Jakarta Post over the weekend.

Legislator Pramono Anung of the House of Representatives' Commission VIII for mines and energy said any discussion on the divestment of Freeport's shares should be held in the framework of the contract.

"There is no need for the contract to be amended, since it already contains a clause regulating the company's divestment obligation," Pramono said.

Under the contract, which was signed in December 1991, Freeport is obliged to divest up to 51 percent of its shares to the Indonesian government, Indonesian companies or Indonesian citizens within 20 years after the signing of the contract.

However, Pramono said, thus far Freeport had failed to divest its shares as stipulated in the contract.

According to him, Freeport had taken advantage of a clause in the contract that allowed it to rid itself of the divestment obligation should the government issue a regulation allowing it to do so.

In 1994, three years after the signing of Freeport's contract, the government issued regulation No. 20/1994 allowing foreign investors to fully own their companies, Pramono said.

Pressure on the government to review Freeport's contract also came from State Minister of Environment Sonny Keraf.

He blasted Freeport for failing to protect the environment around its mining site.

Freeport vice president Yuli Ismartono rejected allegations that the company had damaged the surrounding environment and did not care for the welfare of the local communities.

She said meeting environmental standards was mandatory in Freeport's contract and the company had been complying with the Indonesian regulations on this matter.

Independent consultant Montgomery-Watson, which was hired by Freeport to conduct an environmental audit on the company last year, described Freeport's environmental protection program as exemplary, but Sonny said the audit was incomplete.

Yuli also said that during 1991 to 1999, Indonesia had earned more than US$1.27 billion in taxes, royalties and dividends from Freeport.

"Some 87 percent of Freeport's earnings were spent in Indonesia," Yuli said in statement last week.

Yuli further said the company had been the object of five independent probes on human rights violations, but none had proved any wrongdoings by the company.

Former U.S. secretary of state Henry Kissinger visited the country in the defense of Freeport last week.

During a call on President Abdurrahman Wahid, Kissinger, who is a member of Freeport McMoRan's board of directors, asked the Indonesian government to honor its contract with Freeport, warning that any violation of the contract would impede the flow of foreign investment. (dja/bkm)