Government will not amend Freeport contract: Alwi

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)