House urges review of Freeport's deal

House urges review of Freeport's deal

JAKARTA (JP): The House of Representatives demanded on Monday
that gold and copper mining company PT Freeport Indonesia's
mining contract of work (COW) in Irian Jaya be renegotiated to
secure greater benefits for the government.

House Commission V for mines and energy said it would set up a
team to assist the government renegotiate the Freeport contract
of work in the near future. The contract was due to end in 2022.

"The commission urges the government to renegotiate Freeport's
contract to give proportionally better benefits to both parties,"
commission deputy chairman Sunardjo of the ruling Golkar party
said in summing up the conclusions of the commission's hearing
with Freeport's management.

The commission considered the taxes imposed on Freeport,
including the 35 percent corporate income tax and the 1.5 percent
royalty, to be too small compared to the American company's huge
profits from its mining concession in Irian Jaya which holds the
world's largest reserves of copper and gold.

The hearing was held amid controversy surrounding alleged
collusion and corruption in the renewal of Freeport's original
contract in December 1991, 12 years before it was due to expire.

The controversy was set off by American scholar Jeffrey A.
Winters, who noted in Jakarta early last week that chief
economics minister Ginandjar Kartasasmita had been accused of
collusive practices concerning Freeport while he was minister of
mines and energy from 1988 to 1993.

During the hearing, Freeport's management again denied any
irregularities or malfeasance in the process of renewing its
contract.

The commission also urged Freeport to comply with the
divestment terms in its 1991 COW, which obliges it to sell up to
51 percent of its shares to the Indonesian government or
companies within 20 years off the signing of the contract.

The commission said that in case no national companies were
ready to buy the shares before the deadline, the government
should itself make the acquisition to ensure that Indonesia
controls Freeport.

"The government should intervene. Otherwise, the people will
keep raising it as a nationalistic issue that we only have a
small part of our own rich natural resources," Ismoe Handoko of
the ruling Golkar party added.

Under the terms of the 1991 COW, the American company Freeport
McMoRan Copper and Gold Inc. is obliged to divest up to 51
percent of its shares in PT Freeport to national companies or
individuals through direct placement within 20 years.

Freeport's president Adrianto Machribie confirmed The Jakarta
Post's headline story in its Monday edition that Freeport was no
longer required to divest up to 51 percent of its shares
following the introduction of Government Regulation No. 20/1994,
which eases mandatory divestment requirements for foreign
companies.

"According to the regulation, Indonesian shares (in foreign
companies) can be kept as small as 5 percent," Machribie said,
quoting a provision in the 1994 regulation.

Machribie said its COW contains an escape clause which
stipulates that: "If there is a regulation which imposes more
lenient divestment terms (for foreign companies), the lenient
divestment terms will be applied."

He confirmed the company had received a letter from the
Investment Coordinating Board (BKPM) which stated the escape
clause applied.

However, legislators Priyo Budi Santoso and Oedyanto
Hadisoedarmo, both from the ruling Golkar party, argued the BKPM
letter was not valid before it was discussed by the House because
the mining law requires the government to refer all COWs to the
House.

"I smell a rat in the issuance of the BKPM letter," Priyo
said.

Ginandjar

Meanwhile, Coordinating Minister for Economy, Finance and
Industry Ginandjar Kartasasmita went to the Attorney General's
Office on Monday to hand over data and information to support his
denial of allegations of corruption made against him by Winters.

"I came at my own initiative to submit data and files on PT
Freeport Indonesia," Ginandjar told reporters after a one-hour
meeting with Attorney General Andi Muhammad Ghalib and his key
assistants.

Ginandjar said he brought files and data pertaining to PT.
Freeport Indonesia's copper and gold mining operation in Irian
Jaya to the meeting.

"I handed over data on Freeport to the Attorney General's
Office, which is currently studying the case.

"Personally, I hope this case can be resolved quickly because
if it drags on it will disturb both my work and my family,"
Ginandjar said.

Winters, an associate professor at Northwestern University in
Chicago, alleged on Oct. 12 that Ginandjar, while serving as
minister of mines and energy, had profited handsomely from the
renewal of Freeport's contract of work.

Ginandjar has denied the charges.

"Ginandjar came to hand over data in relation to the case of
suspected corruption and collusion in Freeport, and not because
of a case of slander," said Anton Sujata, the deputy attorney
general for special crimes.

Ghalib said separately on Monday that for the time being it
was still unnecessary to question Winters, who has been banned
from entering Indonesia. (jsk/byg)