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)