Latief defends business accords with Freeport

Latief defends business accords with Freeport

JAKARTA (JP): PT ALatief Corporation (ALC) defended on
Saturday its business deals with PT Freeport Indonesia, saying
that such transactions are normal and fair.

"Therefore, we'll take legal measures against those who accuse
ALC's business (with Freeport) of smacking of corruption,
collusion and nepotism," ALatief Corp president Usman Ja'far said
in a statement.

The statement was made amid controversy about alleged
corruption and collusion involved in Freeport's operations after
it renewed its contract in 1991 to operate a huge copper and gold
resource in Grasberg, Irian Jaya.

The controversy was set off by American scholar Jeffrey A.
Winters, who noted in Jakarta early last week that Coordinating
Minister for Economy, Finance and Industry Ginandjar Kartasasmita
helped his friends and family get stakes and win projects in
Freeport.

Ginandjar was the minister of mines and energy when Freeport
renewed its contract.

Winters, quoting local research agency Econit's reports and
Asian Wall Street Journal's Sept. 30 edition, said Ginandjar was
involved in collusive practices which enabled Bakrie Group's
president Aburizal Bakrie to acquire stakes in Freeport and
ALatief Corp's chairman Abdul Latief to acquire Freeport's
noncore business in his mining fields in Irian Jaya.

Bakrie, through its subsidiary PT Indocopper Investama
Corporation (IIC), bought a 10 percent stake shortly after
Freeport renewed its contract, while Latief acquired Freeport's
noncore business in 1992.

Freeport Indonesia is 81.28 percent owned by giant U.S. mining
company Freeport McMoRan Copper & Gold. The remaining shares are
owned by the Indonesian government (9.36 percent) and IIC (9.36
percent).

IIC is 50.48 percent by PT Nusamba Mineral Industri, and the
remaining shares owned by Freeport McMoRan (49 percent) and
members of the public (0.52 percent)

Angered by Winters' claims, President BJ Habibie ordered the
police to investigate Winters on charges of defaming Ginandjar
and the Indonesian government.

The police have questioned several people, including
Ginandjar, Freeport's president Adrianto Machribie, Econit's
president Rizal Ramli.

Usman said ALatief Corp was asked by Freeport to cooperate in
managing its noncore business assets in Irian Jaya in 1985. But
the negotiations between them did not bear fruit.

Freeport approached ALatief Corp again in late 1990 and they
were engaged in serious talks in early 1991, Usman said. During
the negotiations, Freeport was represented by New York's law
office Davis Polk and Associates while ALatief Corp was
represented by Makarim and Tairas.

Usman said Freeport offered a cooperation with ALatief Corp
due to the latter's good reputation in retail and management
business.

According to Usman, ALatief Corp bought Freeport's
infrastructure assets for US$370 million, financed by $115
million of equity and $255 million of debt guaranteed by
Freeport.

The assets include department stores, recreational facilities,
a hotel, a golf course, schools, a hospital, housing, a port.

Usman said ALatief Corp considered the business deal very
risky due to the remote location of Freeport's mining field and
the fact that ALatief Corp would only serve a single market.

Banks were then only willing to give loans to ALatief Corp
after Freeport acted as guarantor for the loans, Usman said.

In the first years, Usman said, ALatief Corp could make a
profit from the margin between a yearly after-tax return on
equity of 15 percent and the yearly 9 percent cost of funds.

Since the middle of 1997, however, the investment become
unprofitable following the rise in the cost of funds to between
15 percent and 20 percent.

"Nevertheless, we shall fulfill our commitment to the project.
We shall not back away from it despite the difficult times,"
Usman said. (jsk)