Thu, 13 Apr 2000

Newmont's case hurts Indonesia's image

JAKARTA (JP): Recent disputes involving foreign investors, including the conflict between gold mining company PT Newmont Minahasa Raya and local authorities in North Sulawesi, have tarnished the country's investment image, a minister said on Wednesday.

"Our image has been greatly tarnished," State Minister of Investment and State Enterprises Development Laksamana Sukardi said at the Presidential Palace prior to a Cabinet meeting.

Laksamana was commenting on the recent ruling issued by the Tondano District Court ordering Newmont to close down its gold mine in Ratatotok over a tax dispute between the company and the Minahasa regency administration.

Laksamana also cited the public's opposition to pulp and paper company PT Indorayon Inti Utama in North Sumatra, and the difficulty faced by Mexican fertilizer company Cemex in acquiring a majority stake in state-owned fertilizer firm Semen Padang.

He warned foreign investors would be hesitant to enter the country unless the government took measures to create legal certainty to protect their businesses.

"Why should we place stumbling blocks in front of the investors? We don't see such things happen in other countries. In those countries, all problems can be resolved through talks," Laksamana said.

Separately, Emil Salim, chairman of the National Economic Council, also said the Newmont case surely damaged foreign investor sentiment on Indonesia.

The Minahasa regency administration filed a lawsuit against Newmont at the Tondano District Court last year, demanding the company pay Rp 62 billion (US$8.2 million) in overdue taxes and compensation following the company's refusal to pay taxes on its overburden.

Newmont at first refused to pay the taxes, arguing taxes on the overburden were not included in its contract of work.

The company later agreed to pay the administration Rp 552.6 billion, but the regency turned down the offer despite pressure from the central government to accept it.

At the request of the regency administration, the district court ordered on Saturday Newmont to temporarily close down its mining operation, giving it until Monday to carry out the order.

Meanwhile, Antara news agency reported Newmont and the regency administration were still working to reach a compromise before the Monday deadline.

Newmont general manager Paul Lahti said on Wednesday in the North Sulawesi provincial capital of Manado the company and the regency held talks on Tuesday evening but no agreement was reached.

Lahti said the company was offering the regency $2.4 million in "developmental contributions", including $1.5 million in an immediate cash payment and annual installment payments of $300,000 for three years.

The regency, however, turned down the offer, demanding an immediate cash payment of $3 million.

"There is not yet any agreement on the issue. We are still talking," Lahti said.

Meanwhile, the Ministry of Mines and Energy again voiced concerns on Wednesday over the closure order issued by the Tondano District Court, saying only the minister of mines and energy had the right to shut down a mining operation.

"The Ministry of Mines and Energy is deeply concerned with the temporary closure of Newmont's gold mine, particularly given the fact a lot of unsuccessful efforts have been made to resolve the dispute through negotiations," the ministry said in a statement.

Newmont Minahasa Raya is 80 percent owned by Denver-based Newmont Mining Corp. and 20 percent by Tanjung Sarapung, which is owned by local businessman Yusuf Merukh.

A spokesman for Newmont Mining Corp. was quoted by AP as saying in Denver on Tuesday the Ratatotok gold mine accounted for one-tenth of the company's gold output.

The spokesman said Newmont was concerned that local officials were setting a precedent that could discourage further economic development in the region and ran contrary to 30 years of national mining law in Indonesia. (jsk)