Papua calls foul over Freeport fees
Rendi A. Witular, The Jakarta Post, Jakarta
Dissatisfied with the disbursement of its share of the royalties paid by mining firm PT Freeport Indonesia, the Papua administration has accused the central government of "dishonesty" regarding the amount of royalties it receives from Freeport.
"The government has refused to disclose the amount of royalties paid to it by Freeport. The figure made public by the Ministry of Finance is too small," Papua Governor Jaap Solossa told the press at the State Palace on Tuesday.
He added that his administration had urged the finance ministry on a number of occasions to disclose the true amount of the royalties paid by the subsidiary of U.S. mining giant Freeport-McMoran Copper & Gold Inc. in Papua, but to no avail.
According to the finance ministry, the royalties amount to Rp 150 billion (US$16.6 million) per year and are paid on a quarterly basis. However, Solossa argued that the royalties should reach at least Rp 500 billion based on his calculations, but he did not give the details of how this figure was arrived at.
Under the Fiscal Balance Law, Papua is eligible for 80 percent of the total royalties paid by Freeport annually, while the central government is entitled to the remaining 20 percent.
Solossa further complained that the government had yet to transfer the royalties for the fourth quarter of 2004 to the Papua administration without giving any acceptable reason for this.
Regarding his administration's plan to acquire a 9.35 percent stake in Freeport, the governor said he was still choosing between six investors keen to form a joint-venture company to secure the stake.
"We are still at the negotiating stage with a number of local investors, assisted by international fund managers, to jointly acquire the stake," he said, adding that the stake would be worth around US$700 million.
After forming the joint venture, the Papua administration would hold discussions with the Ministry of Energy and Mineral Resources with a view to securing the necessary approvals.
At present, Freeport-McMoran controls an 81.28 percent stake in Freeport, with the remaining 9.36 percent being owned by the central government and another 9.36 percent held by locally registered investment firm PT Indocopper, which is controlled by Freeport-McMoran.
Aside from the royalty issue, the Papua administration has also requested the central government and Freeport to show more commitment to the development of Papua, the country's eastern- most province.
The Papuans have requested a fair split of the profits earned by Freeport from mining gold and copper at its Grasberg mine, located in the mountains near Timika regency. The mine is the world's largest gold and the second largest copper producer.