Up in the air
Up in the air
I thank Mr. Richard B. Ness of PT. Newmont Minahasa Raya for
his courtesy in responding to my article so thoughtfully and
openly (The Jakarta Post, April 28, 2000). Mr. Ness says
correctly that my article was based on news reports of the
settlement terms and not on the settlement document itself.
If I understand Mr. Ness correctly, the settlement actually
involved a payment of US$500,000 for unpaid taxes and penalties,
not $2.5 million. Insofar as my conclusions grew out of a
mistaken belief that the company paid an excessive sum to settle
the case and agreed to establish a new community development
fund, then to that degree what I implied -- that this settlement
was suspect and therefore casts doubt on Newmont's motives
-- was also mistaken. I apologize for any unwarranted or wrong
presumption of guilt I might have conveyed about Newmont.
Mr. Ness explained that the $500,000 that the company paid
represented previously unpaid Mineral C tax on materials used for
community development programs. The company feels satisfied that
because the regent dropped his claim to Mineral C tax on this
overburden material, there has been an implicit acknowledgement
that contracts of work will be immune from local interference.
But the dropping of a claim does not normally have the legal
effect of settling the underlying question of whether a claim was
lawful or not in the first place; it only protects one party from
the other party in a specific situation. (If this settlement did
have that effect of settling a question of law, it might be
useful for the government to disseminate a fuller explanation in
the National Gazette). Without knowing what the company's
contract of work says, what the Mineral C tax law says and how
the law defines "overburden", it remains unclear whether the
regent had any reasonable basis for trying in the first place to
tax that part of the company's extracted material used for
community development programs. Consequently the ultimate
significance of the settlement remains unclear. This column might
not be the place to carry on an extended debate on finer legal
points, but at another time and place I'd enjoy doing that with
Mr. Ness.
I am not sure that Mr. Ness's explanation addressed the
underlying points of my article. Point One: foreign companies
with large investments here sometimes feel that they are held
hostage by local officials who will not perform their official
duties responsibly (e.g. to issue permits expeditiously, to
provide police protection against crime) unless they receive
extra payments in cash or in kind. Charging a company with some
violation of law, in this case tax regulations; imposing an
inflated penalty; then offering the company a cheaper way out by
bargaining over the penalty: this is a favorite strategy of
corrupt officials. Point two: Once a company begins operations it
is usually on the local level that problems of corruption,
collusion and nepotism arise. For those corporations that do make
a good-faith attempt to comply with their contract terms and with
applicable laws, the national appeals court system represents a
company's last best hope of fair treatment in the face of
recalcitrant local officials. And here the system fails, as in
those cases in which local governments flaunt the authority and
rulings of the central court or the ministry which agreed to the
company's terms of operation. This is what seemed to have been
the situation in the Newmont case for several months, and I am
not sure that Mr. Ness's letter has discussed this point. In
truth, that may be a question better discussed in another forum.
It's very gracious of Mr. Ness to invite me to observe
discussions on implementation of Newmont's new foundation. This
speaks well of Newmont's seriousness about deciding matters that
affect the community in an open manner, rather than behind closed
doors. I would like to accept that invitation by asking Mr. Ness'
office to contact me via horizons@indo.net.id.
DONNA K. WOODWARD
Medan, North Sumatra