Presiden Direktur PT Freeport Indonesia Chappy Hakim (kanan) menyampaikan berbagai hal saat berkunjung ke Kantor Redaksi Harian Kompas, Jakarta, Senin (13/2). Chappy Hakim diterima wartawan dan jajaran pimpinan Redaksi Harian Kompas.
JAKARTA, KOMPAS -- PT Freeport Indonesia is trying to negotiate with the central government over the conversion of its Contract of Work (CoW) into a Special Mining License (IUPK).
Freeport is still unable to agree with several stipulations in the IUPK, such as those related to fiscal policy and operation extension.
The mining giant’s vice president for corporate communications, Riza Pratama, said Freeport could not immediately apply for a permit to export its concentrates and for its contract extension, although the government had approved the change in contract status from CoW to IUPK.
He said that Freeport still disagreed with the provisions, especially those related to taxation.
"What happens if in the middle of the company\'s operations there is suddenly a policy change related to taxation? It will be quite difficult. We are still trying to negotiate with the government about this," Riza said in Jakarta Monday.
Riza added that the mining company wanted certain provisions in the CoW to also be included in the IUPK. In the CoW, taxation was fixed until the end of the contract (nailed down), and there should be a guarantee on the continuation of concentrate exports and extension of the company’s operations.
Before there was clarity, decisions on export permits and operation extensions were still under consideration.
"For the moment, the concentrates produced by the company are only being used to supply PT Smelting in Gresik, East Java, and cannot be exported. Hopefully in the near future there will be a way out of this problem," Riza said.
In the CoW, the royalty paid by Freeport to the government is 3.5 percent for copper and 1 percent for gold and silver, respectively.
Under the IUPK, the royalty has been increased to 4 percent for copper, 3.75 percent for gold and 3.25 percent for silver. The taxation provisions in the CoW are fixed until the end of the contract, while in the IUPK, tax is adjusted based on prevailing rules and regulations.
On Friday last week, the government announced the conversion of PT Freeport Indonesia’s CoW to an IUPK. The government considered that all the requirements for the change in the operational status had been met. Mining companies are required to change their contract status to be able to apply for an export permit.
In addition to Freeport, PT Amman Mineral Nusa Tenggara (formerly PT Newmont Nusa Tenggara) was also allowed to change its CoW to an IUPK.
"With these changes, the CoW is no longer valid. All the provisions in the IUPK must therefore be followed. If it is prevailing, it should be prevailing," director general of minerals and coal at the Energy and Mineral Resources Ministry, Bambang Gatot, said when asked about tax provisions in the IUPK.
Fair
Regarding Freeport’s efforts to negotiate with the government, the executive director of ReforMiner Institute, Komaidi Notonegoro, said it was fair. For companies with investments worth billions of dollars, or trillions of rupiah, it was normal to demand business certainty related to taxation and policy stability.
"The change from CoW to IUPK gives the government a stronger position in its legal status. However, it should not allow the government to arbitrarily issue a policy that could hurt the investment climate. Government policies should further stick to the principle that the country’s natural resources should be used for the welfare of the people," Komaidi said.
PT Freeport Indonesia is permitted to operate in Papua until 2021. However, the company is allowed to apply for an extension to its operations five years before the permit expires.
Export tax
The government has issued a new regulation on goods subject to export duties and tariffs. This policy was issued as follow up to Government Regulation No. 1/2017, which represented the fourth revision of Government Regulation No. 23/2010 on mineral and coal mining operations.
In a press release issued by the Finance Ministry, export duties on mineral products are between 0 to 7.5 percent based on smelter development progress. The greater the progress, the lower the export duties.
