Freeport Must Understand Govt Intention
JAKARTA, KOMPAS — PT Freeport Indonesia should be able to understand the Indonesian government’s good faith in negotiations on the fate of the mining giant’s operations in Papua.
The government has already given quite a strong signal that the company\'s operations will be extended, although there should be adjustments to comply with existing regulations.
"I think there is still a lot of room for the government and Freeport to talk. Freeport should understand the signals given by the government that their investment is still needed, but there must be adjustment to accommodate existing regulations," Pri Agung Rakhmanto, a lecturer at Trisakti University, Jakarta, said in Jakarta on Tuesday.
The signals, according to Pri Agung, indicated that the application for a contract extension could be made earlier – up from two years to five years before the contract expires. This would mean that Freeport could apply for an extension this year as its contract will end in 2021.
In addition, the company is still allowed to export concentrate for the coming five years, or until 2022.
"However, the government has asked the company to comply with the existing regulations, including the obligation to build a smelter. My opinion is based on the assumption that both the government and Freeport are willing to cooperate," Pri Agung said.
Maximum effort
Energy and Mineral Resources Minister Ignatius Jonan said in a statement said the government would do its best to support all investments in Indonesia, both foreign and domestic, without exception.
In the mining sector, the government implemented Law No. 4/2009 on mineral and coal mining and Government Regulation (PP) No. 1/2017 as the implementing regulation for the law.
"In the law, holders of contracts of work [CoW] are required to process and refine their mined raw minerals in the country within five years from the issuance of the law. In fact, the CoW holders who have not been able to refine their minerals domestically have been offered to opportunity to transform their CoW into a special mining license [IUPK] to be able to obtain an export concentrate license," Jonan said.
Monday, in a press conference in Jakarta, president and CEO of Freeport-McMoran Inc. Richard C Adkerson said it was difficult for the company to accept the conditions proposed by the Indonesian government. Freeport was, for example, required to change its operating status from CoW to IUPK in accordance with existing regulations.
Freeport rejected the obligation to divest at least 51 percent of its shares and to change its tax scheme to comply with prevailing tax regulations.
Freeport wanted the change in the operational status not to remove its rights as stated in the CoW, such the use of a fixed tax scheme until the contract expired (nailed down) and to still be allowed to export concentrate until the end of the contract. Under the new regulations, CoW holders cannot export concentrate if they have not changed their operational status to an IUPK.
"If there is no way out, we have the right to resolve the dispute through arbitration," Adkerson noted.
Regret
Separately, Coordinating Maritime Affairs Minister Luhut Binsar Pandjaitan deplored Freeport’s decision to lay off its employees following its refusal to adopt government regulations.
The company should prioritize negotiations to resolve the dispute and not just lay off employees, he said. "That\'s unprofessional. The company has a responsibility to its employees. Professional companies would not do that [laying off employees]," he said.
The Indonesian government should not be dictated by private interests, he said, adding that all government regulations must be obeyed. "All the rules and regulations have been enforced. It is impossible for private companies to dictate to the government," Luhut said.
Luhut said that there were consequences that must be faced by Freeport Indonesia if it lost at international arbitration. It would mean its contract would not be renewed and the company could be taken over by Indonesia.
Based on the CoW, Freeport’s mining contract in Papua will end in 2021, in conjunction with the company’s 50-year operation.
As reported, PT Freeport Indonesia rejected the terms proposed by the government. The company is ready to take the dispute to international arbitration if no solution can be reached.
(LKT/APO)