Govt Must Take Firm Action on Freeport Contract Renegotiation Process

 
Kartini L Makmur, Robert Sidauruk
 
The Human Rights Committee for Social Justice (IHCS) is of the view that the current contract of work (kontrak karya) between the Government and PT Freeport Indonesia (Freeport) is not valid.
 
According to IHCS, Freeport’s contract is no longer in accordance with the Mining Law and any contract renegotiation between the Government and Freeport should have started in 2003.
 
Jense E Sihaloho, IHCS’s legal counsel, said that the Mining Law mandates that any existing mining contracts had to be adjusted to comply with the Mining Law within one year from the Mining Law’s issue. Therefore, the contract renegotiations between the Government and Freeport should have been completed by 12 January 2010.
 
“The fact is, the renegotiation process being led by the Minister of Economic Coordination seems to be drawn out,” said Mr. Sihaloho during a discussion regarding Freeport’s Contract of Work Renegotiation in Jakarta on Wednesday.
 
At the same event, Gunawan, IHCS’s Executive Chairman, added that from 1967 until now, Freeport has only paid a royalty on gold of 1% percent of the selling price per kilogram to the Government. In fact, since 2003 the Government has actually increased the royalty fee to 3.75 percent pursuant to Government Regulation No. 45 of 2003.
 
This has meant that the Indonesian State has only received USD 161 million from PT Freeport when the amount should actually be USD 330 million.
 
“Based on IHCS’s calculation, the State has lost USD 256 million due to the insufficient royalty fee paid by Freeport,” added Mr. Gunawan.
 
Further, Mr. Gunawan also highlighted the Government’s tendency to conceal details of the renegotiation process from the public by not inviting related stakeholders. Mr. Gunawan urged the Government to be transparent in the renegotiation process, as it impacts on the lives of many people.
 
“The renegotiation process should not only be represented by Jero Wacik as the Minister of Energy and Mineral Resources and the Freeport management,” added Mr. Gunawan.
 
Renegotiation in Progress
In responding to criticism of the slow progress for the renegotiation process, Mr. Wacik admitted that the Government and Freeport have yet to reach an agreement and as a consequence he doubts that the amendment to Freeport’s contract will be concluded in the near future.
 
“We are still waiting for input from experts,” informed Mr. Wacik.
 
Further, Mr. Wacik could also not guarantee that the Government will extend Freeport’s contract. He informed that the contract will expire in 2021and Freeport may submit an application for and extension in 2019 at the earliest.
 
However, while the Government has yet to decide option the extent the contract, Mr. Wacik ensured that the Government will provide investment certainty to Freeport, considering the considerable amount of funds invested by them in Indonesia’s mining sector.
 
“To grant the extension is such a dilemma. There will be trouble if the Government approves an extension to the contract now but the fact is they have invested more than USD 12 million,” concluded Mr. Wacik.
 
(hot/kc)