Contract not extended yet, Government had once reproved Freeport

KATADATA - The controversy of the rumor regarding the contract extension of PT Freeport Indonesia continues to attract many attentions. The Energy and Mineral Resources (EMR) Minister Sudirman Said proclaims that the negotiation process to extend the contract of the gold-mining company is still ongoing. The government had even reproved Freeport before because they are seen not to have good initiatives in the negotiation process. 

The EMR Directorate General for the Minerals and Coals delivered the reprove to the President Director of Freeport Indonesia in a letter dated August 31 2015. The letter is the result of the negotiation meeting for the work contract of Freeport, which was held 10 days before the letters were sent. The meeting included the General Director for Minerals and Coals, representative from the Coordinating Ministry for Economic Affairs, Fiscal Policy Body, Finance Ministry, Investment Coordinating Board (BKPM), Bank Indonesia (BI), EMR Performance Control Unit, and work contract (KK) renegotiation team. 

In the letter, the General Director for Minerals and Coals, Gatot Ariyono, said that the government and Freeport have discussed the renegotiation of the work contract amendment draft ever since October last year until March 2015. But then, Freeport has just agreed on two chapters from the 20 chapters that were discussed. The other 18 are still waiting to be approved by the US mining company.

On last August 21, the government has renegotiated the KK amendment draft. But then, Freeport saw that the KK can still be applied until 2021 and the extension can also be in the form of KK. Another option regarding the contract is that in 2021, the contract must be extended even though it is in the form of permit. And not only that, Freeport also argued that the Legislation No. 4 Year 2009 about the minerals and coals is not valid for Freeport’s work contract. The reason is because Freeport’s KK is being prepared and approved based on the Legislation No. 11 Year 1967. 

And it is based on this that the EMR Ministry sees Freeport as not having good initiatives or motives and that they do not intend to finish the KK amendment draft. Besides, Freeport disobeyed the Legislation No. 4 Year 2009, Chapter 169 letter b. 

Bambang also admitted the truth in the letters, that the reprove letters are included as an ongoing renegotiation process. “But there’s still no decision yet regarding the contract extension,” Bambang said to Katadata, Tuesday (13/10). And regarding this matter, Freeport’s spokesperson Riza Pratama admitted not knowing about the letters yet. “What letter? I still don’t know yet,” Riza said. 

In the explanation that is quoted from the official website of the EMR Ministry, Chairman of Freeport McMoRan Inc. James R. Moffett claims that the Indonesian government had agreed on the long-term operation and investment plan of Freeport Indonesia; including the certainty that the government would approve the contract extension after 2021. 

Other than investment commitment, Freeport has agreed on the increase in the values of royalty, processing and refining within the country, ownership divestment, and an increase in the local components. The Indonesian government has also promised the legal and fiscal certainty in the form of Freeport’s work contract.

The Maritime and Resources Coordinating Minister Rizal Ramli has criticized the EMR Ministry’s steps to change the rules that would allow them to extend the work contract. With the mining reserves to still be good for another 30 to 40 years, the ministry should not be too hasty in taking decision like this. And it is even more right considering that in the next 5 to 10 years there will be many mining work contracts that would expire. 

“I am really disappointed with the mentality of officers like that. In order to appease various importance, he pushed so that the Freeport’s negotiation can be accelerated, and other similar things,” Rizal said. He also reminded so that the tragedy of Freeport Indonesia’s contract extension in 1986 would not reoccur. Back then, there were officials that were suspected to receive bribery in order to extend the contract without fixing with several terms and condition in the contract. 

But then Sudirman denied the rumors. The government has only committed to ensure the long-term investment of Freeport in Indonesia. The content of the letter is hand-in-hand with the instruction of President Joko Widodo (Jokowi), who claims that Indonesia would give political insurance as well as legal protection regarding the long-term investment of Freeport in Indonesia. “There’s no word about contract extension (in the letter), but the decision on that would become the solution for the preparation of the investment in a long-term scale,” Sudirman explained. 

Besides that, Sudirman asks so that the people would not make the situation any worse than it already is by spreading the rumors of contract extension of the American company. “The people that don’t understand this need to stop speculating about contract extension, because it’s not true at all,” Sudirman explained in Jakarta, Monday (12/10).