Indonesia’s long relationship with Freeport at crossroads
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Indonesia’s long relationship with Freeport at crossroads

AMERICAN mining giant Freeport-McRoRan Copper & Gold may soon pull out of Indonesia after more than four decades due to prolonged conflict with the government.

The company, which is the country’s oldest international investor and largest taxpayer, has been embroiled in a battle with President Joko “Jokowi” Widodo’s administration over new national mining regulation.

Legislation introduced in January 2017 requires Freeport to convert its business contract into a special mining licence, dictating the company must divest 51 percent of shares in its local subsidiary within a decade and build a new US$2 billion smelter.

Economic nationalism

With economic nationalism a key aspect of Jokowi’s agenda, the government is also demanding higher royalties, land relinquishments and more materials to be procured from local suppliers.

Freeport McMoRan’s current contract was set to expire in 2021 and CEO Richard C. Adkerson has insisted the company will not meet Jakarta’s demands to change its contract, threatening international arbitration.

It was signed in 1991 under the New Order dictatorship, long before Indonesia’s transition to democracy began in 1998.

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Meanwhile, the government has been preparing state-owned aluminium company PT Indonesia Asahan Aluminium to take over management of the gold and copper mining site.

Last week, the Energy and Mineral Resources Minister Ignatius Jonan met with several of his predecessors to discuss the continuation of Freeport Indonesia’s business – even including the minister who served under Suharto between 1978 and 1988.

Protesters across Indonesia have called for the government to nationalise PT Freeport Indonesia, framing American ownership of the company as a form of colonialism.

The company, meanwhile, claim to have injected US$16 billion into Indonesian coffers between 1992 and 2015, and that divesting would impact Indonesia’s foreign investment climate.

Freeport-Indonesia-spokesman-Riza-Pratama-speaks-during-a-news-conference-in-Jakarta-Indonesia-February-20-2017.-REUTERSBeawiharta-1024x719

Freeport Indonesia spokesman Riza Pratama speaks during a news conference in Jakarta, Indonesia, on Feb 20, 2017. Source: Reuters/Beawiharta

Impact on local communities

Whilst negotiations might be taking place in office towers in Jakarta, a temporary suspension of Freeport’s operations is having significant consequences 3000km away in Indonesia’s easternmost Papua province where the mine is located.

Indonesia’s central bank reports the local economy has significantly slowed since Freeport’s decision to indefinitely shut down production. PT Freeport Indonesia has laid off more than 1500 workers in the past two months as negotiations have dragged on.

Natalius Pigai of the national human rights commission, Komnas HAM, told The Jakarta Post “it is not fair to just think about nationalism while letting many people suffer. The government should protect the rights of Papuans, including their job rights.”

Papua has a relatively high GDP compared with other Indonesian provinces despite its small population. Less than four million of Indonesia’s 250 million people live there.

Nevertheless, Papua had the highest rate of poverty of any province at 27.8 percent in 2014, compared with 11 percent nationwide.

Papuan tribal leaders visited the offices of human rights group Imparsial in Jakarta this month, pleading with the government to allow participation from local people in the decision-making process.

Meegabo Traditional Papua Council chairman John Gobai asked Jokowi’s administration to allow Freeport to “operate while the government, Freeport and the Papuan customary councils meet to negotiate the company’s contract. We do not care who will own the company’s shares later.”

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Earlier in March, roughly 100 Freeport employees protested outside the Energy and Mineral Resources Ministry in Jakarta to demand a swift resolution to the dispute.

Layoffs at the company were “a result of regulations issued by the government without giving much attention to the fate of 32,000 employees and Timika residents,” PT Freeport Indonesia Employees Solidarity group member Nathalia Nauw said.

Amungme tribal council Lemasa director Odizeus Beanal said: “We simply want the government and Freeport to think about the fate of Papuans, whose land has been damaged.”