Freeport Rejects Govt Criteria
Freeport-McMoran Inc. president and CEO Richard C Adkerson greets subsidiary Freeport Indonesia’s former president director Chappy Hakim (left) after a press conference at the Fairmont Hotel in Senayan, Jakarta, on Monday (20/2). Freeport has said that it refuses to comply with the government’s requirement to change its operational status from a Contract of Work to a special mining license (IUPK) in order to be able to export ore concentrate.
JAKARTA, KOMPAS — PT Freeport Indonesia has said it cannot accept the criteria proposed by the government and would continue to stick to its existing Contract of Work (CoW).
Settling the dispute through international arbitration would be an option if there was no solution from either side.
This statement was made by president and CEO of Freeport McMoran Inc., the parent company of PT Freeport Indonesia, Richard C Adkerson, in a press conference in Jakarta on Monday.
Accompanied by Freeport Indonesia senior advisor Chappy Hakim, Adkerson explained the latest developments in the company’s negotiations with the Indonesian government.
"Our position is still at the negotiation stage with the government of Indonesia. However, the Indonesian government has decided to remove the company’s rights stipulated in its Contract of Work. We cannot accept this," he said.
According to Adkerson, until the expiration of the CoW, the company still had the right to export its copper concentrate.
In addition, the tax scheme in the CoW was fixed until the contract expired (nailed down). Based on the CoW, Freeport’s mining operation in Papua will expire in 2021.
On Feb. 10, the government announced a change in Freeport’s operating status from CoW to a special mining license (IUPK).
The government’s legal position differs in the two licenses. In the CoW, the company and the government have a similar legal status, while in the IUPK, the government, as the license issuer, has a higher legal status.
In the IUPK, the taxation scheme is based on prevailing rates, which can be adjusted according existing tax regulations. The company must also divest at least 51 percent of its stake to the Indonesian government or national private companies.
Based on Government Regulation No. 1/2017, only companies holding an IUPK license can export ore concentrates.
Adkerson said that as no breakthrough had been made in negotiations with the government, the company had 120 days from notification to the Indonesian government to further negotiate the dispute.
Freeport formally notified the government of its objections on Friday, in accordance with the provision in the CoW stated in Article 21 on dispute settlement.
"If after the negotiation deadline [120 days from Friday, Feb. 12], no solution is found, we have the right to resolve the dispute through arbitration. We hope to find a solution soon," Adkerson said when asked about the company\'s plans to go to international arbitration.
Finding consensus
Interviewed separately, Energy and Mineral Resources Minister Ignatius Jonan said that Freeport had the right to take the dispute to the international arbitration court.
However, he hoped there would be a breakthrough to settle the dispute. If no agreement could be reached, both the government and Freeport had the right to take the dispute to international arbitration.
"Well, do they want to do business or litigate? I think Freeport is a business and wants to do business. If it is doing business, it should negotiate," Jonan said after attending a meeting at the House of Representatives.
According to Jonan, the government was currently implementing its Constitutional mandate. All agreements and regulations should be based on the Constitution. He said no agreement or contracts should deviate from the Constitution, unless it was not stipulated in the Constitution.
Jonan said that the government had given three options to Freeport. First, Freeport had the right to investment stability during the negotiations, or for six months since the IUPK was issued to Freeport. Second, Freeport had the option to change its operational status to an IUPK with all those terms and conditions.
"The third option is to go to arbitration if there is still deadlock," said Jonan.
Concentrate exports
Regarding the concentrate export recommendation issued by the government last Friday, Adkerson said this recommendation was linked to the removal of the company’s rights in its CoW and Freeport had not taken advantage it.
At present, Freeport has limited its concentrate production to match the production capacity of the Gresik copper smelter, which was only 1 million tons per year.
"Since January, we have not been able to export concentrate. Our warehouse in Papua is already full. Concentrate stored there cannot be shipped in the near future because, at the same time, there is a strike at the smelter in Gresik. So the supply of concentrate has been halted," Adkerson said.
Freeport’s supply of concentrate to the Gresik smelter is equivalent to 40 percent of the company\'s concentrate production. Freeport exports an average 500,000 tons of concentrate every six months. With the new rules, the export license is valid for one year, according to the 1.1 million-ton quota given by Energy and Mineral Resources Ministry recently.
"Regarding employment termination, we have had to repatriate a number of foreign employees. They will be in the first batch, before Indonesian workers, which amount to 97-98 percent of our employees, the rest are foreigners," Adkerson said.
Speaking at the State Palace complex, University of Indonesia economics professor Firmanzah said that the government and Freeport should sit together to find a solution.
He said the government\'s efforts to enforce the rules should be accompanied by efforts to maintain investment stability in the country.
"Don’t let Indonesia, which is still trying hard to attract foreign investors, lose an investor that has operating for a long time in the country," Firmanzah said after meeting with Vice President Jusuf Kalla.
He said that Freeport should not use the issue of employment termination as a means to pressure the government. He was optimistic that the problems with Freeport would not affect investor interest in Indonesia.
Meanwhile, Muhammadiyah youth central executive committee chair Dahnil Anzar Simanjuntak encouraged the government to continue implementing the Constitutional mandate.
The program to promote downstream mining industry in the country should be continued. "I hope President Joko Widodo, through minister Ignatius Jonan, does not succumb to the arrogance of PT Freeport. The government should enforce the existing regulations," he said.
(APO/NTA)
