No Bargain for 51% Divestment of Freeport Indonesia

The Freeport saga has continued to a new height regarding the shift from Contract of Work (CoW) to Special Mining Business License (IUPK) in order for them to continue their operation. The Government of Indonesia has given their final say on the fate of Freeport in Indonesia. The decision is for Freeport to obey the new regulations without any bargain and make 51% of divestment or nothing at all.

Freeport’s ongoing contract which is the CoW enables them to be in equal footing with Indonesia because it binds Indonesia in a contract. However, under the new regulations of Government Regulation Number 1 of 2017 (PP 1/2017) in the mineral sector, all corporations under the CoW must change their contract to IUPK if they want to continue to operate in Indonesia. This means, Freeport Indonesia would not be able to enjoy the abundant privileges that were ensured under CoW. Which includes one of their biggest income source, the permit for concentrate export. 

51% Divestment of Freeport Indonesia
Freeport operation territory via westpapuamedia.info

 

In accordance with the new regulations, The Government of Indonesia gave five conditions in order for PT Freeport Indonesia to extend their contract. One of the requirements  is that Freeport would need to make divestment. Currently GoI only have 9.36 percent of Freeport’s share.

Based on CoW, Freeport’s obligation to make divestment is in the amount of 30% of shares. However, with the new regulations under IUPK, it has now increased to 51%. The regulations regarding divestment are stated in PP 1/2017 regarding the amendment of four Government Regulation Number 21 of 2010, as well as the Law Number 4 of 2009 which regulates the operation of mineral and coal mining.

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This means the GoI would hold the biggest power over PT Freeport which has operates and take lucrative profit over the tens of years they have operated without giving any substantial contribution to the development in Papua. This has not been well received by Freeport.

After bargaining for the contract change, they have stated their objection on the 51 % divestment regulation under the new contract of IUPK. Freeport would only make a divestment under the previous CoW agreement in the amount of 30% which was signed in 1991.

The GoI, of course, has strongly rejected Freeport’s requirements. The Vice Minister of the Ministry of Energy and Mineral Resources, Arcandra Tahar said that anyone under the territory of Indonesia should abide by the national law, without exception. This statement could not have been more correct.

The Coordinating Minister of Maritime, Luhut Panjaitan, has also stated strongly that any cooperation that operates under the territory of Indonesia must follow all law and regulations therein. Moreover, he reminded that the 51% divestment was supposed to be carried out in 2009 and there is no reason the delay furthermore.

51% Divestment of Freeport Indonesia
The Coordinating Minister of Maritime, Luhut Panjaitan via news.okezone.com

 

 

The Head of Jaringan Kemandirian Nasional (JAMAN), Iwan Dwi Laksono, has also conveyed their disaproval of Freeport’s bargaining. Freeport must abide to the laws and regulations of Indonesia without further bargains. With the new regulations which affected the contract status of Freeport being issued, the stipulations under CoW would no longer in power and the 51% divestment is a given.

In addition, he believes that if Freeport refused to make the 51% divestment, the GoI should revoked Freeport’s permit, moreover the future contract up to 2021.  It is time for the Government to use steel hands on this agreement.

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These decisions are the right move to be conducted by the GoI. With 51% of share, Indonesia will now have the control over their rich natural resources. Which is from the start, has been the rights of Indonesia and the Indonesian people.


 

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