Tag: Freeport Indonesia

Indonesia aims to emulate Norway in managing its mineral wealth

After three years leading Indonesia’s largest state-owned bank by assets, former Bank Mandiri chief executive officer Budi Gunadi Sadikin has a new role as special staff to Rini Soewandi, the Minister of State-Owned Enterprises (SOE).

In this role, which he started in late June 2016, Budi is charged with establishing a holding company made out of state-owned mining enterprises to re-do the way the government handles its future stakes in the industry.

Continue reading “Indonesia aims to emulate Norway in managing its mineral wealth”

From haze to extortion allegations: Indonesia’s justice system is at stake

To the relief of many, the rainy season has finally arrived in Indonesia. “Divine intervention” seems to be the only thing that can put out forest fires that produced choking haze for months.

Millions of  Indonesians and those in neighbouring countries had to endure acrid smog as a result of deliberate burning of Indonesian forests and peatlands to make way for plantations.

After visits to the worst hit locations, President Jokowi decided to send thousands of soldiers to help extinguish the fires – a clear sign that local governments on Sumatra and Kalimantan islands are incapable of handling the long-standing problem.

Although a bit too late, the government finally accepted help from neighbours, after initially rejecting their offers. The scale of the problem was too big for Indonesia to handle alone, and obviously, public patience was running thin.

Even after deploying thousands of soldiers and getting all the help, the problem was clearly far bigger than the government had anticipated.

The blame game then began: fingers were pointed at large plantation companies and their suppliers, who in turn blamed small-time farmers and indigenous villagers for the fires.

It’s common knowledge among Indonesians that this problem stems from weak law enforcement. For too long, companies, big or small, have been allowed to open plantations in areas where they shouldn’t have.

Satellite images could have been used as evidence to bring those companies to court. But things are easier said than done. Few if any, perpetrators have been punished.

Indonesia’s legal system has consistently earned poor marks in various surveys. Our police, prosecutors, judges, advocates – those who are supposed to mete out  justice – are notorious for being corrupt.

Although Indonesians are known to have extra tolerance to the haze problem, our neighbors don’t.

Now that the haze is gone, people’ attention is being diverted to other issues.

The media have had a field day after it was revealed that House of Representatives  speaker Setya Novanto allegedly asked for 20 percent of shares from Freeport Indonesia, on behalf of President Joko Widodo and Vice President Jusuf Kalla.

Setya Novanto was already the focus of public criticism after he met US presidential hopeful Donald Trump in New York in September. At the end of his speech, Trump briefly introduced Setya, asking him what Indonesians thought of him: “Do they like me in Indonesia?” To which Setya replied: “Yes, very much.”

Thousands have signed an online petition to have Setya Novanto removed from his position as the House speaker. Major media outlets have also repeatedly warned that the investigation should be open to the public, and that the matter shouldn’t be shoved under the rug.

The people are fed up with incompetent and corrupt  law enforcement in Indonesia. We want capable and honest law enforcement institutions that can deliver justice for all.

That is why I was shocked when I heard the news that Indonesia’s anti-narcotics agency chief Budi Waseso plans to build an island prison surrounded by croc-infested waters to keep drug kingpins isolated from convicted couriers and users.

Budi Waseso dismissed concerns over inmates’ rights, because “It’s not a human rights violation when a crocodile does the killing,”

I mean, shouldn’t the police be the one who make sure that law is enforced? why leave it to the hungry crocodiles? define irony.

If this kind of public insult to common sense continues, I am afraid people will be desperate and start taking matters into their own hands.

If things continue like now, we can expect the breakdown of law and order. We need to learn from the painful lessons of history.

 

 

Freeport extortion allegations rock Indonesian politics

Allegations that House of Representatives Speaker Setya Novanto sought to extort shares from mining giant Freeport Indonesia has rocked the country’s political establishment.

Energy and Mineral Resources Sudirman Said claimed he has evidence that Setya demanded a Freeport stake on behalf of President Joko Widodo and Vice President Jusuf Kalla.

The government has demanded the company divest some of its shares to comply with Indonesian law.

Jokowi, as the president is universally known, is reportedly angry that Setya apparently negotiated the renewal of the contract to allow Freeport to continue its operations in Papua.

Setya Novanto was already the focus of public criticism after he met US presidential hopeful Donald Trump in New York in September. At the end of his speech, Trump briefly introduced Setya, asking him what Indonesians thought of him: “Do they like me in Indonesia?”

To which Setya replied: “Yes, very much.”

Setya made his name as a successful businessman long before he started his career as a politician, although not without controversy.

In 1999, he was implicated in a scandal involving Bank Bali, which centered on the transfer of Rp546 billion from that bank to PT Era Giat Prima (EGP), a company he controlled, but he was cleared by a court.

More recently, Setya has been implicated in a number of graft cases handled by the Corruption Eradication Commission (KPK), but his status has remained as a witness.

Setya asked Freeport for “11 to 9 percent, saying he would give [11 percent] to the president and 9 percent to the vice president,” Sudirman charged.

The attempted shakedown reportedly took place over the course of three meetings between the legislator and Freeport Indonesia executives in June.

Shakeup coming?

Other top politicians may also be dragged into the bribe attempt, a source said. That reportedly has triggered major behind-the-scenes movement in Indonesia’s political establishment as it seeks to cope with the new way of doing business.

Junimart Girsang, a deputy chairman of the council, confirmed that Sudirman filed the complaint, including submitting wiretapped phone conversations that purportedly quoted an unnamed lawmaker.

Although neither the minister nor the House would reveal the identity of the legislator, the transcript was leaked to local media, which reported that it was Setya, a senior member of the Golkar Party as well as being speaker of the house.

“We received concrete evidence in the form of a recorded conversation for us to examine,” Junimart told reporters.

He added that Sudirman had said “there are several people in the conversation including a very prominent Indonesian businessman.”

Media reports quoted said in the taped conversation, the unnamed legislator approached Freeport officials, claiming he represented the president and the vice president.

Under government regulations pushed through in 2014 on mineral and coal-mining business activity, Freeport must divest 10.64 percent of its shares to the government. After accepting the offer, the government has 90 days to negotiate with Freeport.

IPO for Freeport

Freeport Indonesia is expected to be allowed to conduct an initial public offering to comply with the mandatory divestment regulation imposed by the government. The company’s spokesperson Riza Pratama said divesting shares through an IPO would be more transparent and accountable.

It is currently 90.64 percent owned by Freeport McMoRan of Phoenix, Arizona and 9.36 percent by the Indonesian government. To meet the government’s requirement, the company must offer another 20.64 percent of its shares to Indonesian shareholders.

According to the current schedule, Freeport Indonesia should have divested a further 10.64 percent of its shares in October.

The mining company’s export permit expired in July. The permit is necessary for the company to continue shipping its partly processed copper concentrate despite the government’s implementation of a ban on raw mineral exports in January 2014. Due to a loosening of the

export ban, export permits for raw minerals are now possible as long as the company in question shows a commitment to making progress on smelter developments and they pay export tax.

The company currently produces approximately 2.5 million tonnes of copper concentrate per year. While the export permit is extended, Freeport Indonesia is currently under the spotlight following its attempt to seek certainty over its operation after the termination of its contract in 2021. Critics have argued that its poor progress in smelter development was also driven by uncertainty regarding its operation after 2021.

The export tax is set at a maximum of 7.5 percent, depending on the progress of smelter development, which is calculated based on the amount of money spent. An export tax of 7.5 percent is imposed on companies whose disbursement is at 0 to 7.5 percent of their total investment in downstream facilities.

Freeport Indonesia has been the sharp target of critics from Indonesian officials and environmental activists.

Indonesia’s coordinating Maritime Affairs Minister Rizal Ramli said although Indonesia was blessed with abundant mineral resources, unfortunately, all of those resources, except coal, are controlled by foreign powers through a work contract.

The minister said a mining site currently controlled by Freeport Indonesia in Papua was one of the three biggest copper and gold mines in the world.

“However, people in Papua are very poor because Freeport pays only 1 percent in royalties for the gold it exploits. Across the world, gold royalties are around 6-7 percent,” Rizal Ramli said.