Jakarta, Aug 26 (Antara) - The Indonesian government has been asked to concretize its plan to divest 51 percent of US-based gold and copper mining company PT Freeport Indonesia (FP) stake by assigning a state company to take over the divested shares.
The Indonesian government is still negotiating several issues, including the divestment of the 51 percent shares with FP, whose mining operation contract will expire in 2021. The government has stressed that FP will be allowed to extend its mining operation permit if it divests 51 percent of its shares to the Indonesian government.
"I agree with the government's step to take over 51 percent of FP stake. Therefore, we call on the government to take a concrete step regarding the divestment," Legislator Ahmad M Ali of Commission VII on energy affairs of the House of Representatives (DPR) stated in Jakarta on Thursday (Aug 24).
Hence, the lawmaker, who is a politician of the National Democrat Party (NasDem), asked the government to concretize its proposal on the divestment of Freeport by assigning a state-owned enterprise (SOE), including the payment system and legal instrument.
This is intended to ascertain that the divestment of foreign stake in Indonesia is truly for the interest of national economy and for the people's prosperity. "The divestment of 51 percent of Freeport's share should not just become a discourse to attract shares. The government should concretely assign a SOE with the needed legal instrument to ascertain that divestment is for national economy and for the people's prosperity," Ali said.
The assignment of a SOE is to ensure that the share would not fall on others¿ hands but on the state. The government should learn a lesson from its failure in the divestment process of Newmont's stake, which eventually fell on the hands of the private sector and was returned to the stock exchange to float its shares.
Therefore, according to Ali, the government should make clear its category of participation in the divestment.
The discourse on the divestment of FP shares surfaced when Coordinating Minister for Maritime Affairs Luhut Pandjaitan affirmed the government's stance on the divestment of 51 percent of FP stake if it wants to have its operation contract extended.
According to the Minister of Energy and Mineral Resources (ESDM) Ignatius Jonan, stake divestment is one of the conditions for PT Freeport Indonesia to get its contract extended.
He noted that Freeport has agreed to divest 51 percent of its shares.
"One of the conditions for us to grant contract extension is divestment. If not, we will not grant contract extension permit," Jonan stated at the Presidential Palace in Jakarta on Wednesday (Aug 23). He revealed that by the end of this month, Freeport and the government would continue talks on the renewal of the contract.
Pandjaitan added that talks on the 51 percent divestment of Freeport shares are still underway, and divestment is a requirement for contract extension.
"What Mr. Jonan says (is true that) we should receive a 51 percent divestment. We have to 'divest' Freeport, then the smelter must be built, and the taxes will go down. It is still being calculated," Luhut noted at the Presidential Palace.
The Coordinating Minister for Maritime Affairs remarked that Freeport wanted the same tax payments, and the government does not mind the downtrend. "Basically, we agree because the tax tends to go down. But negotiations are still underway on tax obligation to the region," he revealed.
It was earlier reported that PT Freeport Indonesia has agreed to divest 51 percent of its shares to the Indonesian government as one of the conditions it has to meet in extending its work permit to operate in Indonesia.
PT FI, the US-based gold and copper mining company, will end its contract in 2021 and is seeking to extend it until 2041. But based on regulation, the contract can only be extended for another 10-year period or reviewed in every decade.
However, according to Pandjaitan, the contract can be made for a period of 20 years until 2041 if PT FI divests 51 percent of its shares.
"Virtually, there is no problem if PT Freeport Indonesia wants to review its contract until 2041 on the condition that it is prepared to divest 51 percent of its stake to the Indonesian government," Pandjaitan noted on Aug 14, 2017.
The Indonesian government signed its first work contract with Freeport McMoran Inc. on April 7, 1967, with exclusive mining rights on a 100 square-kilometer tract in Ertsberg, Papua. The work contract was extended in 1991 and would expire in 2021.
Freeport is now required to divest 51 percent of its shares to the Indonesian government. So far, the Indonesian government only has 9.36 percent of Freeport's shares.
The government has decided that state-owned companies will take over the remaining shares that will be divested by Freeport.
At the office of the Coordinating Ministry for Home Affairs, Jakarta, on Monday, Pandjaitan noted that Freeport is prepared to divest and build smelter facilities as required by the government.
"Indeed, Freeport is prepared to divest 51 percent of its shares, build a smelter, and seek a contract extension until 2041. There is actually no problem with this," he explained.
Pandjaitan, who is a former coordinating minister for political, legal, and security affairs, said that regulations in Indonesia state that the extension of mining permits can only be carried out in stages in every 10 years instead of 20 years as demanded by PT FI.
The contract of the company will expire in 2021. It needs be extended, as the contract is required for the smooth implementation of the underground mining development plan.
"Our law stipulates that the contract should first be for 10 years, but I think if Freeport has already divested 51 percent of its stake, there will be no problem to issue a contract until 2041," he remarked.
Jonan recently discussed the contract issue with Freeport McMoran CEO Richard Adkerson in the US.
Jonan stated that positive developments have been made with regard to negotiations with Freeport. Freeport has agreed to build a smelter and continue its operations, he noted.
PT FI has agreed to adopt a special mining business permit (IUPK) instead of a Working Contract (KK) as the legal basis for the working relations between the Indonesian government and PT FI. ***3***(A014/INE/B003)EDITED BY INE(T.A014/A/BESSR/Bustanuddin) 26-08-2017 20:00 |
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