Recently, #IndonesiaKuasaiFreeport (#IndonesiaControlFreeport) became a trending topic among Indonesian on Twitter, because Freeport and the Indonesia government announced a deal that confirms Indonesia government increase stake in the asset to 51% and has majority control of the Grasberg mine.
On that agreement, state-owned PT Indonesia Asahan Aluminium (Inalum) would pay $3.85 billion. The deal is part of a series of complex discussions that would see Rio Tinto Group cash out on its interest for $3.5 billion, leaving Freeport’s share of the payment at $350 million.
Indonesian seems very happy about the news that they have been waiting for in the last decades. However, what then makes Indonesian excited from this transaction? To make things clear, let's talk about what is really going on between Freeport and the Indonesian government, and what it has to do with energy sovereignty.
What is Freeport?
Freeport or PT Freeport Indonesia (PTFI) is one of the world's leading mining companies. Freeport explores, mines, and processes copper, gold and silver containing ores in the main open pit at Grasberg; it is more than 4,000 metres above sea level among snow-capped mountains in a remote part of Indonesia.
Freeport Controversy
Freeport is the first foreign company to obtain a mining license in Indonesia. In 1960 Freeport geologists confirmed the findings of copper and gold reserves at the top of Jayawijaya as did the Dutch research.
Freeport has benefited enormously from mining resources in Papua. These benefits have made Freeport transformed into a gigantic mining company in the world in just a short time. This unnatural change contrasts with the rationality of business ethics. Allegedly a lot of administrative misappropriation and political pressure in contractual agreements.
The Indonesian government should not allow this injustice to continue. Therefore, the next step is the government must confidently review and correct the policies and contents of the contract of work (KK – Kontrak Karya) Freeport. KK with Freeport must be amended in accordance with the mandate of Laws No. 4 of 2009 on Mineral and Coal Mining (UU Minerba).
Tension Rises between Indonesia and Freeport
It was a smooth ride for Freeport until it encountered a major speed bump in 2017. On January 10, the Indonesian government, under the Minister of Energy and Mineral Resources (ESDM), Ignasius Jonan, issued a special mining license that the company must convert its Contract of Work into.
Tension is rising as Freeport feels like it is being treated unfairly. First off, the special license puts the government on top of the company in contrast to the previous contract that stated both parties have equal standing. Indonesia had stopped exports from the mine in January after saying it wanted foreign mining companies to pay higher royalties and to sell a 51 per cent stake in their assets to local owners and requires Freeport to build a smelting facility.
To compensate, Jonan allowed the company to export copper concentrate up until February 16, 2018. This is something that could not be done before, as the ministry passed a regulation in 2009 that only allowed mining companies to export purified minerals.
Why Indonesian hate Freeport?
Papuans across Indonesia repeatedly held demonstrations against Freeport. The mass wanted Freeport should be closed down and leave Papua. Since the Grasberg mine operation in 1973, Freeport has been repeatedly accused of human rights and environmental degradation.
The signing of the first contract between the government and Freeport in 1967 called as an “illegal act” as the eastern Papua region had been an area of conflict between Indonesia and the Netherlands.
“Freeport hasn’t brought prosperity. It’s just destroyed the natural environment,” said Surya Anta, national coordinator for the Indonesian People’s Front for West Papua. His organization helped organize anti-Freeport protests in 17 cities around the country.
People also accused Freeport of continuing to illegally exploit mines and seizing people's lands. Locals consider Freeport-McMoRan to be closely linked to the military presence and its operations in the mineral-rich territory since 1967. It has caused violence that resulted in misery and suffering to the people of Papua.
Divestment of Freeport
The Indonesian government has successfully completed the divestment process of Indonesian ownership in PT Freeport Indonesia to 51.2 percent from 9.36 percent before. The fierce process on the stock divestment has been going on for 26 years with various regulatory changes. Freeport currently manages the mines with the largest gold deposit in the world.
Energy Sovereignty Matter
Billions of dollars’ worth of metal are produced at the mighty Grasberg mine, which provides jobs in a province with few other prospects. The problem? The mine is — to the frustration of Indonesians watching their country’s economic growth begin to sputter as commodity prices sag — American owned and operated.
To address that, the government has in recent years passed regulations intended to exert greater control over mine operators. Freeport says those requirements violate the company’s 1991 contract, which lasts until 2021 and which it wants to renew.
The agreement points that have been decided are one important part of maintaining the energy sovereignty of the Indonesian Nation. So that the wealth of Indonesia's natural resources should be used as much as possible for state revenue and national development.
Central Board of the Indonesian Catholic Students Association (PP PMKRI) appreciates the struggle of the Indonesian government. They believe it is an important step for Indonesia in maintaining energy sovereignty.
During the period the Indonesian public has been waiting for the agreement with Freeport, as it has been predicted that the President's persistence in safeguarding assets and restoring energy sovereignty is finally slowly answered.
For PMKRI, Freeport is an entry point for Indonesia to safeguard the country's assets and natural resources to realize people's sovereignty and energy sovereignty.
Sources: indonesiaexpat.biz, aa.com.tr, ft.com, netralnews.com
Authors: Nenden S. Arum & Ricky D. Apriadi