PT Freeport Indonesia operation in Papua has caused extensive debate and trigger the pros and cons in the community.
Implementation of government policy that prohibits the export of concentrates since January 12, 2017 has been a blow to Freeport that has yet to realize its obligations. Law No. 4 of 2009 on Mineral and Coal, article 170 has been obliges mining companies Co-holders to perform purification and processing within 5 years since the Act was passed or effective Smelter was completed in 2014.
This law prohibits the export of raw materials extracted from Indonesia. The process is expected to provide added value to the community with employment, be an incentive for economic growth and increase revenue of the country. Unfortunately, PT Freeport Indonesia is a PMA actually do not obey the law and are always looking for loopholes to avoid their responsibility.
Actually good faith of the government to understand the importance of all forms of foreign investment in Indonesia has been very understandable. Because it was ultimately leading to the impression that the government is too loose and potentially breaking the rules.
Criticism then targeted at government policy revise Government Regulation No. 1 of 2014 which states that mining companies are allowed to export raw minerals until January 11, 2017. Revised stipulated by Government Regulation No. 1 Year 2017 on the Fourth Amendment Regulation No. 23 Year 2010 on the Implementation of Mining Mineral and Coal, Ministry of Energy and Mineral Resources No. 5 of 2017 on Improving the Value Added Mineral Through Processing and Purification Activities Mineral Domestic and ESDM No. 6 of 2017 on Procedures Requirements Referral Implementation of Sales Mineral Abroad Results of Treatment and Purification, considered a shortcut to accommodate the interests of big mining companies are largely dominated by foreigners, to continue with the production and export of raw concentrates although not build Smelter.
According to Maryati, National Coordinator of PWYP Indonesia, the revised policy on January 11, 2017 could potentially conflict with the Mining Law, particularly Article 102 and 103 that require companies mineral and coals to undertake the processing and refining of mining production in the country, as well as Article 170, which requires all credit card holders who already production to refining not later than five years since the mining Law was enacted in 2009. In addition, the various parties also considered that the relaxation of the policy since 2014 is unlikely to turn a deterrent effect and provide a loophole exploited by the major mining companies such as Freeport. According to estimates, of about 6,541 Mineral Mining Permit issued by the government, of which 4,019 of them are of Production Operation IUP, only 26 smelters are ready to operate.
Choose IUPK or Cut KK?
Polemics about the operating status of the PT Freeport McMoran in Indonesia should immediately look for the best solution, especially for the interests of Indonesia. For decades, Freeport has dredge gold, silver, copper and other valuable minerals from the earth Indonesia.Freeport has also received generous benefits without significant contributing. Freeportauthority to export the crude concentrate made Indonesia does not have access to accurate information about the true commercial value of production, especially gold, silver and copper.
Referring to KK, since 1967, Indonesia only got copper royalties by 3.5%, gold by 1% and 1% silver. Moreover, until now the Indonesian government only has a 9.36% stake, the rest is owned by PT. IndocopperInvestama 9.36%, and the majority share controlled by Freeport-McMoRan Copper & Gold Inc. (AS) of 81.28%. Though Freeport has the obligation to divest shares up to 30%, because the company had reneged on its obligation to divest a stake of 20.64 per cent as a consequence of Article 10 of the Contract of Work II in 1991 which revised COW I in 1967. In fact, on the revenue side as stated Ignatius Jonan, Minister of Energy and Mineral Resources, royalties and taxes paid by PT. Freeport over the last 25 years only 214 Trillion Rupiah (US $ 8 billion per year). This value is far from that obtained from the state cigarette tax payment of the year 2015 amounted to 149.5 trillion rupiah. It proves that the revenues from Freeport operation is not significant compared with a profit of Freeport.
The government's move to resolve dispute over mining business, particularly Freeport did not get out of controversy.Thus, these measures should be appreciated as a breakthrough advance for increased state control over mining and mineral resources, as well as boost state revenues. Government Joko Widodo (Jokowi) has issued Government Regulation (PP) No. 1 of 2017 (Regulation 1/2017), concerning the Fourth Amendment to Government Regulation No. 23 Year 2010 regarding Implementation Business Activities of Mineral and Coal.
The substance of the policy change was criticized by a number of parties, but the important thing is to be achieved by the policy change should be understood as a way out of the interests of the state on the one hand, and investment interests on the other side. In PP 1/2017, the holder of the Contract of Work including PT Freeport Indonesia, PT Amman Mineral Nusa Tenggara (AMNT), and so forth, are encouraged to change the status of his contract into a Special Mining Business License (IUPK) Production Operations, that as a condition for obtaining export licenses concentrates (processed mineral that has not reached the stage of purification).
Changes IUPK into KK becomes more profitable because a number of aspects, first, the state's position was higher than investors so that control of the country as licensors more effective than KK who put the country and investors are aligned. Second, fiscal, if the mining company KK subject to royalties, fixed fees, corporate income tax, the UN and local taxes are fixed throughout the contract or naildown, then in IUPKbesarnya tax and non tax state revenue (non-tax) is determined by the provisions of laws invitation or is prevailing. Companies also pay levies and other charges in accordance government.
Policy regarding the payment of royalties, the government set a royalty copper rose from 3.5 percent to 4 percent. Gold royalty of 1 percent to 3.75 percent and silver from 1 percent to 3.25 percent. Third, the government also requires that Freeport increase the use of domestic goods and services (local content). Forth, divestment obligation increased to 51% as the road for the government to increase the control.
Fifth, Freeport still charged an obligation to build a processing plant and refinery (smelter) within a period of 5 years in which the progress of the construction of the smelter will be reviewed every six months by an independent verifier, and if progress does not reach at least 90 percent of the plan approved, on exports will be lifted.
A number of the clauses proposed by the government is certainly an option that has been taken into account before Freeport filed an extension in 2019, two years before the time runs out in 2021. The fight of KK Freeport which threatened to bring the issue to the policy change and the National Arbitration employee layoff plan course rights for PT Freeport Indonesia which is under the control of Freeport McMoran.
However America, it just shows that Freeport uncooperative and abusive government integrity of Indonesia. Since beginning of Freeport has been putting off the obligation realization of building a smelter, Freeport is now threatening the government of a sovereign state after decades of obtaining billions of dollars in profits from the earth. Thus, governments need to consider options other than the change KK became IUPK, namely the termination of the contract and take over the operations of Freeport.
Believes in Its Own Abilities
Intimidation as presented by the CEO of Freeport McMoran, Richard C Adkersosn cannot be regarded as a usual business strategy. Those ways can be interpreted as a serious threat to the authority of a sovereign state to create policies for its country.Freeport has got a wide range of discretion and the opportunities provided by the government to guarantee its operation in Indonesia for decades. Even, when the company did not fulfill any obligations, the Indonesian government still provides a variety of policies to prevent the relaxation of the cessation of production at Papua. Because Freeport, the government should not be afraid to take a firmer option to cease cooperation with PT. Freeport Indonesia.
Termination of cooperation will have the full support of all the people of Indonesia. It is not merely a wave of nationalist euphoria, but rationally because Indonesia has the human resources and national industry that is able to manage Freeport's operations in Papua. It is important to ensure the role of the country fully and effectively manage strategic natural resources, including various essential minerals other than gold, silver and copper contained in the Freeport mine.
According to various reports strongly suspected that there is the potential for important minerals such as uranium, for future energy development in Indonesia. Therefore, the takeover Freeport is also a security measure future energy (energy security) for Indonesia.
Indonesia is also no need to fear if true Freeport brought the issue to international arbitration. Steps to be taken by the Indonesian authorities in accordance with applicable law in Indonesia as a sovereign state. In addition, the international community would also open his eyes that for Freeport operation has caused many problems, in business Freeport gain in ways that are not fair, contributing to environmental damage and is strongly suspected to be behind a number of events that trigger violence in Papua.
This moment is the right moment for the Indonesian government to demonstrate its capacity to realize the national interest in accordance with the program Nawacita. Countries present in natural resource management is important and strategic for the interests of development and improvement of people's welfare. Whatever the option is to be taken by the state, it should be emphasized also the interests of Indonesian workers to be aware of the rights and economic security by the government.
If Freeport was taken over then the origin Freeport Indonesia workers should be prioritized to occupy a position as before. Neither the public access around Freeport to benefit either directly or indirectly from mining operations in their area. Increased development and prosperity should be a major concern that the presence of the Freeport mine can be a blessing and not a disaster for the community, state and nation.
*) The author is a researcher at Cersia, Jakarta.
COPYRIGHT © ANTARA News Megapolitan 2017
Implementation of government policy that prohibits the export of concentrates since January 12, 2017 has been a blow to Freeport that has yet to realize its obligations. Law No. 4 of 2009 on Mineral and Coal, article 170 has been obliges mining companies Co-holders to perform purification and processing within 5 years since the Act was passed or effective Smelter was completed in 2014.
This law prohibits the export of raw materials extracted from Indonesia. The process is expected to provide added value to the community with employment, be an incentive for economic growth and increase revenue of the country. Unfortunately, PT Freeport Indonesia is a PMA actually do not obey the law and are always looking for loopholes to avoid their responsibility.
Actually good faith of the government to understand the importance of all forms of foreign investment in Indonesia has been very understandable. Because it was ultimately leading to the impression that the government is too loose and potentially breaking the rules.
Criticism then targeted at government policy revise Government Regulation No. 1 of 2014 which states that mining companies are allowed to export raw minerals until January 11, 2017. Revised stipulated by Government Regulation No. 1 Year 2017 on the Fourth Amendment Regulation No. 23 Year 2010 on the Implementation of Mining Mineral and Coal, Ministry of Energy and Mineral Resources No. 5 of 2017 on Improving the Value Added Mineral Through Processing and Purification Activities Mineral Domestic and ESDM No. 6 of 2017 on Procedures Requirements Referral Implementation of Sales Mineral Abroad Results of Treatment and Purification, considered a shortcut to accommodate the interests of big mining companies are largely dominated by foreigners, to continue with the production and export of raw concentrates although not build Smelter.
According to Maryati, National Coordinator of PWYP Indonesia, the revised policy on January 11, 2017 could potentially conflict with the Mining Law, particularly Article 102 and 103 that require companies mineral and coals to undertake the processing and refining of mining production in the country, as well as Article 170, which requires all credit card holders who already production to refining not later than five years since the mining Law was enacted in 2009. In addition, the various parties also considered that the relaxation of the policy since 2014 is unlikely to turn a deterrent effect and provide a loophole exploited by the major mining companies such as Freeport. According to estimates, of about 6,541 Mineral Mining Permit issued by the government, of which 4,019 of them are of Production Operation IUP, only 26 smelters are ready to operate.
Choose IUPK or Cut KK?
Polemics about the operating status of the PT Freeport McMoran in Indonesia should immediately look for the best solution, especially for the interests of Indonesia. For decades, Freeport has dredge gold, silver, copper and other valuable minerals from the earth Indonesia.Freeport has also received generous benefits without significant contributing. Freeportauthority to export the crude concentrate made Indonesia does not have access to accurate information about the true commercial value of production, especially gold, silver and copper.
Referring to KK, since 1967, Indonesia only got copper royalties by 3.5%, gold by 1% and 1% silver. Moreover, until now the Indonesian government only has a 9.36% stake, the rest is owned by PT. IndocopperInvestama 9.36%, and the majority share controlled by Freeport-McMoRan Copper & Gold Inc. (AS) of 81.28%. Though Freeport has the obligation to divest shares up to 30%, because the company had reneged on its obligation to divest a stake of 20.64 per cent as a consequence of Article 10 of the Contract of Work II in 1991 which revised COW I in 1967. In fact, on the revenue side as stated Ignatius Jonan, Minister of Energy and Mineral Resources, royalties and taxes paid by PT. Freeport over the last 25 years only 214 Trillion Rupiah (US $ 8 billion per year). This value is far from that obtained from the state cigarette tax payment of the year 2015 amounted to 149.5 trillion rupiah. It proves that the revenues from Freeport operation is not significant compared with a profit of Freeport.
The government's move to resolve dispute over mining business, particularly Freeport did not get out of controversy.Thus, these measures should be appreciated as a breakthrough advance for increased state control over mining and mineral resources, as well as boost state revenues. Government Joko Widodo (Jokowi) has issued Government Regulation (PP) No. 1 of 2017 (Regulation 1/2017), concerning the Fourth Amendment to Government Regulation No. 23 Year 2010 regarding Implementation Business Activities of Mineral and Coal.
The substance of the policy change was criticized by a number of parties, but the important thing is to be achieved by the policy change should be understood as a way out of the interests of the state on the one hand, and investment interests on the other side. In PP 1/2017, the holder of the Contract of Work including PT Freeport Indonesia, PT Amman Mineral Nusa Tenggara (AMNT), and so forth, are encouraged to change the status of his contract into a Special Mining Business License (IUPK) Production Operations, that as a condition for obtaining export licenses concentrates (processed mineral that has not reached the stage of purification).
Changes IUPK into KK becomes more profitable because a number of aspects, first, the state's position was higher than investors so that control of the country as licensors more effective than KK who put the country and investors are aligned. Second, fiscal, if the mining company KK subject to royalties, fixed fees, corporate income tax, the UN and local taxes are fixed throughout the contract or naildown, then in IUPKbesarnya tax and non tax state revenue (non-tax) is determined by the provisions of laws invitation or is prevailing. Companies also pay levies and other charges in accordance government.
Policy regarding the payment of royalties, the government set a royalty copper rose from 3.5 percent to 4 percent. Gold royalty of 1 percent to 3.75 percent and silver from 1 percent to 3.25 percent. Third, the government also requires that Freeport increase the use of domestic goods and services (local content). Forth, divestment obligation increased to 51% as the road for the government to increase the control.
Fifth, Freeport still charged an obligation to build a processing plant and refinery (smelter) within a period of 5 years in which the progress of the construction of the smelter will be reviewed every six months by an independent verifier, and if progress does not reach at least 90 percent of the plan approved, on exports will be lifted.
A number of the clauses proposed by the government is certainly an option that has been taken into account before Freeport filed an extension in 2019, two years before the time runs out in 2021. The fight of KK Freeport which threatened to bring the issue to the policy change and the National Arbitration employee layoff plan course rights for PT Freeport Indonesia which is under the control of Freeport McMoran.
However America, it just shows that Freeport uncooperative and abusive government integrity of Indonesia. Since beginning of Freeport has been putting off the obligation realization of building a smelter, Freeport is now threatening the government of a sovereign state after decades of obtaining billions of dollars in profits from the earth. Thus, governments need to consider options other than the change KK became IUPK, namely the termination of the contract and take over the operations of Freeport.
Believes in Its Own Abilities
Intimidation as presented by the CEO of Freeport McMoran, Richard C Adkersosn cannot be regarded as a usual business strategy. Those ways can be interpreted as a serious threat to the authority of a sovereign state to create policies for its country.Freeport has got a wide range of discretion and the opportunities provided by the government to guarantee its operation in Indonesia for decades. Even, when the company did not fulfill any obligations, the Indonesian government still provides a variety of policies to prevent the relaxation of the cessation of production at Papua. Because Freeport, the government should not be afraid to take a firmer option to cease cooperation with PT. Freeport Indonesia.
Termination of cooperation will have the full support of all the people of Indonesia. It is not merely a wave of nationalist euphoria, but rationally because Indonesia has the human resources and national industry that is able to manage Freeport's operations in Papua. It is important to ensure the role of the country fully and effectively manage strategic natural resources, including various essential minerals other than gold, silver and copper contained in the Freeport mine.
According to various reports strongly suspected that there is the potential for important minerals such as uranium, for future energy development in Indonesia. Therefore, the takeover Freeport is also a security measure future energy (energy security) for Indonesia.
Indonesia is also no need to fear if true Freeport brought the issue to international arbitration. Steps to be taken by the Indonesian authorities in accordance with applicable law in Indonesia as a sovereign state. In addition, the international community would also open his eyes that for Freeport operation has caused many problems, in business Freeport gain in ways that are not fair, contributing to environmental damage and is strongly suspected to be behind a number of events that trigger violence in Papua.
This moment is the right moment for the Indonesian government to demonstrate its capacity to realize the national interest in accordance with the program Nawacita. Countries present in natural resource management is important and strategic for the interests of development and improvement of people's welfare. Whatever the option is to be taken by the state, it should be emphasized also the interests of Indonesian workers to be aware of the rights and economic security by the government.
If Freeport was taken over then the origin Freeport Indonesia workers should be prioritized to occupy a position as before. Neither the public access around Freeport to benefit either directly or indirectly from mining operations in their area. Increased development and prosperity should be a major concern that the presence of the Freeport mine can be a blessing and not a disaster for the community, state and nation.
*) The author is a researcher at Cersia, Jakarta.
Editor : M. Tohamaksun
COPYRIGHT © ANTARA News Megapolitan 2017