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Freeport Proposes Public-Private Partnership

March 20, 2014

Wednesday 19 March 2014 11:05pm WIB (JoyoNews1)

The Jakarta Globe
By Tito Summa Siahaan

Jakarta. US mining giant Freeport is finally indicating a degree of willingness to comply with its legal obligations in terms of divestment and value-adding, according to comments by Coordinating Minister for the Economy Hatta Rajasa on Wednesday.

The minister revealed that he had received a letter from Freeport Indonesia, which operates the Grasberg copper and gold mine in Papua, containing a request for a public-private partnership to build a copper smelter.

"I have tasked my team to look into the proposal," the silver-haired minister said in Jakarta, adding that it was too early to discuss details since he had just received the letter.

Under the Mining Law passed in 2009, the export of raw minerals is banned since the beginning of this year, part of the nation’s push for in-country value-adding to develop industries before rapidly dwindling natural resources are mined out.

Despite a five-year window to comply with the House of Representatives’ move, both government and mining companies have so far failed to play their roles in encouraging the development of domestic smelters and secondary industries.

A further provision in the Mining Law, and in the older "Contract of Work" regulatory system which it replaced, requires foreign-owned mining companies to sell at least half their shares to local firms or governments.

In most cases, the deadline for this sell-down is long past, yet companies continue to defy the divestment requirement.

Rather than enforcing the law, the government has chosen to enter into individual negotiations with mining companies, with Hatta, also the National Mandate Party (PAN) chairman, saying on Wednesday that "Freeport was ready to return land to the government, increase royalty payments from 1 percent, divest 20 percent of its shares and undertake an initial public offering," referring to the six main negotiation points.

While the divestment proposal by Freeport was still short of its obligation to sell 51 percent of its shares, Hatta said that the letter showed that the negotiations with Freeport were going well.

Meanwhile, newly appointed Trade Minister M. Lutfi revealed that he had met with the Japanese ambassador to Indonesia to discuss the country’s objection to the 2009 ban on raw mineral exports.

Bachrul Chairi, director general for international trade at the ministry, said that the government was confident in facing down threats of WTO action, saying WTO rules clearly supported the Indonesian government’s right to enact public interest provisions such those in the Mining Law.

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