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Labor rumbles, quiet talks underlie Freeport standoff

May 3, 2017

Indonesia-Labor-Mining-Protest-May-1-2017.jpg Labor rumbles, quiet talks underlie Freeport standoff
Indonesia and the US miner have made progress in behind-the-scenes negotiations to end an impasse over the future of the world’s most profitable mine

Labor rumbles, quiet talks underlie Freeport standoff

Indonesia and the US miner have made progress in behind-the-scenes negotiations to end an impasse over the future of the world’s most profitable mine

After painting themselves into a corner, the Indonesian government and American mining giant Freeport McMoRan Copper & Gold are finally taking tentative steps in quiet negotiations to end the impasse over the future of the world’s most profitable mine.

The emphasis is on quiet. If the government is serious about securing a long-term, win-win solution — and Freeport seems convinced it is — the talks must stay out of the public arena, where economic nationalists dominate the agenda.

Hence Freeport chief executive Richard Adkerson’s recent quiet dinner with Finance Minister Sri Mulyani Indrawati in Washington and now his under-the-radar visit to Jakarta with chief financial officer Kathleen Quirk, who is involved for the first time.

Apart from the immediate objective of negotiating a so-called “financial stabilization agreement” that will keep the provisions of Freeport’s current contract intact until its expiry in 2021, they now also face the prospect of labor unrest.

Employees are threatening to strike unless Freeport reinstates the 10% of its work force that was laid off when a 12-week government ban on concentrate exports forced the company to cut production by more than 60%.

Adkerson and Quirk were meeting this week with Mines and Energy Minister Ignasius Jonan and a multi-ministerial working group. The group was originally formed to tackle the international arbitration case Freeport has threatened to bring against the government for breach of contract.

Now it is focused instead on the company’s request for a 20-year contract extension beyond 2021. Because it includes taxes and divestment, the stabilization agreement would be a critical component of any longer-term settlement.

“The challenge is to find an agreement that is acceptable to the minister and the president and is acceptable to us,” Adkerson told analysts last month. His reference to the president is a solid pointer to where the ultimate decision lies.

Public opinion, fed by what Australian resources analyst Eve Warburton describes as “popular mobilization and electoral politics,” feels it is high time for Indonesians to own and run their extractive sector.

While that may apply to the simple excavation of surface coal seams and the exploitation of maturing oil and gas fields, it becomes a lot more difficult and expensive when it comes to sophisticated underground mining and deep-water drilling in remote areas of the archipelago.

When the commodity boom ended in 2012, resource nationalism did not fade in Indonesia as it usually has during previous down cycles. Indeed, it even accelerated with new President Joko Widodo building on nationalistic policies introduced by his predecessor Susilo Bambang Yudhoyono.

That has left the Freeport contract negotiations in politicized limbo. While the firm has agreed to build a second US$2.7 billion smelter, demands for a 51% divestment and the replacement of the firm’s contract with a special mining license remain the main sticking points.

“It is important for the government to come out with one voice,” says one source familiar with the discussions. “There is now more clarity. They are now distinguishing between the short and long-term issues.”

If they fail to reach an agreement by mid-October, when a temporary six-month export permit expires, Freeport says it will be forced to suspend the conversion of the Grasberg mine from an open pit to an underground operation.

The company has already cut expenditure on the expansion from US$120 million to US$40 million a month. But shutting down the tunneling work would further delay the six-year period it will already take to ramp up production to near current levels.

More immediately, it will mean laying off 5,000 workers engaged in the first US$6.2 billion underground phase, which began in 2004 and by this year had brought Freeport’s total capital expenditure in the mine since 1973 to US$13.8 billion.

Among them are Australian-based Redpath Mining’s 1,500 specialists, drawn from around the world, who are building much of the common underground infrastructure. Reassembling them once they have been dispersed would take months.

Another US$13.6 billion is planned to be spent between now and 2041 on a project that will eventually see hundreds of kilometers of high-speed electric railway tapping into five different ore bodies deep beneath the Grasberg mine.

The change-over was originally planned to take place this year, but has now been pushed out to 2018, the year before Indonesia’s next presidential elections which could have an inhibiting influence on the current talks.

Because of the risk of subsidence, Freeport must first extract the estimated US$5 billion worth of ore left in the bottom of the two kilometer wide open pit before it can begin block-caving directly beneath it.

Widodo has personally insisted on the 51% divestment of subsidiary PT Freeport Indonesia and any retreat from that would be seized on by opposition leader Prabowo Subianto, who is now widely expected to run against him a second time.

The government is turning Sumatra-based PT Indonesia Asahan Aluminium (Inalam) into a holding company for state-owned mining companies, four years after taking over Southeast Asia’s only aluminum smelter from Japanese interests.

Valuation will play a big part in the Freeport talks, with foreign stock analysts bemused by Indonesia’s position that the US miner can’t claim Grasberg’s reserves because they constitutionally belong to the country’s citizens.

How that will be resolved is unclear. If there is any wiggle room, as far as Freeport is concerned, it will almost certainly have to involve an initial public offering (IPO) that will conceivably allow it to retain a controlling interest to protect its investment.

Some lawyers have suggested that could be accomplished by the parent company issuing class A and class B shares, with the B shares carrying limited or no voting rights.

Outside of an IPO, there is still the question of where local entities, either the central and regional governments, state enterprises or domestic corporations, will get the money to buy such a significant stake.

The government already has a 9.36% interest in Freeport Indonesia, but the company’s offer of a further 10.64% stake has stalled because its declared valuation is two-thirds that of the firm’s US$1.7 billion.

Freeport had originally agreed to a 30% divestment under a 2014 memorandum of understanding reached with the Yudhoyono administration. All that changed, however, when Widodo came to power.

For now, neither side is winning from the legal standoff, labor layoffs and reduced production. The ban on concentrate exports, which began in mid-January and lasted until the issuance of a temporary license on April 21, cost the government US$500 million in lost revenues and taxes.

In February, Freeport responded by triggering a 120-day arbitration notice, which is likely to be extended beyond mid-June provided the two sides are talking and there remains hope of a settlement in a year that marks Freeport’s 50-year anniversary in Indonesia.


2) Jakarta press event ignores Papua
Taylor McDonald


Indonesia is hosting World Press Freedom Day in Jakarta this week but has been criticised for failing to address media restrictions in Papua, where a reporter was beaten by the police this week.

The media event, themed “Critical minds for critical times: media’s role in advancing peaceful, just and inclusive societies”, is being held from May 1 to 4, with a focus on strengthening media freedom and quality.

Organised by the UN’s cultural agency, Unesco, with the Indonesian government and the Press Council, the event does not include any discussion of media freedom in the subjugated eastern provinces of Papua and West Papua. Indonesian and foreign journalists have long complained about the difficulties of getting access to report on the separatist movements in the ethnically distinct provinces.

As ever, Jakarta treads an uneasy balance between its aspirations to join the international community and the necessity to hold its sprawling, impoverished archipelago together. Jakarta cannot afford another East Timor.

Indonesia’s decision to hold a conference proclaiming press freedom, while simultaneously crushing the Papuan media, neatly encapsulates the contradictions.

Press Council chairman Yosep Adi Prasetyo said the lack of media freedom in Papua was never on the agenda. “[Papua] is a domestic affair while this event is an international forum where we focus more on discussing issues that are relevant both locally and internationally,” he said. This fails to recognise that the Papua issue is of both domestic and international significance.

Human Rights Watch (HRW) and other NGOs have documented harassment and violence faced by activists and journalists in Papua.

President Joko Widodo’s announced in May 2015 that Papua would be open to the foreign media but international access to Papua was often denied on spurious “security” grounds, HRW reported.

Yosep said: “We cannot solve the matter, only Jokowi’s administration can. Other countries can’t meddle in this affair, because of non-interference principles.”

The council had visited Papua, the chairman said, to discuss the concerns with the police and military, urging them to relax restrictions on access.

The provinces make up around a quarter of Indonesia’s landmass but West Papua has a population below 900,000 and Papua Province around 3.5 million out of the archipelago’s total population of 263 million.

Meanwhile, the Indonesian police reportedly arrested at least 50 Papuans this week in the provincial capital Jayapura for joining a public discussion and prayer event.

Suara Papua reported that 26 of the Papuans taken into custody had been tortured.

The rally was apparently organised by the West Papua National Committee to commemorate May 1, 1963, when the UN gave temporary administration of West Papua to Indonesia.

A Papuan journalist who was covering the peaceful demonstration in Sentani, a suburb of Jayapura, was allegedly beaten by the police.

Yance Wenda of the news website Jubi has published photos of his injuries after he was taken into custody where he said the police beat him with a rattan cane.

Wenda told the BenarNews he had a letter of authorisation from his employer to cover the protest.

Jayapura police chief Gustav Urbinas acknowledged Wenda had been arrested, but denied his officers beat him.

Reporters Without Borders (RSF) condemned what it called Indonesia’s “double-dealing”.

Benjamin Ismaïl, head of RSF’s Asia-Pacific desk, said: “We firmly condemn the police violence against Yance Wenda and we call for an investigation so that both the perpetrators and their superiors, who endorse their brutality, can be brought to justice. Indonesia is in the bottom third of the 2017 World Press Index and this beating, the latest in a long series of attacks on media freedom in West Papua in recent months, constitutes yet further evidence that it did not deserve to host the World Press Freedom Day celebration.

“Unesco and all the political figures gathered in Jakarta must condemn the violence and ask President Joko Widodo to stop playing a double game that consists of promoting media freedom with the international community while continuing to crack down in West Papua.”

Indonesia was ranked 124th out of 180 countries in the 2017 World Press Freedom Indexlast month, while journalists were regularly threatened by the authorities and forced to censor their work, RSF said.

Last week, the Papuan police seized the camera of television reporter Richardo Hutahaen and deleted its content. Hutahaen, who represents an organisation of Papuan journalists, and two colleagues reportedly received death threats after covering a court hearing on a dispute between politicians in the province.

Back in in Jakarta, more than 1,500 journalists, including 500 representatives from 90 countries, are attending the event.

Communications and Information Minister Rudiantara said the Indonesian press had experienced more freedom since the beginning of the reform era. Since the 1999 Press Law, the government had never intervened, he told the event.

“All stakeholders want democracy and freedom of expression to be maintained to guard Indonesia’s unity while journalists should obey ethics codes,” he said.

His promises ring hollow.

The Indonesian police block a demonstration in Jayapura, Papua, last year. Picture credit: YouTube


3) Truck crash in Papua kills 10, including nine children
Nethy Dharma Somba The Jakarta Post
Jayapura, Papua | Wed, May 3, 2017 | 10:14 pm

As many as 10 people were killed when the truck carrying them overturned in a crash in Dogiyai regency, Papua, on Tuesday.

The truck, which was heavily loaded with sand, was carrying a total of 24 people. They had departed from Kumipugi village and were en route to Egebutu village.

However, the seemingly overloaded truck failed to climb a hill and it began to roll backwards.

Most of the people who were riding in the back of the truck’s tailgate were students aged 8 to 13. Nine of the students were killed, as was the driver, M. Ansori, 30. As many as 14 others were injured.

(Read also: Fatal collisions raise safety concerns)

Papua Police spokesman Sr. Comr. AM Kamal said the truck was later burned by villagers because they were upset that it killed the 10 people.

“All of the dead victims were buried yesterday and the police have investigated the accident,” Kamal told The Jakarta Post in Jayapura on Wednesday.

Kamal said he hoped it would be a lesson for truck drivers to consider their loads before giving people rides. (hol/bbs)


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