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4 April 2017 16:00

Why Should We Support Govt's Effort To Take Freeport's Shares?

It's not (only) about the money. Irwan Khoiruddin
This photograph taken on Aug. 16, 2013 shows Freeport security personnel looking on at the Freeport McMoRan's Grasberg mining complex, one of the world's biggest gold and copper mines, located in Papua province. (AFP Photo/Olivia Rondonuwu)

The divestment of Freeport Indonesia is still a hot topic. Minister of Energy and Mineral Resources (ESDM) Ignasius Jonan said that the negotiation between government and Freeport is still ongoing.

Jonan saidthat Freeport has agreed to change itsstatus of contract of work (CoW) to Special Mining License (IUPK), so the company now can startexporting concentrate again and continue to operate after being stopped by thegovernment for more than two months.

The negotiation between the government and Freeport continues including aboutthe regulation that requires companies with IUPK to divest 51 percent of its stock to Indonesian entities. The government has also said that it will only giveacontract extension for Freeport until2021 if the company would follow the regulation.

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But what will the divestment do to Indonesian people and government if it's agreed upon?


1. Indonesia can strengthen its control over Papua's natural resources.

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Photo: Twitter/KementerianESDM

If the deal is done, the 51 percent of stock will be owned by several parties, including state owned enterprises and local governments in Papua but all will be Indonesian entities. The nation will then have a stronger control over its own natural resources and can act on the benefit of its people.

2.Local government will get more capital to develop its land and people.

Photo: Twitter/KementerianESDM

President Joko Widodo promises that Papua government will get 5 to 10 percent of the shares. The interest coming from the shares can be used to improve the province's education, agriculture and human resources.

3. Indonesia can finally enforce its law that has been avoided by Freeport for decades.

Photo: Twitter/KemensetnegRI

Based on the CoW, Freeport should have released its 51 percent of shares by 2011 to state and public enterprises.However, only 9.36 percent of its sharess have been divested to the government untiltoday.

The 9.36 percent divestment itself is the first phase of divestiture that had been agreed to be fulfilled within 10 years from 1991 when Freeports contract begins. Starting from 2001, the company shouldve released 2 percent of its sharess annually until the amount reaches 51 percent.

But the deal was forgotten until recently when President Joko Widodos administration revised the law and started enforcing existing regulations.


4.Indonesia can increasethe state revenue.

Photo: Twitter/KemensetnegRI

The government has set up their state-owned diversified miner PT Aneka Tambang Tbk, PT Timah Tbk, PT Bukit Asam Tbk and PT Indonesia Asahan Alumunium (Inalum) to buy Freeport's shares once the deal is done. In coming years, there will be trilions generated from the businessthat can be spend by Indonesian government to advance its economic power.

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