Freeport?s operations in RI not powering Papua unrest: Expert

U.S. mining giant Freeport-McMoRan Copper & Gold Inc.'s (FCX) operations in Papua aren't the root cause of recent violent protests in the restive province, the Dow Jones Newswires reported on Tuesday quoting a U.S. security analyst as saying.

"Freeport is like a lightning rod," Sidney Jones, project director for the International Crisis Group in Jakarta, said in a panel discussion organized by the Jakarta Foreign Correspondents Club. "(But) I don't think it's the real problem."

The protests instead reflected public perceptions in the province that revenues from Freeport-McMoRan's local operations haven't benefited the bulk of poor Papuans, Jones said.

The New Orleans-based company, which started mining in Papua in 1972 under a 50-year contract, paid $1.2 billion in taxes, royalties, dividends and fees to the Indonesian government last year.

Freeport-McMoRan has been a focal point of popular unrest in the province since February, when the firm temporarily closed its massive Grasberg gold mine after protesters demanding the right to mine its waste ore blockaded the facility.

A mob bludgeoned to death three police officers and an air force officer last month in Jayapura, 400 kilometers from Grasberg, in a rampage that began as a public protest demanding the mine's closure.

Freeport-McMoRan's President and Chief Executive Richard Adkerson told Dow Jones Newswires on Friday that the recent protests weren't a deterrent to the company's investment in Papua.

But the protests threaten to damp the enthusiasm of foreign investors who have only recently begun to reconsider Indonesia as a destination for serious long-term investment since the turmoil of the 1997-1998 Asian financial crisis and its aftermath.

Indonesia's investment inflows have been hobbled by investors' perceptions of an unpredictable judiciary, rampant corruption and shabby infrastructure.

The government of President Susilo Bambang Yudhoyono needs foreign investment to help fund an estimated $150 billion national infrastructure upgrade in order to meet an average annual 6.6% economic expansion target for 2004-2009. Indonesia's government has forecast 6.2% on-year economic growth in 2006, outpacing the 5.6% on-year expansion last year.

A Yudhoyono spokesman, Andi Mallarangeng, said that Freeport-McMoRan wasn't "the real issue" in Papua.

"(The demand for) closing of the mine is misled," Mallarangeng said, without elaborating.

Mallarangeng reiterated official assurances that the government will honor its contract with the U.S. mining giant, which contributes around 58% of Papua's annual gross domestic product. (*)