Inco threatens to go to arbitration if it is forced to review COW

PT International Nickel Indonesia (Inco) has warned that it would go to the international arbitration if it is forced to re-negotiate the contract of works (COW) with the government for its mining concessions in Sulawesi.

Inco president Rumengan Musu said that the company last year contributed a total of US$12.549 million to the government in the form of tax and non-tax levies.

If it is considered not enough and the company is forced to re-negotiate and review the COW by local administrations in Sulawesi, Musu said that the company would be compelled to take its case to the international arbitration.

Musu made the remarks in connection with demands by the South, Southeast and Central Sulawesi administrations that Inco review and re-negotiate the COW with the government as Inco contribution to local administrations was considered too small, only Rp 1.6 billion a year for the three provinces.

Inco has just renewed its COW with the government, and the renewed COW would expire in year 2025.

South Sulawesi governor HZB Palaguna, Central Sulawesi governor HB Paliudju and Southeast Sulawesi governor La Ode Kaimoeddin have planned to meet with Vice President Megawati Soekarnoputri to present their proposal to review the COW with Inco.

They argued that Inco's contribution to the three provinces was very small, compared to the environmental destruction the company had caused in the three provinces.

But Musu reminded the three governors that the government had issued Government Regulation (PP) No. 25/2000 that protects all international contracts the government has signed. Such contracts must be respected by autonomous regions following the implementation of the autonomy law in year 2001.

Musu explained that Inco paid a total of $12.549 in various tax, royalties, and other levies to the central government that would then channel around 80 percent of those fund to local governments. The provincial governments would get 16 percent of the portion for local governments, while 32 percent goes to regencies where the mining fields are located and another 32 percent goes to other regencies in the province where the mining fields are located.

He explained that the company had paid a total of US$100.802 million in various taxes to the government in the period of 1995 through the second semester of this year. They included $54.45 million from corporate income tax, $10.674 million in individual income tax, %9.552 income tax from royalties, interest and dividend, and $1.664 million in value added tax.

Besides the taxes, in the period of 1995 through the second semester of this year, Inco also paid a total of $1.204 million for land rent, $8.301 million for water levy, $14.756 in royalties and $193,000 in other levies.

Inco, a foreign investment venture controlled by Inco Ltd of Canada (58.7 percent) and Sumitomo Metal Mining Co Ltd of Japan (20.1 percent), has been mining for nickel matte in Malili, Luwu Utara, South Sulawesi, since mid 1970s. Its mining concessions cover 194,000 hectares area spreading in South, Central and Southeast Sulawesi. (*)