Ministries differ over responsibility in negotiation with Freeport

In what may be signs of challenges ahead in the next round of negotiation between the government, and gold and copper giant PT Freeport Indonesia over the company?s mandatory divestment program, two ministries seem to differ as to who should play leading role in starting the negotiation process, Kontan reported on Thursday.

The paper quoted Minister of Energy and Mineral Ignasius Jonan as saying that the ministry is waiting for the initiative of the Office of the State Minister of State Owned Enterprises (BUMN Ministry) to lead the way in the negotiation process regarding the PT Freeport divestment issue. He said that his ministry will only support decisions taken by the BUMN Ministry.

?Regarding divestment (issue), in line with the direction of the President (Joko Widodo), it is the responsibility of the BUMN Ministry, not us. We only support (the BUMN Ministry),? Jonan said.

But, Deputy for Restructuring and Development of State Enterprises at the BUMN Ministry, Aloysius K. Ro said that before the ministry starts negotiation process, the government must decide whether the PT Freeport stake will be acquired by state owned enterprises (SOEs).

?We can have different answer than Minister Jonan right? The point is that the government must first (make decision), then onto us. From the government is a decision whether it (the PT Freeport shares) will be acquired by the government (via SOEs), which (must be decided by) the Ministry of Energy and Mineral Resources, and the Ministry of Finance),? he said.

Government officials have previously indicated that state owned enterprises engaged in the mining sector and companies owned by local administrations in Papua Province will be assigned to acquire the PT Freeport shares.

PT Freeport, a subsidiary of US Freeport McMoran Inc, which operates the giant Grasberg minie in Papua, has been engaged in negotiations with the government since April to resolve disputes following the introduction of new regulations earlier this year. PT Freeport finally agreed late last month to the terms demanded by the government including obligation to divest up to 51 percent shares to Indonesian investors (whether the government, SOEs, local government owned companies, or Indonesian private investors), build domestic smelter, and convert the status of its current mining contract from contract of work (COW) to IUPK special mining business license. In return, PT Freeport?s contract, which is set to expire in 2021, will be extended until 2031, and can be extended again until 2041. The company plans to invest up to $20 billion through 2031.

But details of the agreement have yet to be shorted out including regarding the divestment program particularly regarding the price of the PT Freeport shares, the method of divestment, and the timing.

Jonan said late last month that the government and the company will continue negotiation process to work out the details, and hoped to be able to conclude the details in the near future. (*)