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sharing in governance of extractive industries

Watchdog Urged Freeport to Respect Indonesia Regulation

The deadlock of renegotiation between Government of Indonesia and PT Freeport Indonesia (PTFI) to reach an agreement regarding the adjustment toward Indonesia regulations (2009 Mining Law), particularly on the export permit of concentrate, the switch of Contract of Work (KK) into Special Mining Permit (IUPK), provision of tax (prevailing vs nail down), and divestment provision, will be likely settled through dispute settlement mechanism in the International Arbitration Agency. This situation gets more critical, especially coincide with the deadline of export permit issuance for processed minerals (concentrate produced by PTFI and other contract of work, such as Newmont/ Aman Mineral) in 12 January 2017.

Despite of strong critic from the civil society groups and experts due to its violation toward the constitution, the government again ease the export policy by allowing limited export permit for mining permit (IUP) and IUPK Operation Production holders under several conditions, including strong commitment to develop smelter, comply to the provision of tax and financial obligation, as well as shift from KK into IUPK in accordance with the applied regulation. This was followed by the decision of PTFI and Aman Mineral to switch their KKs into IUPK on 10 February 2017. Then they were granted export permit on 17 February 2017. However, PTFI refused to switch into IUPK and on the next day (18/2) PTFI laid off the workers which then followed by the demonstration of PTFI employee in Timika, Papua.

On this matter, Publish What You Pay Indonesia-a national coalition of 35 civil society organizations in resource rich area in Indonesia, who’s committed to promote governance improvement in the extractive resources, particularly in oil, gas, and mining, suggests that:

(1) As the owner of mineral right, Government of Indonesia possesses utmost authority and sovereignty to manage the utilization of natural resource in Indonesia through law making and enforcement which shall be conducted in accordance with the value of Indonesia constitution and for prosperity of the people. Therefore, the effort taken by Government of Indonesia to negotiate with PTFI, holder of KK, to adjust and enforce Indonesian regulations shall be fully respected in the form of Indonesia’s sovereignty.

(2) As the negotiation still deadlock and an agreement has yet to reach, this sacred process shall not be intervened by socially and economically sensitive actions, such as workers layoff. Therefore, the best effort for both side is conduct renegotiation carefully by respecting respect the rights and position each party, and looking for a win-win solution.

(3) Dispute settlement through International Arbitration is the last option if both parties can’t reach an agreement. This option can be either ‘a good chance’ or ‘a bad chance’ for both parties, that’s why both should consider thoroughly and ready to face all the possible risks. Any measures taken, both sides should consider the continuance of development and fulfillment of the Papuan rights and all Indonesian people.

(4) Contract renegotiation shall be conducted in an open and transparent manner. The document of PTFI contract (and other contracts) shall be accessible for public. Thus, public will understand the situation and provide any suggestion for a best deal for the nation and Indonesian people.

(5) On the renegotiation process, Government of Indonesia and PTFI shall conduct public consultation and implement the principle of Free Prior Informed Consent (FIPC) toward Papuan, particularly for the community live around PTFI site, indigenous leader, local government and other stakeholders in Papua.

(6) Lastly, during the renegotiation process, government shall uphold national interest and prioritize the best choice for Indonesian people. Also stay wary and prevent any interest of rent seeker, who look for momentarily and short benefit, and do not prioritize public and national interest.

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