Friday, July 14, 2017

Government Urged to be Consistent with Freeport When Enforcing Mining Law

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Prayogo Serevin Wisnumurti, M Dani Paratama Huzaini


Photo by: RES


Article 33, Paragraph (2) and (3) of the 1945 Constitution of the Republic of Indonesia states clearly thatnatural resources are the property of the state and must be used for the prosperity of the Indonesian people, however it seems that this is not the case as regards the natural resources which are mined and managed by the Freeport Indonesia corporation (FI).
Publish What You Pay (PWYP) Indonesia is thus currently urging the Government to uphold the sovereignty of the state by implementing Law No. 4 of 2009 on Minerals and Coal Mining (Mining Law) and by prioritizing the interests of its people during the renegotiation process that is currently taking place between the Government and FI. The Government should not be swayed by the interests of FI, which tend to conflict with the prevailing Mining Law, harming Indonesian citizens in the process.
Mrs. Maryati Abdullah, a National Coordinator for PWYP, has reminded the government that the issuance of Government Regulation No.1 of 2017 on the Fourth Amendment to Government Regulation No. 23 of 2010 on the Implementation of Minerals and Coal-Mining Activities; which was subsequently implemented through Ministry of Energy and Natural Resources Regulation No.5 of 2017 (Regulation 5/2017) on the Enhancement of the Added Value of Minerals Through Domestic Mineral Processing and Refinery Activities; as well as Ministry of Energy and Natural Resources Regulation No.6 of 2017 on Procedures and Requirements for the Granting of Recommendations for the Sale of Processed and Purified Minerals Overseas, clearly contradicts the Mining Law and demonstrates the powerlessness of the Government against FI.
“It [the powerlessness of the Government] has become more apparent as regards the granting of a concentrate export permit to FI through the provision of a Temporary Special Mining License (Izin Usaha Pertambangan Khusus– IUPK). This has been allowed through the issuance of Ministry of Energy and Mineral Resources Regulation No. 28 of 2017on the Amendment to Regulation 5/2017, which runs contrary to the Mining Law. In particular, the issuance of the Temporary IUPK provisions overlaps with and directly contradicts the Mining Law,” Mrs. Maryati told Hukumonline on Tuesday, 11 July.
In addition, Mrs. Maryati believes that there is an indication that the export duties imposed upon FI have been eased from the mandated level of 7.5% down to only 5%. This is in direct contradiction with Ministry of Finance Regulation No. 13 of 2017 which states that this calculation should be based on the physical progress of the construction of smelters within the country.
“Once again, the FI have received the red-carpet treatment from the Government,” bemoaned Mrs.Maryati.
Therefore, the Government needs to show greater consistency as regards upholding the Mineral Law, as this is seen as vital during the negotiation process with FI, especially in terms of various economic factors, such as investment stability (i.e. fiscal provisions), share-divestment obligations, sustainability of operations and the construction of local smelters.
Moreover, the Government should also have the courage to reject the extension of its contract with FI in 2021 and to strengthen Indonesia's state-owned enterprises, so that they will be able to take over operation of the mine.
In addition, Mr. Fabby Tuwiwa, Chairman of the Board of Directors of PWYP, has reminded the government that in addition to economic factors, the Government should pay more attention to various environmental aspects and to compliance with human rights norms during negotiations with FI.
"Until today, it is not clear what the Government is going to do as regards the potential losses which have resulted from environmental violations committed by FI and which are estimated to be worth around IDR 185 trillion, based on a report issued by the State Audit Agency [Badan Pemeriksa Keuangan - BPK], which assessed FI’s contract of work during the 2013-2015 period,” explained Mr.Tuwiwa.
According to Mr. Tuwiwa, the Government should also consider the clarity of FI’s investment planning after the renegotiation process and the provision of post-operative environmental recovery, which is an often missed point during such negotiations. Data from the Ministry of Energy and Mineral Resources issued in February 2017 revealed that FI is one of a number of mining corporations which has yet to offer any post-mining guarantees.
“The Government should be more open and transparent with the public as regards the negotiation process with FI. It should be clear who is leading the negotiations, as well as how the arrangements, deadlines and milestones of this negotiation process are going. Today, the public is witnessing uncertainty within the agency as regards who is ultimately responsible for safeguarding the negotiation process. In this context, it is seen as vital that there should be no more conflicting statement between government officials regarding the negotiation process,” Mr. Fabby added.
Furthermore, according to Fabby, transparency must be also accompanied by public participation and the public should be able to access the FI contract documents, as well as have the ability to offer input into the negotiations. The Government should also ensure chances for consultation and for Free Prior Inform Consent (FPIC), especially from Papuan communities. This is seen as important in order to prevent the immediate interests of rent seekers (pemburu rente) taking advantage of the limited availability of information as regards the negotiation process, without considering the public or the national interest.
Mr. Aryanto Nugroho, acting as Advocacy and Network Manager for PWYP, has urged the House of Representatives (Dewan Perwakilan Rakyat – DPR) to be more active during its supervision of the negotiation process. Mr. Nugroho believes that the DPR should be more active when exercising its authority in order to ensure that both the process and the outcome of negotiations between the Government and FI do not contradict either the Mineral Law or the national interest. Ultimately, the DPR should simply be rubber stamping any outcome that emerges from the negotiation process.

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