Shaky Deal with Freeport

Posted by AsiaViews | Sep 12, 2017 | 0 |

The Jakarta Post

Sep 4, 2017

The agreement in principle between the government and Freeport-McMoRan last week requiring the American company to increase Indonesian ownership in its gold and copper mining subsidiary Freeport Indonesia (FI) in Papua from the current 9.36 percent to 51 percent by no means reflects significant progress in resolving once and for all the dispute over FI.

As “the devil is in the details,” the most difficult issues related to the valuation of the FI shares and the time frame for the divestment have yet to be negotiated. Yet this provisional deal has secured Freeport a license to operate the world’s largest gold and copper mine until 2041.

We don’t think the divestment deal will scare off other mining investors. Nor is it a sign of rising resource nationalism in the country, as several foreign analysts have observed. It instead allows FI to resume copper concentrate exports and gives it fiscal and legal certainty for the next 24 years to recoup the estimated US$20 billion in additional investment needed to expand the mine and shift much of the mining work underground.

Freeport’s commitment to divest is a pledge to no longer play games with Indonesian law. It is simply a long-delayed enforcement of the law for FI, which has operated the giant mine since 1973, generating more than 95 percent of Freeport’s consolidated gold sales and more than a quarter of its revenues.

FI’s contract of work (CoW), which was extended in 1991 by 20 years to 2021, required Freeport to divest at least 51 percent of its shares by 2011.

But this stipulation has never been enforced for various reasons, including the government’s inability and other national interests to finance the acquisition and disagreement on the share valuation.

The absence of clear-cut rules on the divestment time frame and the seemingly different opinions regarding the method of valuation could see negotiations on the divestment details drag on for years. Freeport has insisted that the shares be priced based on fair market value. Earlier reports put Freeport’s estimate of the value of the 41 percent divestment at $6.6 billion, which apparently takes into account the mine’s gold and copper reserves.

But the government valued the 41 percent equity at only $2.46 billion, arguing that the divestment price should not include the value of the reserves that will still be in the ground after the end of the contract in 2041. The share value should be based entirely on the value of the business, which also depends on gold and copper prices.

This argument makes a lot of sense, because after 2041, the whole mine will be returned to the government, and all the remaining reserves or deposits certainly will belong to the government as the owner.

Hopefully, the technical details for implementing the provisional agreement will be completed before the end of 2018. Otherwise inordinate nationalistic sentiment that will likely rise in the run-up to the April 2019 presidential and legislative elections will overshadow the negotiations.

( http://www.thejakartapost.com/academia/2017/09/04/editorial-shaky-deal-with-freeport.html

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EXTRICATING NDONESIAN CHILDREN FROM ISIS INFLUENCE ABROAD

Indonesia urgently needs to revisit the possibility of repatriating the neediest of its young citizens stranded abroad, whose families had earlier joined ISIS. Most of these children are in camps in northern Syria but there are also small numbers in the Philippines, Afghanistan and Iraq. “Extricating Indonesian Children from ISIS Influence Abroad”, the latest report from the Institute for Policy Analysis of Conflict (IPAC) argues that the government could begin by bringing back small groups of unaccompanied children under ten years of age, who pose minimal security risk and are most vulnerable to deteriorating conditions in the camps.“The problem is that health and security conditions are worsening by the day in the Syrian camps, and the children are growing older,” says Dyah Kartika, IPAC analyst. “They need access to schools, a nurturing environment, and medical attention. If the government waits too long, the children will be further exposed to ISIS ideology.” The new report examines a 2019 list of Indonesians in camps and prisons run by the Kurdish Syrian Democratic Forces (SDF). The Indonesian government has been trying to verify their citizenship, but with pseudonyms, misspellings and bad transliterations, it is a daunting task. At the time the data was collected, between March and June 2019, there were 555 Indonesians in SDF camps and prisons, including 367 children. Among the children, approximately 277 were under the age of ten and 34 were unaccompanied. In June 2021, there are fewer than ten children who are both unaccompanied and under the age of ten that could be prioritized for return. Bringing back children of ISIS families is no easy task. The report analyses the main challenges faced by the Indonesian government. These include definitional issues, bureaucratic competition, the difficulty of verifying nationality, evaluating the toll of exposure to conflict, assessing security risk, and finding relatives or others willing to provide care once the children are returned. In addition, COVID has meant stringent restrictions on travel, placing further obstacles in the way of repatriation. There are several models for rehabilitation of children exposed to violent extremism in Indonesia that could be modified to accommodate the needs of children repatriated from abroad. The report examines these models and argues that the government does not need to have every detail of rehabilitation programs in place before it starts extricating children from ISIS influence. It can start by bringing back the most vulnerable children and then modify programs as needed.

“It’s important that the government see these children as victims” says Dyah. “They deserve a chance to be children again.”

Shaky Deal with Freeport