No Need to Rush over the Freeport Contract
Monday, November 27, 2023
President Jokowi wants to extend the Freeport contract period, which will not end until 2041. This is not an appropriate move at the end of his term.
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GOOD governance requires legal and ethical compliance. The first requirement is to guarantee that the rules of statehood are applied impartially. The second is to ensure that public officials produce policies that put the public interest above those of individuals or their groups. President Joko Widodo’s desire to extend the license period of Freeport Indonesia violates both these principles.
Jokowi expressed this intention when he met with Freeport-McMoRan Chairman Richard Adkerson in Washington, DC on Monday, November 13. The President wants negotiations over his plan to increase Indonesia’s shareholding by 10 percent and to extend Freeport’s permit by 20 years to be completed this month. If this happens, Freeport will be able to continue its gold production and mining operations at the Grasberg Mine in Central Papua until 2061.
Jokowi must restrain his desire, whatever the motive is behind this plan. Increasing the share ownership and extending the Freeport permit are both major actions that cannot be decided hastily. Extending the permit at the end of the president’s term of office is also against regulations and a violation of public ethics.
Freeport was awarded a special mining permit (IUPK) in 2021 valid for two phases, each of 10 years, until 2041. This new license is a continuation of the work contracts that the company has held for more than half a century. Freeport also met the conditions for the alteration of the permit in the form of a divestment of shares in 2018, resulting in the Indonesian share of the mining company through Indonesia Asahan Aluminium, or Inalum, increasing to 51.24 percent.
In accordance with the Mineral and Coal Mining Law, a holder of an IUPK as continuation of a working contract can obtain a contract extension. However, Government Regulation No. 96/2021 on Mineral and Coal Mining Company Operations, as the implementing regulation for the Mineral and Coal Mining Law, states that an application for an IUPK extension as a continuation of working contract operations can be made at most five years before the end of the permit. This means that the plan to extend Freeport’s operating period can only be discussed from 2025, five years before the end of the first phase of the IUPK.
Perhaps the government is nullifying this regulation in order to ensure success in the negotiations with Freeport. But this clearly shows the lack of ethics of public officials in this republic. A president who is about to reach the end of his term is breaking the rules in order to produce a decision resulting in consequences, good or bad, that will affect the government and the people of Indonesia over the next four decades. This kind of action makes no sense, and could lead to suspicions because it concerns a large business transaction.
The President should leave this matter to the new leadership that will replace him. The decision to extend the permit and increase the shareholding in Freeport must be accompanied by long-term calculations that are comprehensive, accountable and transparent. It is these principles that are absent from these latest negotiations between the government and Freeport. Therefore, it is not an overstatement to view Jokowi’s wish as more of a desire to preserve his own interest.
