We find it mind-boggling that President Susilo Bambang Yudhoyono did not act more firmly to establish a tough government stance on the acquisition of the remaining 7 percent divestment stake in gold miner Newmont Nusa Tenggara (NNT), instead allowing the transaction already concluded by Finance Minister Agus Martowardoyo to get bogged in legal limbo.
It has now been more than a month since the government wealth fund (PIP), on behalf of the finance minister, concluded a sales and purchase agreement with NNT shareholders to acquire the 7 percent equity, but the deal seemed to face imbroglio as the minister of mines and energy has yet to endorse the transaction.
The government’s ambivalent stance has made the West Nusa Tenggara provincial and regency administrations even more stubborn in its attempt to legally and politically contest the deal in collaboration with private-interest lobbyists and a number of House of Representatives members.
We see the fight as rather absurd. On one side are regional administrations that still depend on grants from the central government for more than 80 percent of their budgets. On the other is the central government, represented by the finance minister.
First of all it was the central government — which awarded the mining contract to NNT in 1986 — that holds the right of first refusal regarding the shares to be sold under NNT’s compulsory divestment scheme. Moreover, West Sumbawa and Sumbawa regencies and West Nusa Tenggara province had earlier been allowed by the central government to acquire 24 percent of NNT through their joint venture with PT Multicapital, a unit of the Bakrie Group, which is controlled by Aburizal Bakrie, the chairman of the Golkar Party.
But that deal seems to have been botched by the regional administrations because they acted virtually as a front for the Bakrie unit that wholly financed the acquisition with loans from foreign creditors.
It turned out the acquired shares were pledged to the foreign creditors as securities to the debts.
Finance Minister Agus has repeatedly explained to the House and the general public that by acquiring the remaining 7 percent equity the central government will be able to enter NNT both as a shareholder, thereby entitled to join its board of commissioners and regulator.
These positions will empower the government to better supervise the US$3.85 billion gold mine’s operations and examine all aspects of its corporate governance.
Several high-caliber lawyers and the deans of eight state law schools across the country that Agus consulted about the share acquisition confirmed the finance minister and the sovereign wealth fund had a clear mandate (based on the 2003 Law on State Finances and the 2004 Law on State Treasury) to make the investment.
Yet strangely, the President allowed the energy and mining minister to hold up the final closing of the deal by dragging his feet regarding its endorsement.
The government’s investment deal related to the NNT share acquisition could be a litmus test for similar business transactions in the future. If the deal fails to go through the legal and political system, many other mining concessions in regions will be at risk of being forcefully acquired by regional administrations. Editorial Jakarta Post
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