Seyta
Indonesia’s political power structure may well be
set for an earthquake amid revelations that Setya Novanto, the Speaker of the
House of Representatives, was caught on tape allegedly seeking to extort shares
from theUS-based mining giant Freeport McMoRan.
Sudirman Said, the Energy and Resources Minister, who is widely regarded
as incorruptible, has launched charges against Setya in the House Ethics
Council, alleging the lawmaker invoked the names of Indonesia’s President Joko
Widodo and Vice President Jusuf Kalla without their knowledge to demand 20
percent of Freeport shares expected to go on the market as the company begins a
forced divestment. The president is said to be outraged at Setya’s purported
attempt to use his name.
According to sources in Jakarta, elements of the political establishment
are angry with Jokowi, as the president is known, for personally negotiating a
promise to renew the contract to allow Freeport to continue its operations in
Papua past 2021.
The company operates the world’s biggest copper mine and second biggest
gold mine in Papua and is poised to invest an additional $18 billion if it
receives a contract extension until 2041. The deal promised Freeport in a
recent letter seemingly cuts political operatives like Setya and others out of
the chance to extort large amounts of money from the company or possibly grab a
controlling interest in the mining asset. Only Jokowi, energy minister Sudirman
and Freeport representatives were said to be in the room to negotiate the
promised renewal.
For years, nationalist slogans have been deployed to paint Freeport, the
country’s largest taxpayer, as a renegade company out to harm Indonesia.
Already out there
The ethically challenged Setya from the old-line Golkar Party was
recently the focus of public criticism after meeting US presidential hopeful
Donald Trump in New York in September. At the end of a speech, Trump briefly
introduced Setya, asking him what Indonesians thought of him: “Do they like me
in Indonesia?” Trump asked. The answer from Setya: “Yes, very much.”
Setya made his name as a successful businessman long before he started
his career as lawmaker although not without controversy. In 1999, he was
implicated in a scandal involving Bank Bali, which centered on the transfer of
Rp546 billion from that bank to PT Era Giat Prima (EGP), a company he
controlled, but a court quickly acquitted him of graft charges.
More recently, Setya has been implicated in a number of graft cases
handled by the Corruption Eradication Commission (KPK), but his status in those
cases has remained as a witness, although court testimonies have confirmed his
roles in those cases.
In the latest flap, which grabbed headlines on Tuesday when a transcript
of a recording documenting the alleged shakedown found its way into print, the
legislator seemingly “requested 11 to 9 percent, saying he would give [11
percent] to the president and 9 percent to the vice president,” Sudirman
charged. The bribe attempt reportedly took place over the course of three
meetings between the legislator and Freeport executives in June.
Shakeup coming?
Other top politicians
may also be dragged into the mess, a source said. That reportedly has triggered
major behind-the-scenes movement in Indonesia’s political establishment as it
seeks to cope with a new way of doing business. “This is a different day and
these guys just don’t get it,” said a long-time foreign resident of Jakarta.
“They can’t get away with this stuff anymore.”
Junimart Girsang, a
deputy chairman of the House ethics council, confirmed that Sudirman filed the
complaint, including submitting wiretapped phone conversations that purportedly
quoted an unnamed lawmaker. Although neither the
minister nor the House would reveal the identity of the legislator, the
transcript was leaked to local media, which reported that it was Setya.
“We received concrete
evidence in the form of a recorded conversation for us to examine,” Junimart
told reporters. He added that Sudirman had said, “There are several people in
the conversation including a very prominent Indonesian businessman.”
Widespread media
reports quoted the taped conversation showing how the unnamed legislator
approached Freeport officials on the pretext of representing the president and
vice president.
Under government
regulations pushed through in 2014 on mineral and coal-mining business
activity, Freeport must divest 10.64 percent of its shares to the government.
After accepting the offer, the government has 90 days to negotiate with
Freeport.
IPO for Freeport
Freeport Indonesia is
expected to be allowed to conduct an initial public offering to comply with the
mandatory divestment regulation imposed by the government. The company’s
spokesperson Riza Pratama said divesting shares through an IPO would be more
transparent and accountable than handing over company stakes to insiders.
The Papua operation,
chiefly the Grasberg Mine, is currently 90.64 percent owned by Freeport McMoRan
of Phoenix, Arizona and 9.36 percent by the Indonesian government. To meet the
government’s requirement, the company must eventually offer another 20.64
percent of its shares to Indonesian shareholders.
The mining company’s
export permit expired in July. The permit is necessary for the company to
continue shipping its partly processed copper concentrate despite the
government’s implementation of a ban on raw mineral exports in January 2014.
Due to a loosening of the export ban, export permits for raw minerals are now
possible as long as the company in question shows a commitment to building a
local smelter developments and pays an export tax.
The company currently
produces approximately 2.5 million tons of copper concentrate per year.
Freeport Indonesia is
currently under the spotlight following its attempt to seek certainty over its
operation after the termination of its contract in 2021. Critics say the
company cannot ask for an extension until 2019; Freeport argues that under its
current contract an extension can be granted any time before expiry. Critics
say the company has made little progress on smelter development.
The whole thing is a
tangle of propaganda, conflicting interests and a history that dates back to
the Suharto era. Environmentalists say the mine has ruined a once pristine
landscape. The lucrative mine has long been seen as a potential takeover target
by Indonesian businessmen whose reach likely exceeds their technical grasp of
the industry.
The contract extension
also has been backed by the US government and is widely seen as a litmus test
of contract sanctity by foreign investors. The $18 billion potential investment
to take Grasberg underground would be one of the largest foreign investments in
Indonesia if it happens.
Indonesia’s
coordinating Maritime Affairs Minister Rizal Ramli, who has some degree of
oversight over mining, has said that Indonesia’s abundant mineral resources
should not be controlled by foreigners. The argument resonates widely.
Despite the
government’s binding promise to renew the company’s contract, Rizal has kept up
a drumbeat of criticism, saying the deal is wrong. “People in Papua are very
poor because Freeport pays only 1 percent in royalties for the gold it exploits.
Across the world, gold royalties are around 6-7 percent,” Rizal Ramli has said.
By Dewi Kurniawati
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