Friday, April 19, 2024

Expert: President should not grant early permit extension for Freeport

Reading Time: 3 minutes
Gusty da Costa




JAKARTA – President Joko “Jokowi” Widodo’s discourse to extend the Special Mining Business Permit for PT Freeeport Indonesia (PTFI), which will expire in 2041, to 2061 prematurely, is a violation to Law No. 3/2020 on Mineral and Coal, particularly Article 169 B paragraph 2. The permit extension must be avoided because it is detrimental to long-term national interests.

This opinion was raised by Executive Director of the Centre of Energy and Resources Indonesia (CERI), Yusri Usman, on Sunday, March 24, 2024. 

“Our government has provided evidence to all foreign investors on the certainty of investment in Indonesia by extending the Contract of Work (KK) of PT Freeport Indonesia twice. The first was in 2001, valid for 20 years and expired in 2021. Then our government has extended the second one in 2018 with the special mining business permit pattern until 2041, and bought foreign shares through divestment from 10 percent to 51 percent,” Yusri said.

“So, there is no argument about investment certainty in Indonesia, as an example, the permit of PT Vale and mining contracts (PKP2B) owned by 7 oligarchs have all been extended, “he added. 

Jokowi’s desire to extend PTFI’s special mining permit (IUPK) sooner was initially revealed by ESDM Minister Arifin Tasrif to the media on 18 November 2023, namely after President Jokowi’s return from a visit to the United States. 

According to Tasrif, one of the crucial matters discussed was the extension of Freeport Indonesia’s mining contract in Papua.

“So, instead of President Jokowi wanting to speed it up, it is better to let the decision whether to extend the contract or let it be 100 percent controlled by the state-owned mining holding company MIND ID be decided by the government of the 2034-2039 period,” Yusri said. 

Moreover, Yusri continued, President Jokowi said that Indonesia in 2045 will enter the golden era. 

“That means our country is ready in terms of mastery of technology, finance and human resources and management to independently manage the copper mine (with byproduct of gold, silver & platinum minerals), maybe this is what Freeeport MacMoran of America is afraid of at this time,” he said. 

So, said Yusri, the statement by Minister of Investment and Head of Investment Coordinating Board (BKPM) Bahlil Lahadalia to the media on Monday, March 18, 2024 that the government would immediately revise Government Regulation No. 96/2021 was considered inconsequential.

“We changed it because it is integrated with the smelter, after the revision, we can extend PT FI’s special mining business permit until 2061 and we already own PT FI because MIND ID shares has reached 61 percent,” Bahlil said. 

Yusri alleged that Bahlil’s statement apparently only wanted to fool the Indonesian people.

“Did Bahlil forget that if you add a 10 percent stake, MIND ID must prepare funds of at least USD 3.5 billion outside of investment in building a smelter? And even then the operation is still controlled by Freeport Mac Moran, while MIND ID only waits to receive dividends every year,” Yusri said.

He questioned Bahlil’s other statements which suggested that permit extension for Freeport should be accelerated because Freeport’s production will decline in 2035, while underground exploration needs at least 10 years.

“If we only think about an extension until 2035, it means that there will be a production vacuum of approximately 5 to 10 years. The government is so stupid that it wants to execute foreign shares of 41 percent in 2018, while production will decline in 2035 (due to depleted reserves)?” Yusri said. 

He said further that Bahlil’s statements could have indicated that the investment minister is in favor of foreign interests rather than national interests.

“Then it also proves that he does not know anything about mining exploration and production, which can be carried out simultaneously when the reserves have been proven,” Yusri added. 

In addition, said Yusri, if the government only changes the substance of Article 109 paragraphs 1 to 4 of Government Regulation No. 96/2021 on Mineral and Coal Mining Implementation, without changing Article 169 B paragraph 2 of the Mineral and Coal Law, then it is futile.

“Therefore coordination efforts between ministries that are meant only to revise Government Regulation No. 96/2021 should be stopped, because there is no point if the Law on Mineral and Coal is not also revised,” he said. 

According to Yusri, how could the President extend PT Freeport Indonesia’s Special Mining Business Permit only based on the revision of Government Regulation No. 96/2021, while its content contradicts to the content of the Law on Mineral and Coal, which is higher in rank.

So, said Yusri, President Jokowi will leave a bad legacy at the end of his power because he will be considered violating the law in extending PT Freeport Indonesia’s IUPK, while the government regulation contradicts the Law on Mineral and Coal.

“Shouldn’t he leave this policy to the next government of Prabowo Subianto-Gibran Rakabuming Raka who will be inaugurated on October 20, 2024?” Yusri suggested.

Gusty da Costa






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