Sri Mulyani Warns Freeport Indonesia over Contract Negotiation
7 August 2017 09:50 WIB
TEMPO.CO, Jakarta - Finance Minister Sri Mulyani has warned Freeport Indonesia that contract renegotiation with the government should result in greater state revenue. She said that the renegotiation is regulated in Law No. 4/2009 on Mineral and Coal.
“Any term, any name used, I don’t care. The main thing is the revenue collected by the government should be greater than before. That’s the government’s stance. And it’s being formulated,” Sri Mulyani told Tempo last week.
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The government and Freeport Indonesia have been negotiating since May. The negotiation team led by the Energy and Mineral Resources Ministry had earlier agreed on four points: resumption of operations after the contract of work (CoW) ends, the requirement to build a smelter, mandatory divestment and long-term investment stability. Freeport is also obliged to change its license from CoW to special mining permit (IUPK).
Energy Minister Ignasius Jonan said that the parties have agreed on the resumption of operations and smelter construction requirements. The other two issues are being discussed with the Finance Ministry.
Sri said that negotiation on divestment centers around share disposal scheme. Freeport is required to dispose of 51 percent of its stake as set forth in the contract of work. The local unit of US-based mining giant Freeport McMoRan is only willing to sell 30 percent of its shares. The company argued that it has reduced its obligation since it has started an investment in underground mining.
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Freeport has demanded a fixed fiscal terms. Freeport spokesman Riza Pratama said that the company wishes to ensure long-term investment stability. “We have no problem with paying a high tax rate, as long as the amount is fixed. We have paid higher tax rate compared to other companies,” Riza told Tempo.
Meanwhile, the government is not so keen on a special fiscal policy. It prefers one that is in accordance with the laws and regulations. Minister Sri Mulyani said that she is preparing a fiscal stimulus in favor of the government.
The negotiation will continue until October. Freeport McMoRan CEO Richard Adkerson said that the company will continue to take the matter to international arbitration if negotiation fails.
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