Union to Strongly Oppose Extension of Freeport’s Contract

State Own Enterprise Worker Union to Strongly Oppose Extension of Freeport’s Contract of Work

Media Release
SERIKAT PEKERJA BUMN BERSATU
Indonesia Federation of Trade Unions of SOEs

After failing to reach consensus on amendments to the Contract of Work (Kontrak Karya– KK) between them, both PT Freeport Indonesia (Freeport) and the Indonesian government have agreed to extend their memorandum of understanding (“MoU”) that expired last Saturday.

First signed in July 2014, the MoU was intended to settle arrangements between Freeport and the government for the extension of Freeport’s KK in return for Freeport accommodating certain renegotiation points proposed by the government.

Unfortunately, the extension has drawn negative reactions from the public which sees this outcome as inconsistency on the government’s part in protecting national interests. Underlying the negative reaction is the fact that the extension of the MoU includes an extension to the approval permitting Freeport to export raw mineral products.

The extension has drawn heavy criticism as Law No. 4 of 2009 on Mineral and Coal Mining (“Mining Law”) clearly requires mining companies to process and purify their mining products in Indonesia.

In regard to this matter, Parlindungan Purba, Chairman of Comission II at the Regional Representatives Council (Dewan Perwakilan Daerah - DPD),is urging the government to immediately terminate the MoU and review Freeport’s KK which expires in 2021.

Of concern to Mr. Purba is that the government is being too soft in dealing with Freeport given the company does not appear fully committed to complying with its obligations. Freeport’s slow progress in constructing its smelter in Gresik is cited as evidence of its attitude.

Sharing Mr. Purba’s view, Mesak Merin, a member of the DPD from Papua, expects the government to push for the construction of a smelter on an island in Papua rather than in Java. According to Mr. Merin, Papuan citizens deserve the benefits of any smelter construction given that the minerals are being mined there. Viewing the extension as disadvantageous, Mr. Merin wants to see this matter handled properly and has threatened to mobilize local citizens to block Freeport’s operations.

Worker Unions are also weighing in on discussions. FX. Arief Poyuono, Chairman of the Workers of State-Owned Companies Federation (Federasi Serikat Pekerja BUMN Bersatu – FSPB) is also threatening to file a class actionrequesting the government to terminate the agreement to extend Freeport’s KK.

“Not only is it constantly delinquent in its obligations, Freeport also provides very poor work, health and safety standards which often results in injuries to their employees,” said Mr. Poyuono.

Mr Poyuono has urged the government to immediately clarify this matter by issuing a Government Regulation in lieu of Law (Peraturan Pemerintah Pengganti Undang-Undang – Perpu). To that extent, Mr. Poyuono expects the Perpu to be prepared with input from all relevant stakeholders in the mining sector.

Responding to the criticms and negative reaction from the public, Sudirman Said, Minister of Energy and Mineral Resources, stated that the government is currently discussing a Perpu which aims to maintain the domestic smelting obligation without hampering ongoing mining activities. Mr. Said explained that the government will fully implement the prohibition on the export of raw mineral products by 2017.

Mr. Said further explained that the government decided to executethe extension of Freeport’sexport approval after careful consideration. He assertsthat during this term of the extension, the government will monitor Freeport’s progress in complying with its obligations. This will including monitoring ofprogress in the construction ofsmelter facilities in Gresik and payment of export duty as set by the Minister of Finance.

Adding to Mr. Said’s statement, R. Sukhyar, Director General of Minerals and Coal at the Ministry of Energy and Mineral Resources, admitted that the government may have violated the Mining Law by granting an extension to the MoU, including the extension to Freeport’s approval to export raw mineral products. However, Mr. Sukhyar emphasized that this action is necessary to maintain the continuity of mining activities in Indonesia.

“Besides, Indonesia still lacks sufficient energy and equipment for the smelter construction,” added Mr. Sukhyar.

(hot/kc)

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