ANALYSIS: US mining giant’s deal with gov’t a victory for Jokowi

Asia Sentinel
ANALYSIS: US mining giant’s deal with gov’t a victory for Jokowi
On the eve of a US visit, the long-term investment is a sign that President Joko Widodo is gaining the upper hand over nationalists

A decision by Indonesian authorities to assure US mining giant Freeport McMoRan that its Grasberg copper and gold mine contract would be extended is being taken as the most important sign yet that President Joko Widodo is continuing to gain the upper hand over economic nationalists.

Freeport said Thursday last week that it had been assured by government officials that the contract for the mine, in Papua, would be extended.

Freeport has been stymied for several years by refusal of the government to give assurances on extending the contract, which ends in 2021. Current rules governing contract talks must start within two years of the lapse of the contract.

The Phoenix, Arizona-based Freeport McMoRan, which has operated the mine since 1973, plans to invest US$18 billion to transition the Grasberg complex from an open pit to underground mining in late 2017 according to a Reuters report.

It is the world’s largest gold mine and the third largest copper one, with 19,500 employees. Freeport owns 90.64% of PT Freeport Indonesia, its principal operating subsidiary. The government owns the remaining 9.36%.

“We welcome the continuation of Freeport’s investments in Papua which will provide increasing benefits to the national and local economies,” said Sudirman Said, Indonesia’s Minister of Energy and Mineral Resources in a prepared release.

“Freeport is the test of whether Jokowi really wants change,” said a western businessman. “I think this is enormously important. It has been a huge internal battle.”

As an example of that internal battle, Coordinating Maritime Affairs Minister Rizal Ramli – on the day the government announced its decision on Freeport – gave a lecture at a local university in Jakarta in which he was quoted by local media as lambasting the mentality of the country’s state officials in the mineral sector and called Freeport McMoRan greedy.

All of Indonesia’s resources except coal, he said, are controlled by foreign powers through work contracts.

“There is now a chance for our country to be able to repeat our previous history, during which our mineral resources gave much benefit to all Indonesian people and the nation,” Rizal told the Post, accusing the mining company of massive environmental damage as well.

A few hours later, Bambang Gatot released the government’s decision granting Freeport the extension.

The extension decision comes within days of Jokowi’s October 20 trip to the United States to meet with government leaders in Washington, DC and investors and businessmen to assure them that Indonesia is serious about attracting foreign investment after a long series of nationalistic policy implementations by both his administration and the preceding one.

LONG-TERM. The government of Indonesia and PT Freeport Indonesia agrees on long-term investment. Photo from Freeport Indonesia website.

The decision to grant the Freeport extension, which has been hanging fire for months as contenders battled it out behind the scenes, gives Jokowi an enormous victory to show to the Americans. (READ: Is Jokowi finally starting reforms?)

For the better part of a year, since he assumed the presidency last October, Jokowi has been under sustained fire from environmentalists, reformers, members of the business community and others for his seeming diffidence against economic nationalists and others.

He was widely assumed to be taking a back seat on many issues to Megawati Sukarnoputri, who used the organizational power of her Indonesian Democratic Party of Struggle (PDI-P) to help engineer his election.

However, his August cabinet reshuffle, in which he put longtime technocrats into key economic management posts and moved aside some of Megawati’s handpicked supporters, was the first signal of change.

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