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SMH Editorial: Greed, Guns and Gold [+Mine Protests to Have
Minimal Impact]
 Mar 23, 2006 04:22 PST 

also: Dow Jones: Interview/Head of the Indonesia Investment
Coordinating Board: Mine Protests To Have Minimal Impact

Sydney Morning Herald
Thursday, March 23, 2006


Greed, Guns and Gold

THE giant Freeport gold and copper mine is carving a scar so vast and
deep into the remote forests of Papua that it will soon be visible from
space. Downstream, a swelling bruise of a billion tonnes of mine waste
has rendered wetlands inhospitable for aquatic life. The stupendous
profits generated by the world's largest copper and gold mine largely
pass the indigenous Papuans by. That the mine has become the violent
flashpoint in their dogged campaign for independence is unsurprising.
Democracy in Indonesia has, rightly, raised expectations for accountability.
The reckless polluters of Freeport, the abusive military units stationed in
Papua and the civilian government in Jakarta are on notice: the bad old
days of impunity are over.

Under the former authoritarian president Soeharto, foreign mining companies
in Indonesia enjoyed cosy deals. The US-operated Freeport mine barricaded
itself behind a security cordon and built an industrial city in the middle of
one of the world's pristine, and most fragile, natural environments. A recent
New York Times investigation revealed Freeport has made $US20 million in
direct payment to Indonesia military officers - protection money to ensure
Indonesian troops do the dirty work of keeping the ragtag Free Papua
Organisation, with its spears and few rusty guns, away. Freeport employs
18,000 people and has pumped $US33 billion into the Indonesian treasury
since 1992, contributing almost 2 per cent of gross domestic product. But
like the oil and gas riches of Aceh, little wealth has been returned to the
province, and local complaints are met with violence, intimidation and abuse.
Last week, thousands of angry Papuan demonstrators set upon and killed
four Indonesian security officers. The murders, and the rage that sparked
them, shocked many Indonesians. But as The Jakarta Post noted: "The
reasons for the protests in Papua are obvious." If Papuans lose all hope
for change the "situation could become more dangerous", it warned.

Australia does not support independence for Papua, but with 43 Papuan
asylum seekers being processed, Canberra cannot ignore the new unrest.
There have been many empty promises of autonomy and demilitarisation
for Papua since Soeharto's fall in 1998. Indonesia's military, with its
interest, is undoubtedly frustrating change. The Bougainville copper mine
in Papua New Guinea provides a warning. It provoked such a violent campaign
for self-rule that it was abandoned in 1989. Almost a decade of conflict
The glare of the international spotlight on Aceh following the tsunami forced
peace deal there. Papua deserves the same attention.


Interview: Indonesia Mine Protests To Have Minimal Impact

By Phelim Kyne

BALI, Indonesia, March 22 (Dow Jones)--Protests that have rocked Indonesian
operations of U.S. mining giants Freeport-McMoRan Copper & Gold Inc. (FCX) and
Newmont Mining Corp. (NEM) haven't seriously damaged investor confidence, says
the head of Indonesia's official Investment Coordinating Board.

Foreign investment risks are an international phenomenon that aren't limited
to protests in Indonesia, Chairman Muhammad Lutfi told Dow Jones Newswires in
a recent interview.

Lutfi was speaking on the sidelines of a blue-ribbon investment conference on
the tourist resort island of Bali.

Newmont Monday said it suspended exploration on Indonesia's Sumbawa Island
after unidentified people torched a camp for its workers.

Freeport-McMoRan temporarily closed its massive Grasberg gold mine in Papua
province last month after protesters demanding the right to mine its waste ore
blockaded the facility.

Lutfi conceded the protests created image problems for Indonesia, but said
the government was committed to ensuring the safety of large-scale investments
by mining and other companies.

Those assurances are essential to encourage foreign investment to help fund
an estimated $150 billion national infrastructure upgrade needed to power an
average annual economic growth target of 6.6% from 2004 to 2009.

Indonesia's government has forecast a 6.2% on-year economic growth in 2006,
outpacing the 5.6% expansion last year.

Lutfi forecast a 15.2% on-year rise in realized foreign direct investment in
2006. Indonesia recorded a 93.0% on-year rise in non-oil-and-gas sector FDI to
$8.91B in 2005, government data indicates.

All Contracts To Be Honored, Investments Protected

The Indonesian government is committed to honoring the contracts and
protecting the assets of all foreign investors, including mining companies
in remote
regions, Lutfi said.

The government will also launch a public education campaign on the benefits
of foreign investment in the resources sector to avoid similar protests in the
future, he said.

The government will also provide security to existing investors. "We will
protect all facilities that are in danger."

"We are now opening all channels to talk to the people about the importance
as a country to host this (kind of) investment."

Freeport-McMoRan is under official scrutiny for alleged illegal security
payments to military officers on Papua.

Indonesia's Minister of Defense Juwono Sudarsono and Minister of Energy and
Mineral Resources Purnomo Yusgiantoro both announced official probes into
payments in January and February respectively.

Those investigations are part of the widening fallout from a New York Times
report in December that said Freeport-McMoRan allegedly made payments of
$20 million to military and police officials posted around Grasberg from 1998
to 2004.

In January, the allegations prompted the comptroller of New York City,
representing shareholders of city pension funds, to ask both the U.S. Justice
Department and the Securities and Exchange Commission to probe the legality of
Freeport-McMoRan's financial support for security forces in Papua.

Reopening Freeport-McMoRan Contract Unlikely

Freeport-McMoRan has said it gave "financial support" to Indonesian security
officials in Papua for items including infrastructure and logistics, according
to a
letter posted on the company Web site Jan. ll. The letter was signed by
company Chief Executive Richard Adkerson.

Lutfi declined comment on the Freeport-McMoRan payments controversy, but
insisted that security for foreign companies was a government responsibility.

"The mechanics of how they do it may be different from one to the other, but
the most important thing is (security's) the responsibility of the
government," he said.

The Indonesian government is also satisfied with the financial returns of its
contract with Freeport-McMoRan, Lutfi said.

Those comments appear to contradict statements last month by Vice President
Jusuf Kalla that the government should revise a profit-sharing contract with
the New Orleans-based mining giant to give Indonesia a bigger slice of revenue
while commodity prices soar.

Freeport-McMoRan signed a 30-year contract in 1991 with the Indonesian
government that requires the company to pay corporate income taxes and
taxes on dividends of 35.0% and 10.0% respectively, along with unspecified
royalties on revenues.

Indonesia's government reaped $1.2 billion in taxes, royalties and dividends
in 2005, company data indicates.

"(Freeport-McMoRan) is paying (Indonesia) more than double of what they pay
anywhere (else)...and the Indonesian government thinks its a fair number for
them to pay," Lutfi said.

Joyo Indonesia News Service

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TAPOL, the Indonesia Human Rights Campaign
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tel +44 (0)20 8771 2904 fax +44 (0)20 8653 0322
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