Indonesia minister distances govt from Freeport extortion allegation

Setya Novanto (right) leaves an ethics panel hearing in Jakarta.
Setya Novanto (right) leaves an ethics panel hearing in Jakarta.PHOTO: REUTERS

JAKARTA (Reuters) - A senior Indonesian minister on Monday (Dec 14) sought to distance the administration from parliament speaker Setya Novanto, who is fighting allegations that he tried to extort shares worth US$1.8 billion (S$2.5 billion) in the local unit of Freeport McMoRan Inc.

Novanto is at the center of a major political scandal, with a parliamentary ethics council investigating allegations he used the name of President Joko Widodo to pressure Freeport's officials for the shares, in return for a contract extension.

Novanto has denied any wrongdoing.

Analysts say the high-profile case could further erode investor confidence in Southeast Asia's largest economy, with Indonesia routinely ranked as one of the world's most corrupt countries. "We must not politicize this anymore because honestly we're playing with something that can cause financial damage to this nation," Luhut Pandjaitan, chief security minister and key presidential adviser, told the ethics panel.

Pandjaitan was called to testify after his name came up repeatedly in a secretly recorded meeting between Novanto and the head of Freeport's Indonesian operations.

In the recording, Novanto indicated he had the approval of Pandjaitan, who was then the presidential chief of staff, to negotiate for the 20 per cent stake on behalf of Widodo.

An ethics panel member said Pandjaitan's name was mentioned 66 times during the two-hour recording.

Pandjaitan, who founded coal and palm oil firm Toba Sejahtera Group in 2004, said he never discussed such an issue with Novanto and had no prior knowledge of the meeting.

"My friendship with Novanto is limited to his work as House speaker and mine as coordinating minister," Pandjaitan told the ethics hearing broadcast live on television. "Since I have taken public office, I haven't been involved in business."

The minister urged panel members to "stick to the facts" as the case could hurt investor sentiment.

Widodo, who has not been called before the ethics panel, has urged authorities to conduct a transparent investigation. The attorney general's office is also looking into the case.

Freeport Indonesia must sell the Indonesian government a greater share of its Grasberg copper and gold mine, one of the world's biggest, under regulations passed last year by the previous administration.

The government already has a 9.36 per cent stake in Freeport's Indonesian operations, and is due to take another 10.64 per cent stake.

In return for Freeport's shares, Novanto allegedly told the company executive that he could ensure the miner's contract would be extended from 2021 to 2041.

U.S.-based Freeport sought the contract extension to give it legal certainty before investing billions of dollars in the Grasberg mine.