No early contract extension for US mining firm Freeport: Luhut Pandjaitan

JAKARTA - Indonesia’s Coordinating Minister for Political, Legal and Security Affairs Luhut Pandjaitan on Friday came out strongly to deny any involvement in the Freeport scandal.

The debacle centres on the country’s House Speaker Setya Novanto, who is accused of trying to secure kickbacks from United States copper and gold miner Freeport-McMoRan during a meeting with businessman Muhammad Reza Chalid and Freeport Indonesian unit chief Maroef Sjamsuddin.

It was during the June 8 meeting, held to discuss Freeport’s bid to extend its contract earlier than what is allowed by Indonesia’s law, that the names of President Joko Widodo, Vice President Jusuf Kalla and Mr Luhut were mentioned. 

The meeting was discreetly recorded by Mr Maroef and a transcript of it was presented at a public hearing this week to determine if Mr Setya had breached ethics rules. 

The transcript has also revealed that Mr Reza and the Speaker had implied that Mr Luhut could help convince the President to agree on an extension for Freeport to continue its operations in Indonesia. This, in exchange for a 20 per cent stake in Freeport’s local unit for Mr Joko and Mr Kalla.

Mr Luhut said he wrote to Mr Joko on May 15 explaining that an extension of the contract could only be done two years before expiry at the soonest. He filed the memo again on June 17, stressing that the contract can only be extended in 2019, due to existing laws.

“How could they say I was involved when early on, my position was no extension? Frankly, I didn’t care about this initially, until it really got to my family,” he said.

“I want anyone who is saying I am involved to come forward and show me what I did wrong. .. This is about my family’s dignity. We will defend our dignity.”

The scandal came to light after Indonesia’s Energy Minister Sudirman Said lodged a complaint last month against Mr Setya with the Parliament ethics committee, alleging that the Speaker had used the names of Mr Joko and Mr Kalla to demand a stake in Freeport’s Indonesian unit.

Freeport Indonesia must sell to the Indonesian government a bigger stake of its copper and gold mine in Papua – the world’s biggest – as part of the process to extend its right to operate beyond 2021.

This after the Indonesian government is looking to increase the ownership of local parties in Freeport Indonesia to 30 per cent from a current 9.36 per cent.

The prompt divestment of another 20 per cent – worth about US$4 billion (S$5.6 billion) – to the government and the construction of a smelter to process gold and copper ores are among the preconditions for a contract extension, which the government will decide on two years before the rights’ expiry in 2021.

Freeport, however, wants an early contract extension before it invests further to build the smelter and develop underground mining in the Grasberg mine.

Mr Joko has not given any clear sign that he will extend the contract, prompting Freeport to lobby Indonesian ministers and political figures.

The mine yielded an output of 255,000 troy ounces of gold and 154 million pounds of copper in the January to March period this year.

The firm has been operating for more than four decades and currently employs about 30,000 people in Indonesia.

It is unclear what impact the ethics committee hearing against Mr Setya will have on Freeport’s bid to extend its contract, but few expect the House Speaker’s political career to survive the scandal.

In previous media interviews, Mr Setya had questioned if the recording is genuine or been doctored, but at other times he acknowledged attending the June meeting at a luxury Jakarta hotel.

He has also said that he was joking or that his remarks and intentions had been misinterpreted. “I feel I have done nothing wrong, I feel I was treated unfairly being bugged,” he said last month, according to a report in Kompas news.

The affair puts his position at risk and could spur a shake-up in the leadership of the parliament that elevates factions more supportive of President Joko Widodo, giving him traction for his economic reforms.

It also has implications for the powerful Golkar party, of which Mr Setya and Mr Kalla are members, which is split on whether to formally join the ruling coalition.

Mr Kalla, however, has since called for Mr Setya to step down over the scandal.