Sun, Nov 10, 2013 - Page 14 News List

US mining giant faces fight
with rising Indonesia

As Indonesia transitions toward democracy and its economy flourishes, there is a growing sense that foreign operations like Freeport’s Grasberg mine have taken a lot from the nation, but given little back

By Olivia Rondonuwu  /  AFP, GRASBERG, Indonesia

Clouds shroud Freeport-McMoRan Copper & Gold Inc’s Grasberg mining complex in Indonesia’s eastern Papua Province on Aug. 16.

Photo: AFP

High in the snow-capped mountains, the sight of tribesmen roaming in loincloths contrasts sharply with that of miners using hi-tech machinery to extract gold and copper ore at a huge US-owned facility in remote Indonesia.

The heavily guarded complex is the resource-rich country’s biggest mine and has been a controversial presence for more than five decades, during which it has been accused of environmental devastation and extracting huge wealth, while giving too little back to a poverty-wracked area.

On a rare visit by foreign media to Freeport-McMoRan Copper & Gold Inc’s Grasberg complex in Papua Province, reporters saw first-hand the challenge of mining at one of the world’s biggest gold and copper mines, where thin oxygen makes it difficult for workers to breathe.

The dangers that come with the job were highlighted in May when a training tunnel collapsed, killing 28 miners.

The company now faces a fight with the state as it looks to extend its contract at a time when emboldened politicians are taking aim at foreign miners with measures forcing them to leave more of their profits in the country.

During the three-decade rule of former Indonesian president Suharto, which ended in 1998, Freeport had a relatively easy life and was showered with privileges.

Yet 15 years on, Indonesia is transforming into a freewheeling democracy and booming economy, with mining firms among foreign companies under scrutiny in what critics say is a climate of rising economic nationalism.

“There is the feeling that Freeport has taken a lot and has shared poorly with the local area,” said a government source familiar with ongoing negotiations to extend the mining giant’s contract.

Authorities have demanded foreign miners give up full ownership of their mining assets in the country, pay higher taxes on mineral exports and build smelters in Indonesia instead of shipping ore abroad to be processed.

“It’s as if I have rented a house for 20 years, but 10 years after it has all been agreed the owner comes to you and says: ‘This is unfair, I must hike the rent,’” Tony Wenas of the Indonesian Mining Association said.

Freeport vigorously defends its operations in Indonesia, saying it is the single biggest taxpayer to the state. Ruby Seba, Freeport Indonesia’s vice president of technical affairs, said the company sought to get its contract extended to 2041 as it aims to build what it says will be the world’s biggest underground mine at Grasberg.

“It wouldn’t be fair for us to put aside money to invest and suddenly have our contract severed,” he said.

For many, government action to get more back from foreign companies is overdue, with Freeport seen as a symbol of foreign exploitation in Indonesia.

“After more than 40 years of Freeport being in Indonesia, the tribes living in the area are still walking around naked,” Juli Parorrongan, a spokesman for the Freeport workers’ union, told reporters.

Union head Sudiro, who like many Indonesians goes by one name, added: “It is ironic that in an area that is at the heart of Freeport’s success, most of its workers are still living in poor conditions and are dependent on loan sharks.”

After years of criticism, the company has recently sought to be more open. Freeport says it has invested lavishly in Papua — building an airstrip, health clinics and housing in villages that have been neglected by authorities.

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