Mining Deal Scandal Grips Indonesia

Dewi Safitri
151209-ID-grasberg-620 Freeport-McMoran operates the Grasberg mining complex, one of the world’s largest gold and copper mines, in eastern Indonesia’s Papua province, Aug. 16, 2013.

A corruption scandal linking the speaker of Indonesia’s parliament to the renegotiation of a lucrative gold and copper mining contract has infuriated Indonesians and dominated headlines in recent weeks.

A parliamentary ethics committee and Indonesian authorities have now finally opened investigations into the scandal.

It surrounds House Speaker Setya Novanto and allegations that he was tape-recorded asking for a combined 20 percent-stake on behalf of Indonesia’s president and vice president, in exchange for guaranteeing a new contract to PT Freeport Indonesia (PTFI), the Indonesian subsidiary of the U.S.-based mining giant Freeport-McMoran.

This week, President Joko “Jokowi” Widodo vented his anger while addressing the public about the scandal for the first time.

“I am okay with being called a crazy president or stubborn president. But when it comes to [misuse of] authority, profiteering, asking for an 11 percent share, that I don’t want,” Joko told a news conference at the Presidential Palace in Jakarta late Monday, referring to the percentage of PTFI shares that Setya had allegedly demanded on the president’s behalf.

Indonesians have been clamoring for Setya, a member of the opposition Golkar party, to resign although he proclaimed his innocence in testifying before a parliamentary ethics hearing earlier on Monday.

According to a written statement he reportedly read at the closed-door hearing, Setya said he had been “defamed” by Sudirman Said, the minister of energy and mineral resources who reported his alleged wrongdoing.

“I strongly object that this tape was unlawfully obtained,” he went on to say.

Big deal

Freeport, which has been in Indonesia since the 1960s, operates the Grasberg mine complex in the far eastern of province of Papua. It is one of the world’s largest gold and copper mines.

In 2014, Freeport made nearly U.S. $2 billion in copper sales from its Indonesian operations and U.S. $1.4 billion in sales of gold mined in the country, according to a calculation of figures culled from the firm’s last annual report.

The firm’s contract for the Grasberg mine is set to expire in 2021. Under Indonesian law, companies can renegotiate contracts two years before they expire, but officials with Freeport’s Indonesian subsidiary evidently have already been discussing the 20-year extension.

PTFI officials are worried that 2019 is too late, because the company has a long-term plan to invest U.S. $17 billion in developing new underground pits at Grasberg Mountain, according to an op-ed piece in the Jakarta Post.


The recording – which has now been made public – is from a June 7 meeting attended by Setya, PTFI Indonesia Director Maroef Sjamsoeddin, and Muhammad Riza Chalid, an Indonesian oil and gas tycoon, who left Indonesia earlier this week.

In testimony to the parliamentary ethics panel, Maroef said he had recorded the conversation because of the controversy surrounding PTFI operating practices over the years, Reuters reported.

“The parliament speaker and his friend R[i]za told me they wanted a 20 percent stake and also asked for a hydroelectric power project,” the PTFI chief testified, according to Reuters.

Sudirman later reported the case of alleged extortion to a parliamentary ethics committee, and handed it a transcript of what was said in the secret meeting.

The House Ethics Council declined to investigate the complaint immediately, saying he lacked the authority to lodge a complaint.

But, amid mounting public anger over the scandal, the council finally opened an investigation. It convened its first hearings on the matter last week, when Sudirman and Maroef testified before the council in sessions that were open to the public.

The ethics council has yet to decide whether the house speaker will be sanctioned for an alleged ethical breach.

Separately, authorities say they have opened a criminal investigation into the matter.

Attorney-General H.M. Prasetyo has questioned Maroef Sjamsoeddin and Sudirman Said, and entered the mobile phone that was used to record the secret meeting into the body of evidence.

Good for Indonesia?

Meanwhile, some Indonesians are questioning whether Indonesia should award a new contract to Freeport, and whether this would be in the best interests of impoverished Papua and the rest of the nation.

In the op-ed published in the Post, Winarno Zain, a commissioner at a publicly listed oil and gas service company, argued that the time had come for Indonesia to take control of its precious metal deposits, including the gold and copper deposits at Grasberg Mountain.

“Freeport has been a thorn in the pride and consciousness of many Indonesians,” Winarno wrote. “It has been a source of resentment among Indonesian because after 70 years of independence, the country is not in control of its richest mineral resources.

“Freeport operations have created constant questions among Indonesians about whether the government’s management of its natural resources has been in line with the spirit of the Constitution – providing utmost prosperity to the Indonesian people through its control over natural resources,” he added.

More bitter voices have come from Papua, where activists and lawmakers alike complain that the company has disregarded the welfare of local people, while dredging trillions of dollars from their land and despoiling the environment.

Papua Gov. Lukas Enembe told BenarNews he wanted the central government to involve the local government in every discussion of the PTFI contract.

“Many people now know about Papua, but are very clever at talking …. We don’t want to be like Jakarta people who speak only for their own personal interests,” he said.

Victor Mambor contributed to this report.


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