Papuans to get shares in Freeport buyout
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As PT Indonesia Asahan Aluminium (lnalum) secures loans to buy a majority stake in gold and copper miner PT Freeport Indonesia (PTFI) following an agreement in July, the government needs to make sure the buyout will benefit Papuans, experts have said.
Inalum, which represents the government in the Freeport deal, is set to acquire a 51 percent stake in PTFI by disbursing US$3.85 billion. It will set aside 10 percent of the stake for two administrations, namely Papua province and Mimika regency.
Experts said the buyout should benefit Papuans and areas in the province, which has suffered from social and environmental Experts want tribes involved in planning Continuity of operations “crucial for Papuans’ Local administrations to pay for shares, lnalum ready to provide loan damage as a result of PTFI operations.
Freeport’s divestment is one among several cases of growing resource nationalism, including the takeover of two giant oil and gas blocks, namely Rokan and Mahakam, by Pertamina. Priest N eles Tebay an academic from the Fajar Timur School of Philosophy and Theology in Jayapura believes local people
should be involved in the decision-making processes at PTFI. He said two indigenous tribes, namely Amungme and Kamoro, were the most aitectcd because they reside near PTFI’s sites in Mimika regency
“The two tribes want not only to take part in operations, but importantly in planning as they want to know whether an action could generate benefits for their people or not,” Tebay said at a discussion organized by Kompas newspaper on Tuesday.
The Catholic priest further said the government could at least provide a time frame on when the representatives of the two tribes could sit down and talk about planning. In this case, the tribes’ trustees could represent them.
At the same event, Hasanuddin University economist Anas lswanto said it was crucial for the government to ensure the continuity of PTFI’s operations after the finalization of Freeport’s deal, which is expected to be completed at the end of September.
“It’s true that we will benefit from owning a majority stake in PTFI, but the crucial point is who will be the operator. If there is no guarantee that operations will continue then we will get no profit,” he said.
Anas believes the continuity of PTFI’s operations is crucial for Papuans. Citing data from the central bank, he said between 2010 and 2014 the contribution of mining to Mimika’s gross regional product (GRP) was over 80 percent. In addition, data from the University of Indonesia in 2015 shows PTFI’s operations contributed 48 percent of Papua Provincie's GRP and 94 percent of Mimika regency’s GRP. He added that l"'l`Fl’s operations have provided 230,000 jobs, 122,000 ofwhich were in Papua.
Inalum president director Budi Gunadi Sadikin said recently his company and lhc local administrations will ensure local participation in FrceporL’s deal by set-
ting up special purpose vehicles (SPV), which are expected to own 25 percent of PTFI.
Inalum will own 60 percent of shares in the SPV while the Papua administration will have 40 percent. That would mean the Papua administration will have a 10 percent stake in PTFI - with 4 percent going to Papua province and 6 percent to Mimika regency. The two administrations, however, need to pay for the 10 percent stake, with Inalum willing to provide a loan. It will be paid in installments from the dividends the administrations would receive from PTFI.
“The total value of PTFI’s shares is $8.56 billion. Hence, to buy the 10 percent, they [two administrations] need to pay $856 million,” Budi said.
Regarding the loan, Institute for Development of Economics and Finance economist Abra PG Tallattov believes that it needs to be- analyzed further to ensure that the money taken from the dividends is not too much and the payout period not too long.
“Besides a clear explanation on local participation in this deal, I also expect that it will not be used as a political commodity as it would taint the process,” he said on Tuesday.
Jakarta Post, Page-13, Wednesday, Sept 26, 2018
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