President Joko “Jokowi” Widodo deserves the highest praise for his appropriate pursuit of resource nationalism. Last Friday, the government finally closed its deal with United States mining giant Freeport-McMoRan (FCX) on acquiring majority shares in its subsidiary Freeport Indonesia’s (FI) Grasberg copper and gold mine in Papua for US$3.85 billion — less than four months before the presidential and legislative elections in April 2019.
Still, it is mind-boggling to hear the perpetual criticisms analysts and the campaign team of presidential challenger Prabowo Subianto have lashed out at the successful FI divestment.
Looking at the FI acquisition only through the distorted political lens of misguided arguments simply insults the people’s intelligence.
Critics have ridiculed the acquisition of the world’s second largest copper and gold mine as a “senseless and stupid move”, asking why the government did not wait until FI’s current contract ended in 2021 — by which time it could simply take over the mine without paying a single rupiah.
These detractors deliberately ignore the legal fact that under Indonesian law, mines operating under a contract of work (CoW) serve as both contractor and investor.
Hence, the government cannot “simply take over” mining operations in the event that the FI contract is not extended beyond 2021, because FCX has the legal right to take home all mining equipment and other fixed assets of its Indonesian subsidiary. Only the mineral deposits laying deep underground belong to the state — mineral resources that have absolutely no value without FI’s technology, expertise, operational system and global network.
This is very different from foreign oil companies, which cannot claim anything after their production sharing contract (PSC) ends, as they are purely contractors.
Taking over the FI mine after the CoW ends without paying due compensation to Freeport as mutually agreed would land the government at the international arbitration court and isolate Indonesia as a…
