MAC: Mines and Communities

Indonesian military admits accepting cash from Freeport-McMoRan

Published by MAC on 2005-12-29

Indonesian military admits accepting cash from Freeport-McMoRan

by Associated Press

29th December 2005

JAKARTA, Indonesia -- Indonesia's military acknowledged for the first time Thursday that its commanders in Papua had received "support" from a U.S. gold-mining giant _ responding to allegations that Freeport-McMoRan Co. gave the army millions of dollars to protect its facilities in the remote province.

Maj. Gen. Kohirin Suganda said the armed forces "as an institution" had never received donations from the New Orleans-based company.

"But we have heard that Freeport provides support such as vehicles, fuel and meals directly to the units in the field," Suganda said. "That's the company's policy. It was not done because we requested it."

Suganda was responding to an article published Tuesday in The New York Times that detailed Freeport-McMoRan's payments of $20 million to military commanders in the area in the last seven years.

Indonesia regularly ranks among the world's most corrupt countries in international surveys. The latest reports will do little to raise confidence in the army _ considered one of the country's most graft-ridden institutions _ or the government's pledge to eradicate official corruption.

Human rights groups have criticized direct payments by foreign mining and energy companies to the military, saying they were undermining efforts to bring the politically powerful armed forces under civilian command following the collapse in 1998 of the 32-year military dictatorship of former President Suharto.

Only one-third of the financing for Indonesia's armed forces comes from the state budget, while the rest is collected from non-transparent sources such as "protection payments," allowing the military brass to operate independently of the government's financial controls.

When asked about the payoff allegations, Indonesia's military commander Gen. Endriartono Sutarto would only say, "Please ask Freeport, not me."

A Freeport spokesman in Jakarta said the only company official who could comment on the matter was busy in Papua.

Reports that Freeport was paying off the military to protect the mine have circulated for years.

Last year, international watchdog Global Witness reported that Maj. Gen. Mahidin Simbolon, the region's former military commander and currently inspector-general of the army, personally received $247,705 from Freeport from 2001 to 2003.

In 2003, Freeport acknowledged in a report to the U.S. Securities and Exchange Commission and to New York City authorities that it had paid millions of dollars to the army.

"We've been deployed to difficult areas, don't we deserve better supplies?" Simbolon was quoted as saying Thursday in The Jakarta Post.

He acknowledged that the military had received payments from Freeport, but denied he benefited personally, saying the money had been given to battalion commanders to pay for various expenses and daily allowances to the troops.

The Indonesian military had previously denied receiving money directly from Freeport.

Freeport has been accused by international environmental groups of causing massive pollution in Papua's hitherto pristine jungles by allowing large quantities of toxic waste to seep into surrounding groundwater.

In its filings to the U.S. Securities and Exchange Commission, Freeport said annual payments to the Indonesian security forces were included in its contract covering operations at the giant Grasberg mine in Papua, the Indonesian-occupied half of New Guinea island.

Other U.S.-owned mining and energy companies also have come under fire for allegedly providing money and other services to the Indonesian armed forces, which are accused of having killed thousands of labor activists and other political opponents after a military coup in Jakarta in 1965.

Suharto gained Western support following the 1965 coup by opening Indonesia's economy to foreign investment. The first company to take advantage of this was Freeport-McMoRan in 1969. Critics have long condemned Freeport for allegedly obtaining the rights to the mine through a direct deal with the dictator.

At the time, Indonesia was under a reign of terror _ at least 500,000 opponents of the dictatorship were slaughtered in a political purge _ and it was impossible for local people to demand an open international tender, critics say.

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