MAC: Mines and Communities


Published by MAC on 2003-03-14


Freeport Gives Billions of Rupiahs to Indonesian Military

Koran Tempo, Indonesia

Friday, March 14, 2003

“It’s crazy, Rp.50 billion? That money should go to me.”

Jakarta – The mining company Freeport has rolled out billions of rupiahs for the Indonesian Military (TNI). The money was expended for the security of employees of the gold and copper mine in Papua owned by the company. “Limited resources, the remote location, and limited development in Papua has made PT Freeport Indonesia a constant source of logistical and infrastructure assistance, for both government and the military/police,” Freeport states in a document that was quoted by AFP yesterday.

Last year, Freeport expenditures for TNI totaled US$5.6 million (approximately Rp.50 billion). This support covers costs for housing of military personnel, fuel, travel, and vehicle repairs. In addition, US$400 thousand was expended to build “supporting infrastructure”. Freeport also claims it spent US$4.7 million (some Rp.41 billion) in 2001 to pay for 2,300 security personnel provided by the Government of Indonesia.

The contribution is included in the report issued by Freeport McMoran Copper and Gold Inc, Freeport Indonesia’s parent company. According to a report by AFX Global Ethics Monitor, a new service from AFP, yesterday this classified document was sent to all shareholders in New York and the USA SEC.

AFX reported that the document was released in response to the demands of some shareholders, a public pension fund in New York. Early this year, they demanded a detailed explanation of Freeport’s presence in Papua in relation to allegations of military involvement in human rights violations in the area.

Freeport’s contribution to TNI is an old issue, but this is the first time that the company, where one of the board of directors is former US Secretary of State Henry Kissinger, has included the issue in a formal document. Freeport’s spokesman yesterday said that these expenditures for the military would be included in detail in the company’s 2002 report.

In Jakarta, TNI Commander General Endriartono Sutarto admitted that his institution received funds from Freeport, but the amount was not large. “It’s crazy, Rp.50 billion? That money should go to me,” he said, laughing. He said the company’s support was merely in the form of food and pocket money.

Meanwhile, PT Freeport Indonesia spokesman Siddharta Moersjid declined to comment. He claimed not to know what the information was about. “I have been out of the office so I cannot give you an explanation. Wait until tomorrow,” he said last night.

Deputy Head of the Budget Committee at the House of Representatives (DPR) Arief Mudatsir Mandan said he had not known of any contributions from Freeport to TNI. He said that all foreign monetary assistance to the military should be recorded by the Finance Minister and the National Development Planning Board. “The state should look into any unrecorded contributions,” said this member of the DPR Defense Commission from the Partai Persatuan Pembangunan faction.

Arief admitted that the state could only provide minimum funds to TNI, but that does not mean they are free to accept foreign contributions. He promised to request an explanation from the TNI Commander on this issue through his commission at DPR.

Bambang Widjojanto, a member of the Ethics Board of Indonesia Corruption Watch, questioned whether TNI was allowed to accept contributions and whether it reported the matter to government. He also questioned the size of Freeport funds for the surrounding communities. If these communities receive a smaller amount, he said, “Does Freeport intend to buy TNI?”

Freeport shareholders had previously questioned its support for the military after the shooting of last August.

US$ 1.6 Billion

PT Freeport Indonesia was granted mining exploration rights in April 1967. Twenty-four year later, in 1991, it signed a second contract of work for a period of 30 years.

Eight months after the contract was signed, exploration began in Erstberg – the name of the field to be explored. Mining products are in the form of concentrates and copper, which were exported for the first time in 1972.

Freeport made its mark in history with the discovery of the Grasberg field in 1988. This is the largest gold mine in the world. In one year alone (2001), the company sold concentrates containing 1.4 billion pounds of copper, and 2.6 million tons of gold. The total value was estimated at US$1.9 billion.

Freeport’s data states that in the span of one windu ( a cycle of eight years), or up to 2000, the benefits going to the government of Indonesia from its mining operations amounted to US$1.6 billion – considerably smaller than its revenues in one year alone (2001). Half of these benefits are in the form of royalties, and the other half, in taxes and dividends.

With a work force of over 10,000, Freeport’s expenditures for wages during that period reached US$ 517 million. The majority of shares in the company is owned by Freeport-McMoran Copper & Gold Inc. The Government owns less than 10 percent of shares.

The contribution of the mining sector, including from Freeport, to last years State Budget reached Rp.1.34 trillion.

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