MAC: Mines and Communities

Freeport paid Indonesian military US$5.6m in 'protection money'

Published by MAC on 2003-03-13

Freeport paid Indonesian military US$5.6m in 'protection money'

The Jakarta Post [online]

March 13, 2003

Jakarta (JP): The U.S. Freeport company paid the Indonesian military (TNI) about US$5.6 million last year to protect employees of its giant copper and gold mine in Papua province, according to a report released Thursday.

The TNI, which is combating a sporadic and low-level separatist revolt in Papua, has been accused of widespread abuses in the province, including the killing of pro-independence leader Theys Eluay.

Freeport-McMoran Copper et Gold Inc disclosed the figure in a confidential document sent to the New York City comptroller's office and to the US Securities and Exchange Commission, said the report by AFX Global Ethics Monitor, a new service from AFP.

Freeport also said that in 2001 it paid the military $4.7 million for the employment of about 2,300 "Indonesian government security personnel".

The money covered costs for housing, fuel, travel and vehicle repairs for the military, Freeport wrote in the document.

It also paid 400,000 dollars in 2002 for "associated infrastructure" in Indonesia, according to the document.

It said Freeport filed the document in response to a shareholder resolution filed by a group of New York's public pension funds earlier this year.

This requests more information about Freeport's presence in Indonesia because of allegations of human rights abuses by the military.

West Papua mine paid $18.5m to military

By Sian Powell in Jakarta, Australian Herald and Weekly Times

15th March 2003

FREEPORT Indonesia has been forced to reveal it paid more than $US11million ($18.5 million) to the Indonesian army over the past two years for security at its operations in strife-torn West Papua.

It is the first time the mining giant has admitted the full extent of the military's involvement in the controversial gold and copper mine.

US shareholders in the parent company Freeport-McMoran Copper & Gold Inc demanded a full report on the Indonesian military's involvement in the Freeport operations in West Papua.

"Transnational corporations operating in countries with repressive governments, ethnic conflict, weak rule of law, endemic corruption or poor labour and environmental standards face serious risks to their reputation and share value if they are seen to be responsible for, or complicit in, human rights violations," the shareholders' resolution reads.

The shareholders, including a teachers' union, were concerned about reports of human rights abuses by the military in Indonesia, especially in West Papua.

There has been discontent with Freeport's West Papua operations, leading to riots that have been brutally quelled by the Indonesian army. Last year, a convoy nearing the mine was shot at, killing two US teachers and an Indonesian national. Questions have been raised about the Indonesian army's involvement in the shooting.

Freeport Indonesia told The Weekend Australian yesterday: "The Grasberg mine has been designated by the Government of Indonesia as one of Indonesia's vital national assets. This designation results in the military's playing a significant role in protecting the area of company operations."

Since Freeport Indonesia began operations in West Papua, the Indonesian military, along with the police, has had a presence in the working area to provide security.

Conceding that Freeport Indonesia had contributed $US35 million over a number of years to provide infrastructure for the troops in the area, the company detailed more recent payments.

According to the statement, expenses associated with government-provided security for the mine operations cost Freeport $US5.8 million in 2001 and $US5.6 million in 2002.

The support comprised infrastructure costs, catering, accommodation, fuel, transport, allowances to cover incidental and administrative costs, and community assistance programs conducted by the military and police.

Indonesian army spokesman Lieutenant-Colonel DJ Nachrowi said yesterday he would check the information.

"As the chief of TNI (the Indonesian military forces) says, we admit we get support from Freeport, but it's only material support, and it's not as much as has been said."

A spokesman for Rio Tinto, which owns 16 per cent of the parent company Freeport-McMoran Copper & Gold Inc, said that management of the Indonesian mine was the responsibility of Freeport, and it was inappropriate for a minority shareholder to comment.


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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