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[BBC] Divestment of foreign mining companies

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It is feared that the obligation of foreign mining companies to divest 51% of their shares to the Indonesian government will create opportunities for corruption and conflicts of interest, according to the results of research and the opinion of an analyst.

In Government Regulation number 1/2017, holders of mining business permits (IUP) and special IUP (IUPK) from foreign investors up to the 10th year are required to release shares of at least 51% to Indonesian participants.

Indonesian participants, according to the PP, are the central government, regional governments, BUMN, BUMD and the national private sector.

The results of an analysis by the Natural Resource Governance Institute, NRGI, stated that regulations on divestment of foreign mining companies to the Indonesian government could create opportunities for corruption.

"Selling mining equity can create opportunities for officials to make a profit at the expense of the community," said NRGI analyst David Manley in a discussion in Jakarta, Thursday (23/02).

He added that the divestment policy could also create risks of bribery and conflicts of interest.

"For example, government officials may arrange sales to private companies or state-owned companies whose beneficiaries are themselves, their families or close associates," said David.

Research results from NGO Article 33 Indonesia show that divestment of shares in mining companies involving the presence of state institutions is vulnerable to corrupt practices.

"Divestment occurred in three regions, two of which had the potential for corruption or were suspected of committing acts of corruption," said NGO researcher Article 33 Indonesia, Iqbal Damanik in Jakarta, Thursday (23/02).

LSM Article 33 menyebutkan divestasi saham perusahaan pertambangan yang melibatkan kehadiran lembaga negara rentan adanya praktik korupsi.

PT Freeport and divestment

The suggestion that the divestment of PT Freeport Indonesia's shares be taken over by the State-Owned Enterprise, BUMN, has been voiced by various groups. The reason is that state control over the majority of shares is mandated in the Constitution.

So far, the Ministry of BUMN has stated that it is interested and ready to buy PT Freeport shares in accordance with the provisions regarding the divestment of PT Freeport Indonesia.

According to the Deputy for mining, strategic industry and media at the Ministry of BUMN, Fajar Harry Sampurno, his party will form a BUMN consortium.

Meanwhile, Coordinating Minister for Maritime Affairs Lubut Binsar Pandjaitan said that divestment should not only be carried out by BUMN or BUMD, but could also involve the private sector.

“We can encourage everyone, private and state-owned companies. Why not? "Many of the nation's children work at Freeport, around 90 percent, that is our strength," said Luhut.

However, PT Freeport Indonesia has so far stated that it is difficult to accept the conditions proposed by the Indonesian government, including the 51 percent divestment issue and the tax scheme.

In an official statement, Freeport stated that it would continue to negotiate with the Indonesian government to reach an agreement that would provide benefits for both parties.

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'We will behave'

On Thursday (23/02), President Joko Widodo emphasized that he would take action if PT Freeport was "difficult to consult" regarding the continuation of its production business in Papua.

"If it is difficult for us to consult and it is difficult for us to negotiate, then we will act," said Jokowi in front of journalists in Jakarta.

The President emphasized that Indonesia wants to find solutions that win over each other.

“We want to find a win-win solution, find a solution win win we want that because this is a business matter," he said.

So far, according to him, his party is still handing over the negotiation matters to the Minister of Energy and Mineral Resources.

"Yes, we will see later that the minister is still in the process of negotiating with Freeport. "The point is, if it's really difficult to talk to and difficult to negotiate with, I will take action, but for now, let the minister do that," he said.