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[KOMPAS] Assessment Team Involved * Divestment Scheme for 51 Percent of Freeport Shares Has Not Changed

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JAKARTA, KOMPAS — The government has confirmed that it will not change the divestment scheme for 51 percent of PT Freeport Indonesia shares. The share valuation process for divestment will involve an independent assessment team. A number of parties have again called for the share value not to include mineral reserves.

Coordinating Minister for Maritime Affairs Luhut Binsar Pandjaitan in Jakarta, Tuesday (17/10), stated that the divestment of Freeport Indonesia shares would be carried out in stages. "It's just a matter of the process, how long it will take, whether (divestment) will be completed in 2019 or 2021," he said.

He said that the management of 51 percent of Freeport Indonesia's shares is entirely in Indonesia's hands. Freeport's obligation to build a smelter has also certainly not changed.

According to Luhut, the problem that is still emerging is related to the valuation of Freeport Indonesia shares. From the calculation results, the total valuation of Freeport Indonesia's shares reached 8 billion US dollars. However, the company wants the highest price possible. Related to this, share valuation will follow market mechanisms involving independent appraisers. The determination of the independent appraiser is determined by the government together with the company.

"If we give it to an independent appraiser, then it's fair enough. "We are looking for the best solution," said Luhut.

According to Luhut, during a visit to Washington DC, United States, last week, his party also met with the United States Secretary of Commerce Wilbur Ross and conveyed the Indonesian Government's position regarding the divestment of Freeport Indonesia shares.

"I convey, the divestment of 51 percent shares is not for bargaining. That is the right of the Indonesian Government. They didn't have any questions," he said.

Separately, Director of the Center for Indonesian Resources Strategic Studies Budi Santoso said that the plan to appoint an independent team to assess shares would be meaningless if the team assessed it by including mineral reserves until 2041 or the results of an extension. In fact, in the contract signed by Freeport, the company's operations in Papua are only until 2021.

“The concept of independent team calculations is important. "The work contract also states that minerals belong to the state and Freeport is aware of that," said Budi.

To date, the Indonesian government's share ownership is only 9.36 percent for the 50 years of Freeport's operations in Indonesia. Under existing regulations, Freeport is obliged to release its shares to Indonesian participants in an amount of no less than 51 percent.

In 2015, Freeport offered 10.64 percent shares to the Indonesian government worth 1.7 billion US dollars (equivalent to Rp. 22.6 trillion at an exchange rate of Rp. 13,300 per US dollar). At that time, Freeport included mineral reserves with the assumption that the operating period would be extended until 2041. According to the government at that time, the value of the 10.64 percent stake was equivalent to 600 million US dollars.

Regional shares

The regional government and indigenous communities around Freeport's operational area in Timika, Papua, are also demanding share ownership. However, whether the shares were obtained for free or had to be purchased is still unclear. They also want to be involved in the negotiation process between the central government and Freeport.

Divestment policy researcher at Article 33, a research institute for social change, Iqbal Damanik, said that in a number of cases of share divestment in Indonesia, regional governments, which also have the right to buy shares, were suspected of not having enough funds. A free share scheme could be a way out for that.


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