Date: Thu, 18 Feb 1999 14:21:24 -0800 (PST)
From: Alice McCombs <amccombs@igc.apc.org>

Contents - Freeport/Rio Tinto Update

1. WEST PAPUA: Free Papual Movement (OPM) Spokesperson Visits USA
2. JAKARTA: The Freeport/Rio Tinto mine
3. INDONESIA: Excerpt, National Dialogue - to what end?
4. INDONESIA: Caltex, Freeport test the post-Soeharto waters

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1. WEST PAPUA: Free Papua Movement (OPM) Spokesperson Visits USA

OPM Representative visits USA
tapol                           reg.westpapua              2:42 AM  Feb 16, 1999
(at gn.apc.org)

PRESS RELEASE
NEW YORK, FEBRUARY 15, 1999

FREE PAPUA MOVEMENT (OPM) SPOKESPERSON VISITS USA

Mr John Ondawame, International Spokesperson for the Free Papua Movement
(OPM) is visiting the United States of America (USA) from Wednesday,
February 10, 1999 raising  public awareness regarding political, human
rights and environmental abuses in West Papua.

He is addressing students at  New York University on Thursday, February
17th (121 Meyer Hall, Broadway & Washington Place) and will hold public
meetings with diplomatic representatives to the United Nations, the US
Congress and with non-governmental organizations  concerned with human
rights and environmental issues.  He also has various other engagements
around the country in Washington DC, Austin and New Orleans.
Mr.Ondawame, who is currently studying for a PhD at the Australian National
University in Canberra, Australia is a former guerrilla leader in the OPM
army which has been fighting the Indonesian military since it was formed in
1965. Under pressure from Indonesia, he was arrested in Papua New Guinea
(PNG) and deported to Sweden where he was accepted for political asylum in
1979.

Mr Ondawame is also a member of the Amungme people on whose lands
Freeport/RTZ operate the largest single gold and copper mining operation in
the world. Opposition to the environmental destruction caused by the
company has been intense; there have been ongoing human rights abuses,
including extra-judicial killings in the area, which have intensified in
the past five years. Mr Ondawame said:

"The Amungme  and the people of West Papua will continue to fight back
against Freeport-McMoRan and the colonial government of Indonesia. The
presence of Freeport-McMoRan has already destroyed our land, our secret
mountains, rivers, and forests and removed our people, crimes which have
serious social, economic, political and ecological implications. Freeport
must change its current policy if it would like to continue to operate in
West Papua. I call the on the government of the USA to take the strongest
possible action  against Freeport-McMoRan/RTZ in order to stop the further
escalation of human rights abuses, environmental degradation and
injustice."

Under the supervision of the United Nations, the USA, during the presidency
of John F. Kennedy, forced the Dutch government to transfer West Papua to
Indonesia at the New York Agreement on 15 August 1962. West Papua has been
under Indonesian military control since 1963. In 1969, the Indonesian
administration organized a fraudulent referendum, which it called the "Act
of 'Free' Choice". United Nations records state that only 1,025 people
voted, out of a population of some one million Papuans. A UN witness
expressed his regret that Indonesia "exercised a tight political control
over the population" at the time of the so-called plebiscite. West Papua
was renamed "Irian Jaya" by Indonesia in 1973.

 Regarding these events, Mr Ondawame  said:
"The government of the USA and the United Nations have a moral obligation
to end the political conflict in West Papua. These bodies denied the rights
of self-determination and independence to the people of West Papua. They
aided the illegal transfer of West Papua to Indonesia during the cold war.
This was a crime against humanity. Now, in the post cold war era, these
bodies must intervene to end the conflict.  I call on the Habibie
government of Indonesia to immediately implement national dialogue between
Jakarta and the people of West Papua."

To arrange an interview with Mr Ondawame  or for further information, tel.
Professor Steven Feld, phone 212-998-3757 or 253 6977 or Alyn Ware 212-818
1861.

Steven Feld
Dept. of Anthropology
New York University
25 Waverly Place
New York, NY 10003
212-998-3757
212-995-4014 fax
steven.feld@nyu.edu

------------------------------------------
TAPOL, the Indonesia Human Rights Campaign
111 Northwood Road, Thornton Heath,
Surrey CR7 8HW, UK
Phone: 0181 771-2904   Fax: 0181 653-0322
email: tapol@gn.apc.org
Campaigning to expose human rights violations in
Indonesia, East Timor, West Papua and Aceh

25 years - and still going strong

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2. JAKARTA: The Freeport/Rio Tinto mine

Topic 1574           DTE 40: The Freeport/Rio Tinto mine
dte                             reg.westpapua              3:09 AM  Feb 15, 1999
(at gn.apc.org)

The following article was printed in Down to Earth, No. 40, February 1999

The Freeport/Rio Tinto mine:
a nice little earner

One reason why Jakarta will be less than willing to give any real autonomy
to West Papua.

The indigenous Amungme people continue to protest against the desecration of
their lands by the huge US-UK-owned copper and gold mine in the highlands of
West Papua. Freeport Indonesia has been buffeted by strikes and corruption
scandals; its 1991 contract and expansion permits are being questioned,
while its appalling record on human rights and the environment is being laid
bare. But the substantial revenues Indonesia's economy draws from the mine;
the government share in its ownership and the company's close connections
with power-mongers in Jakarta mean it is well protected. The Freeport mine
is also one of the main reasons why Jakarta will be extremely reluctant to
loosen its tight control over West Papua. And in the current crisis, the
mine is an economic lifeline the Habibie government will not want to give
up. Last year Freeport paid US $220 million in taxes to the Jakarta
government plus $30 million in royalties. Added to the value of the
government's share-holding in the mine, the cash is a welcome injection into
Jakarta's foundering economy.

Indigenous resolution

A week-long meeting of the Amungme Tribal Consultative Council (LEMASA) in
December confirmed the community's determination to shut down the mine
unless the company changed its ways. LEMASA urged Freeport/Rio Tinto to
"enter into honest and fair negotiations on an equal footing with LEMASA as
the representative of the whole community which has been victimised by
Freeport." The meeting decided that the lawsuit currently being brought
against Freeport should go ahead until a "comprehensive, honest and fair
solution" had been reached. The lawsuit, filed by community leaders Tom
Beanal and Yosefa Alomang in the New Orleans District Court, Louisiana, was
"an integral part of the struggle being waged by LEMASA to expose the many
human rights abuses, the degradation of the environment and the robbery of
our ancestral land that has occurred in the Amungsa region as a result of
the mining operations of Freeport."  Finally, LEMASA warned that if Freeport
failed to show it was seriously seeking to reach such a solution, it would
"use all peaceful means at its disposal "to halt all the activities of
Freeport in the Amungsa region." (LEMASA Resolution on the lawsuit against
Freeport, 12/12/98)

Corruption scandal

Indigenous opposition to the mine focuses on the constant features of its
history: human rights abuse and environmental degradation. Yet these issues
were submerged by the corruption scandal which broke in September last year
(see DTE 39). This centred on the renegotiating of Freeport's Contract of
Work in 1991, and implicated economics minister Ginandjar Kartasasmita, his
close business colleague Aburizal Bakrie and Freeport. All three parties
were summoned to the Attorney General's office for questioning following
calls for an investigation into the affair and all three denied any hint of
KKN (corruption collusion and nepotism). The spotlight turned on Ginandjar's
family connections with Freeport in Indonesia and the US, but, as pointed
out by the SiaR news agency, failed to pick out Suharto as the main KKN
broker in the affair. It was he who asked Freeport to sell 10% of its shares
to a private company, (PT Indocopper Investama Corp. - a company especially
created by the Bakrie Group) which Suharto then bought into through the
Nusamba Group. Nusamba, headed by top crony Bob Hasan but  80% controlled by
Suharto, bought just under 51% of Indocopper's shares. The other 49% were
bought back by Freeport. Bakrie made millions on the re-sale of his shares,
but Suharto gained too, by acquiring a stake in the world's biggest known
gold reserve. (SiaR New Service 30/10/98)

The KKN scandal, following hot on the heels of a critical parliamentary
report on Freeport's impact in West Papua, led to calls for a re-negotiation
of the 1991 Contract of Work. Environmental organisation WALHI said the
contract should be redrafted with the full involvement of indigenous people.
A parliamentary commission argued that the level of royalties received by
the government was too low. But both the Habibie government and Freeport
confirm they have no intention of changing the current contract.

Another row has broken out over the terms of this contract itself, which
stated that the company must divest up to 51% of its shares after 20 years.
An exemption granted to Freeport following a 1994 regulation allowing wholly
foreign-owned companies in Indonesia, has been thrown into question as it
was made without following the proper legal procedures. Other companies,
such as Rio Tinto's huge coal operation in East Kalimantan, PT Kaltim Prima,
have not been exempted. It is currently arranging share divestment to comply
with the terms of its contract.

Similar questions surround the status of the expansion plans that are being
bankrolled by Freeport's UK-based partner, Rio Tinto. An application to more
than double its ore processing at the mine from 160,000 tonnes per day to as
much as 300,000 tonnes per day was approved by former president Suharto
before any of the legally required environmental assessments or feasibility
studies had been completed. (See also DTE 31, 34 and 35 for more on this
expansion.)

Freeport's Vice-president of Public Affairs Yuli Ismartono told the press
late last year that the company had the government go-ahead to proceed with
the expansion up to 300,000 tonnes per day, but this was then contradicted
by the mining minister, Kuntoro Mangkusubroto. He explained that a
provisional licence to allow time for environmental and feasibility studies
had been permitted for up to 200,000 tonnes, but that a final decision had
yet to be made. The provisional permit runs out in March this year.
According to one of his officials, although the EIA has been completed and
approved, there is still some question over retrieval levels and the
predicted life of the mine. Now these issues have been overridden by
President Habibie who in January instructed his ministers to help Freeport
step up production to 300,000 tonnes per day. Minister Kuntoro quoted the
president as saying "We want to invite foreigners from overseas, so of
course, those who are already here should be secure." Kuntoro added however
that royalty payments were currently under renegotiation because a higher
proportion of gold was being extracted than originally thought. Freeport's
gold production jumped 66% from the previous year to 3 million ounces in
1998.

The discussions at government level are evidently limited to how best to
divide the mine's profits between the Jakarta government and its big
business partners in Indonesia and abroad. How much revenue should end up in
West Papua hardly figures in the debate, let alone what should be done about
the devastating impact of the mine on the local people and their
environment. In future, as expansion plans at the mine proceed, this will
create even greater havoc in the region's rivers and forests and further
destroy the resource base of its indigenous communities.

The level of the debate is an indication of the uphill struggle
being waged by the indigenous groups and their supporters in the
environmental and human rights organisations. At the same time, if the
current state of affairs drags on, the promised action to shut down the mine
and the wider political unrest in West Papua that will be sustained, may
well cost the Jakarta government and its foreign friends a lot dearer.
(Sources: Jakarta Post 19/10/98, 25/1/99 Washington Post 30/11/98; Bisnis
23/11/98, AFP 29/1/99)

Box 1: Who owns Freeport Indonesia?

PT Freeport Indonesia is currently owned by US-based Freeport McMoRan
(81.28%); Indonesian Government (9.36%) and PT Indocopper Investama Corp.
(9.36%).

Under the 1995 buy-in, Rio Tinto (then RTZ) bought a 12% share in Freeport
McMoRan and through its US$ 850 million financing deal holds a 40% interest
in the expansion and in any new mine.

Box 2: New law: fairer shares?

The Indonesian government's strong commitment to honouring its Contract of
Work with Freeport/Rio Tinto is not surprising given the company's important
contribution to the central government's funds. But double-standards are
evident where powerful interests are at stake. Where the level of revenues
due to central government is concerned, Jakarta is keen to renegotiate - in
January this year director general for mining Rozik Sucipto said the
government was seeking to double its royalty on the mine's gold sales
currently running at 1 to 3 per cent depending on gold prices. In return,
Freeport will get the go-ahead for its massive expansion project. But where
community interests or changing the proportion of revenues from centre to
regional authorities are concerned, the government says the contract is
non-negotiable.

If a new Mining Act, currently under preparation, is passed, the
division of future spoils between centre and regional authorities may be
quite different. According to Rozik, speaking in December, the greatest
share (64%) will go to district governments (Kabupaten); with 16% going to
provincial governments and 20% going to the central government.

The emphasis on Kabupaten level is in line with the a new Act on
regional autonomy which devolves some powers to local governments at that
level. The danger is, that unless there is democracy and transparency in
local government, regional autonomy will still fail to bring real benefit to
local people.

Rozik also announced that the Contract of Work  (CoW) system will be
scrapped and a new standard licence for both foreign and domestic companies
introduced. "We realise that there is controversy surrounding the CoW scheme
especially after the incident involving the Busang gold mine and Freeport's
copper mine," he said.

Ironically, Rio Tinto's chief executive officer Leon Davis had praised the
CoW system on a visit to Indonesia the month before, saying that other
nations were copying it.

The CoW is not finished yet, however. While the new Mining Act is
under preparation, an eighth generation CoW is being drawn up. According to
Rozik this will require mining companies to hand over around 5% of sales in
royalties. Companies will also be obliged to propose community development
programmes to be assessed as part of the feasibility study. Previous
generations of CoWs also oblige companies to carry out community
development, but do not stipulate how these should be implemented.

Unfortunately such 'improvements' on paper will mean little in
practice while communities living near mining areas remain disadvantaged by
laws, and while their right to veto projects affecting their resources
continues to be denied.

(Sources: Jakarta Post 4/12/98, 2/12/98, AFP 28/1/99; Singapore Business
Times 4/12/98)

--------------------------------------------------

DTE's quarterly newsletter (usually 16 pages) costs £10 per year.
Organisations in the South may be able to receive the newsletter gratis. For
a trial copy write to:

Down to Earth
International Campaign for Ecological Justice in Indonesia
59 Athenlay Road
London SE15 3EN
UK

Email: dte@gn.apc.org  campaigns: dtecampaign@gn.apc.org

Carolyn Marr    (dte@gn.apc.org)

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3. INDONESIA: Excerpt, National Dialogue - to what end?

Topic 1575           DTE 40: National Dailogue - to what
dte                             reg.westpapua              3:09 AM  Feb 15, 1999
(at gn.apc.org)

Excerpt from an article was printed in Down to Earth, No. 40, February 1999

West Papua

"One thing remains very clear, however. Indonesia's main motivation for
holding on to West Papua has always been to secure the profits from its vast
reserves of minerals and timber. Substantial percentages of state revenue
have been earned by the Freeport/Rio Tinto copper and gold mine and more
vast deposits are likely to be found in future. Huge natural gas reserves
have been located in the Bintuni Bay area recently by the US-based Atlantic
Richfield Corporation (see also DTE 39) and many more areas are under
survey. Land for resettling Javanese transmigrants, for growing food and
developing plantations remains a key motivation to retain central control of
West Papua. Investigations into land holdings of the Suharto family found
that thousands of hectares in West Papua had been handed over to companies
they controlled (see page 3). The pressure to develop large-scale
plantations for oil palm and other quick cash-earners is all the more
intensive under the present economic crisis. (For some idea of current
development strategy in West Papua see DTE 37).

All this means it is highly improbable that any real measure of
control over West Papua's resources will be relinquished by Jakarta. It also
means that talks about West Papua's future, whatever wording is chosen for
the agenda, may well be pointless. On the other hand, the momentum for
change is so great that the government is unlikely to get away with a
'business as usual' policy. And, as witnessed in Aceh and East Timor,
increased military violence is unlikely to deter a freedom-hungry population."

--------------------------------------------------

DTE's quarterly newsletter (usually 16 pages) costs £10 per year.
Organisations in the South may be able to receive the newsletter gratis. For
a trial copy write to:

Down to Earth
International Campaign for Ecological Justice in Indonesia
59 Athenlay Road
London SE15 3EN
UK

Email: dte@gn.apc.org  campaigns: dtecampaign@gn.apc.org

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4. INDONESIA: Caltex, Freeport test the post-Soeharto waters

Topic 1573           AFR: Caltex, Freeport test the post
plovers                         reg.westpapua              1:28 AM  Feb 15, 1999
(at gn.apc.org)

Received from Joyo

Australian Financial Review
February 13, 1999

*Caltex, Freeport test the post-Soeharto waters

Jakarta Observed,
By Greg Earl

It is hard to think of two foreign companies more synonymous with the economic
development of modern Indonesia than Freeport McMoRan and Caltex Pacific.

Caltex was already pumping oil in central Sumatra in the 1950s when former
President Soeharto was still learning how to make a few extra rupiah on the
side as a regional military commander in central Java.

And Freeport started putting its spare cash into the Irian Jaya jungle in the
late 1960s when the then new president was just starting to implement the
crony capitalist model of growth that so many other companies chose to follow.

Both companies have only just bedded down the rights to what amounts to the
next phase of their resource development activities in Indonesia -- but not
without some twists and turns that reveal a lot about the new climate for
foreign investment.

Caltex, the country's largest oil producer, has been pursuing rights to
continue production on its Coastal Plains Pekanbaru (CPP) block after a
20-year licence expires in 2001.

Simultaneously, Freeport, long one of the biggest Indonesian taxpayers, has
been seeking the right to expand production at its Grassberg copper and gold
mine by about 50 per cent.

The expansion plans would produce new revenue from established projects that
Indonesia sorely needs as it scours the world for aid money and are also in
line with the much touted idea that natural resources will now play a greater
role in the country's medium-term growth.

Although Freeport is much more associated with the Soeharto order than Caltex,
both companies have been fending off allegations of cronyism that have upset
the processing of their projects.

Links from the Soeharto order could be a growing problem for foreign
investors, with businessman Hashim Djojohadikusumo warning that European
businesses are holding off new investment because they are concerned that old,
potentially corrupt contracts could be cancelled.

Hashim, who is Habibie's special business envoy to Europe, has had his own
difficulty shrugging off Soehartoist links via his controversial and once
powerful soldier brother, Prabowo Subianto.

But the Freeport and Caltex cases contain more significant longer-term lessons
for potential investors.

Both companies have had to deal with a more assertive legislature and an
independent-minded minister, rather than a centralised presidential decision-
making system, and that is likely to be a persistent feature of the business
landscape.

Caltex's problems go back to 1997 when a then isolated and anti-foreign
Soeharto ordered that the state oil company Pertamina should take over the
company's CPP block, which accounts for 10 per cent of its oil production,
when the current licence expires.

Last year with Pertamina under a cloud for its inefficiency and its own
corrupt business ties to the Soehartos, Caltex managed to have the decision
reviewed by the new Energy Minister, Kuntoro Mangkusubroto, and argued
persuasively that it was best equipped to install enhanced oil recovery
technology.

In a climate of growing nationalism about resource ownership, Kuntoro's
advisers came back with a Solomonic decision that the two companies should
form a joint venture.

Meantime, Caltex has become embroiled in a new controversy over how it came to
award a contract for a power plant in 1997 to a construction company that is
reportedly partly owned by Soehartoist interests and the then head of
Pertamina.

Caltex denies any corruption, pointing out that the contractor is really a
subsidiary of its parents -- Chevron and Texaco -- but Kuntoro says tendering
rules were breached and the project will now be subjected to a special audit.

And in a final sting, Kuntoro has announced that Pertamina will have the
majority share in the oil production joint venture and operate it.

Freeport has been through a similar saga since Soeharto reportedly approved
the plant expansion with a handwritten notation on a letter during a private
meeting with Freeport's domineering chief executive, James Moffet, in 1997.

The company subsequently got all the necessary formal approvals in place but
has had a difficult time getting the final sign-off from Kuntoro as it has
been embroiled in a public debate about ownership of resources, regional
development and how it got its earlier approvals.

The mining minister has to walk a difficult path between pulling new
investment and placating rising nationalist sentiment and appears to have
decided that giving new rights to Freeport early on may not have been the most
astute political move.

Kuntoro is one of Habibie's most professionally qualified ministers with a
good reputation in the mining industry and he was out of the starting blocks
much faster than most of his colleagues amid the policy confusion of last
year.

He has been pushing forward with his own agenda ahead of the Government by
cracking down on Soeharto family contracts in the oil industry, devolving
power to the provinces in the mining industry and holding regular press
conferences. Some observers say it is an image of action that President
Habibie may not fully appreciate.

So it was interesting to see Moffet go right back to Indonesian business
basics three weeks ago by holding a private meeting with Habibie to discuss
his difficulties getting the Freeport production expansion under way.

Habibie obviously warmed to the process and signed a letter the very same day
telling his ministers to help Freeport.

Another mining company executive says he was surprised to see Moffet use his
time-honoured dispute settlement mechanism because government officials and
Freeport staff are weary of having to pick up the pieces of his periodic
interventions in Indonesian affairs.

But things are not so simple any more as the irrepressible Kuntoro
demonstrated when he observed sarcastically later that everybody can meet the
President but "we of course have procedure and clear rules".

Amid criticism of Habibie's intervention from environmentalists and other
political activists, Kuntoro has since revealed that he wants to at least
double Freeport's royalty rate before he feels obliged to apply the
President's order.

**************************************************
Paul Barber
TAPOL, the Indonesia Human Rights Campaign,
25 Plovers Way, Alton Hampshire GU34 2JJ
Tel/Fax: 1420 80153
Email: plovers@gn.apc.org
Internet: www.gn.apc.org/tapol
Defending victims of oppression in Indonesia,
East Timor, West Papua and Aceh, 1973-1998

25 Years...and still going strong!

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