Discourse: Nationalizing Freeport could be disastrous for the economy
The Jakarta Post
Jakarta, posted: Fri, July 31, 2015 | 02:33 pm
Ikrar Nusa Bhakti - JP
The future of PT Freeport McMoran in Indonesia is hanging in the balance with the government refusing to negotiate the extension of its contract until 2019, two years before it will expire. The American gold mining giant, which operates the world's largest gold mines in Papua, is lobbying to get the negotiations underway. Political analyst Ikrar Nusa Bhakti of the Indonesian Institute of Sciences (LIPI), who has done extensive research in Papua, talks to The Jakarta Post's Safrin La Batu to discuss the future of Freeport. The following are excerpts from the interview.
Question: What do you think of the growing demands for nationalizing Freeport?
Answer: The majority of Freeport's employees in almost all divisions are Indonesian; from the lowest to the highest positions. In fact, up to 98 percent of its employees are Indonesian. I was told that jobs with certain expertise, like explosive handling, are still handled by Filipinos because Indonesians are not as capable.
But the government has made Freeport use Indonesian-made detonators supplied by PT Pindad, the state-owned arms company. That seems like a fair deal.
The company also now buys its food and beverages from Indonesia rather than from Australia as it
did in the past. Some Indonesian workers have also been sent to work at Freeport's other operations in Australia.
But would nationalizing Freeport make sense to you?
I would say that I am a nationalistic person, but I am also realistic. The mining industry is a lucrative sector. If our leaders, cabinet members, governors and local leaders are greedy and cannot control themselves, then nationalization will be counterproductive.
This was exactly what happened during the massive nationalization of Dutch companies in 1957. The impact for our economy was catastrophic, and lasted until 1971. There was mismanagement by army officers with little knowledge and skill who were entrusted to manage state-run companies. They didn't have the international market networks.
So, should we just forget about nationalization?
Nationalization is possible, but it needs process and time. Before even thinking about it, we need to fix and strengthen the governance of state-owned companies and create a system that stops officials from working for their own personal gain.
The government instead should focus on enforcing existing laws or come up with new ones that are more pro-people.
Do you think Freeport is doing enough to help with the economic development in Papua?
Freeport can do more in helping to build infrastructure facilities. Infrastructure development in Papua, such as road construction, is not evenly distributed. Freeport has already helped build roads in the Mimika regency [where it operates], and it can help with the development in other parts of Papua like Merauke.
Freeport says they have also contributed large sums for education in Papua. But how many schools have they built? How many Amungme people [the main tribe in Mimika] have benefited from this program? They should also help to bring the many tribes in the area, who are often in conflict with one another, together. Freeport needs to have peace and stability in the area to be able to operate.
Is Freeport also responsible for fostering harmony in Papua?
We have to question the results of Freeport's Corporate Social Responsibility (CSR) programs. They must have spent a huge sum, but where did the money go?
The people living in areas near its operation should get a proper education, not just material benefits.
The recent Tolikara tragedy (communal conflict between Christian Papuans and migrant Muslims) was just the tip of an iceberg. The biggest problem in Papua is education, and the target is for all the people in the province, whether they live in the highland or the coastal areas, or whether they are indigenous Papuans or migrants, is learning to live in harmony.