Govt slams BPK finding in Newmont case

The government is defending its controversial purchase of a 7 percent stake in gold and copper mining firm PT Newmont Nusa Tenggara after the Supreme Audit Agency (BPK) announced it had found improprieties in the process.

According to the BPK, the stake purchase required approval from the House of Representatives because it was permanent government capital participation, while the Finance Ministry said Newmont was a non-permanent investment that did not have to be reported to the House.

“There’s a different point of view on this investment,” Hadiyanto, the finance ministry’s director general for state assets, told a news conference on Thursday, without disclosing the next legal steps the government would take.

Hadiyanto, however, was open to the possibility of a judicial review by the Constitutional Court.

Soritaon Siregar, chairman of the State Investment Agency (PIP) that purchased the stake for the government, said the signed US$246.8 million sales and purchase agreement (SPA) between the agency and Newmont shareholders allowed the PIP to hold the stake for up to five years.

“We will have the right to sell. So, this is not permanent government capital participation but a non-permanent investment,” he said.

The SPA, signed on May 6, will expire on Nov. 6, but Newmont and the government hope to extend the agreement due to the deadlock, Soritaon added.

“We are still negotiating to extend the SPA,” he said, claiming to have Newmont shareholders’ support. “We will go ahead as we are in the right, according to the law.”

The Newmont divestment “has entered a political course” with strong opposition from lawmakers, Finance Minister Agus Matowardojo has said.

Legislators, primarily within the Golkar Party faction, have suggested that the shares be taken over by the West Nusa Tenggara regional administration, which already owns a 24 percent stake through a joint venture with Multicapital, a business unit of the Bakrie Group, which is head by Golkar Party chairman Aburizal Bakrie.

“This is a political reality; the different views of the government and the BPK, as well as the House’s political view,” Hadiyanto said.

House Commission XI, which oversees finance and banking affairs, held an internal meeting on Wednesday and decided to draft a letter to “urge the President to uphold the BPK’s finding that the government’s purchase of Newmont shares requires House approval”, said Harry Azhar Azis, vice chairman of the commission.

“Otherwise, without House’s approval, the use of state budget funds by the government is against the law,” he told The Jakarta Post in a text message.

“Commission XI urges the government to obey the law in its policies.”

The PIP, Harry added, was designated to finance infrastructure projects, so the government’s purchase of Newmont’s stake through the PIP “was against the purpose of the PIP’s establishment”.

Different point of view between the government and the Supreme Audit Agency (BPK)

Supreme Audit Agency (BPK)
Stake purchase requires House’s approval Law No. 17/2003 Article 24 Clause 7
At a certain time, to save the nation’s economy, central government could borrow and/or inject capital into private firms after House’s approval.
Government Regulation No. 44/2005 Article 6
Capital participation in a company without state-owned shares is done at a certain time to save the nation’s economy

Government (Finance Ministry)
Stake purchase does not require House’s approval Law No.1/2004 lex specialist Law No. 17/2003
Article 29: State financial management for state and regional government budget is regulated in the 2004 State Treasury Law

Law No. 1/2004 Article 4 Number 2 (H)
Finance Minister as the state’s treasurer has the authority to place state funds and manage investment

Law No. 1/2004 Article 41
Number 1: The government could do a long-term investment for economic, social benefit.
Number 2: The investment includes that in the form of shares, debt papers and direct investment
Number 3: The investment is regulated in a government regulation

Government Regulation No. 1/2008
Article 10: The authority of managing government investment is conducted by the finance minister as the state treasurer

Article 11: The investment management authorities include regulatory, supervisory and operational. Finance minister is responsible for the investment’s policies, agreement, payment process, monitoring, evaluation, coordination with related institutions, fund management, etc.

Source: Finance Ministry