Editorial: The Newmont shares issue

President Susilo Bambang Yudhoyono has again demonstrated his acute lack of leadership, this time by not forcefully asserting his support for Finance Minister Agus Martowardojo’s decision in May to take up a 7 percent stake in gold and copper mining giant PT Newmont Nusa Tenggara (NNT).

Instead, Yudhoyono let Agus loose as prey to the political wolves at the House of Representatives, especially members of the Golkar Party, who have opposed the government’s purchase of the shares sold as the last tranche of the NNT compulsory divestment deal.

The President also failed to protect Agus’ predecessor, Sri Mulyani Indrawati, from the barrage of political harassment at the House early last year over her role in the process of bailing out Bank Century (now Bank Mutiara) at the height of the global financial crisis in 2008. Mulyani eventually quit the Cabinet in May 2010 and joined the World Bank as one of its two managing directors.

The President should have moved firmly to mobilize the six factions of his coalition government in the House to fully support the May 6 share purchase, which was conducted by Agus through the State Investment Agency, in line with the 2004 Law on the Treasury.

It is the central government — which awarded the mining contract to NNT in 1986 — that held the right of first refusal in regards to the shares.

NNT has since 2006 gradually reduced its equity stake in the Batu Hijau mining venture, one of the world’s largest gold mines. This divestment has enabled the administrations of West Sumbawa and Sumbawa regencies and West Nusa Tenggara province to own 24 percent of NNT through a joint venture with PT Multicapital, a unit of the Bakrie Brothers group.

The central government’s acquisition of the remaining 7 percent stake has resulted in an ideal composition of NNT shareholders: foreign and national private companies, regional administrations and the central government. Obviously, such a complete mixture of shareholders could contribute greatly to maintaining good corporate governance within the company and protecting national interests.

We don’t need special investigations to conclude that House members of the Golkar Party have been politicizing the issue right from the outset, in view of the position of party chairman Aburizal Bakrie, as one of NNT shareholders.

We share the Finance Ministry’s stance that the government purchase of the NNT shares was not a permanent equity investment that required prior approval from the House.

However, what should have become a normal government investment decision has now become controversial politics, especially since the Supreme Audit Agency (BPS) joined the fray and concluded after a special audit that the share transaction was legally improper because it required House approval.

We wonder why the Supreme Audit Agency, which is supposed to focus on financial accountability, suddenly became the arbiter of the legality of a financial deal.

The President should firmly oppose the Supreme Audit Agency opinion and immediately instruct state attorneys to submit a judicial review of the case to the Constitutional Court.

Letting this controversy linger any further will only add to uncertainty about the State Investment Agency – a sovereign wealth fund like Singapore’s Temasek and Malaysia’s Khazanah Nasional – which plays an important role in implementing government investment.