Vice President Jusuf Kalla urged ministries and related authorities not to rush to finalize a divestment plan with US-based Freeport-McMoRan for its Grasberg copper and gold mine in Papua for fear of driving investors away from the country.
“We have inconsistent regulations. We asked foreign investors [to establish their companies here, expand their business] but when there are signs of them making any profit, we then shoo them away,” Kalla said during a breakfast meeting held by the Indonesian Journalist Association (PWI) in Jakarta on Thursday (03/11).
Kalla said instead of rushing to finalize an agreement with Freeport, the government needs to push the agenda to operate abandoned smelters across the archipelago.
“If we don’t have enough capital [to divest stake in Grasberg mine], just push to build and operate these abandoned smelters,” Yusuf said.
The Arizona-headquartered Freeport and the Indonesian government reached a deal in April, which will force Freeport to divest a 51 percent stake in the world’s largest gold mine and the second largest gold mine located in Papua.
The US-based company also agreed to build smelters to process copper concentrate as the part of the government’s effort to push mining companies to create more jobs and add value to their products.
In return, the Indonesia government agreed to extend Freeport’s permit license to export copper and gold.
Such takeovers can be disadvantageous for both parties, Kalla said. For instance, when Venezuela’s government took over several foreign oil companies, including the US-based Exxon, investors shied away from the local market, coupled with that government’s mismanagement of the industry, which drew the Venezuelan economy into an ongoing crisis.
He said that the Indonesian government’s push to introduce new mining rules is the part of the country’s efforts to gain greater control of the nation’s resources. However, that plan, if not executed well, could spell economic disaster.
“Under Chavez’s leadership, he took over foreign companies [that were established and operated] in Venezuela and made them government-owned,” said Kalla, referring to Hugo Chavez, Venezuela’s president for 14 years, until his death in 2013.
The collapse in global oil prices, turning a once oil-rich nation with a peaceful democratic government into a totalitarian state with a deteriorating economy and the world’s highest inflation rate.
“It is hard when foreign investors lose trust for you,” Kalla said.