Govt and Freeport Feeling Their Way Through Foreign Ownership Rules
It takes two to tango, the adage says, and so it goes with the government and the country’s biggest miner.
In response to Freeport Indonesia considering listing its shares on the local stock exchange, the government has expressed an interest in buying a stake in the miner.
Soritaon Siregar, chief of the State Investment Agency (PIP), says the government investment arm is interested in buying a stake in Freeport Indonesia.
“We are still studying it. Unfortunately, I cannot tell you how much we’ll put aside as our future budget has not been made yet,” Soritaon told the Jakarta Globe on Wednesday.
His agency is preparing to buy a 58.9 percent stake in Indonesia Asahan Alumnium (Inalum) from Japan’s Nippon Asahan Aluminum. The government has committed to set aside up to Rp 7 trillion ($749 million) in the 2012-13 state budget for PIP to buy the Inalum stake.
Rozik Soetjipto, president director of Freeport Indonesia, announced on Tuesday a plan to hold an initial public offering and list shares on the Indonesia Stock Exchange, a move that would let it abide by government rules on foreign ownership and improve its corporate governance.
Given that the nature of the plan is still in the preliminary stages, there were no details. Rozik did say that should things run smoothly, the company might start working next year on its IPO strategy. He also has to seek approval from Freeport’s parent company, US-based Freeport-McMoRan Copper & Gold, which owns a 90.64 percent stake in the Indonesian firm. The government owns the remainder.
Still, unwillingness and reluctance by the company and the government have underscored the complication in renegotiating mining contracts in Indonesia, as well as the government’s prodding to bring overseas ownership in local mining companies to less than half — at 49 percent in five years’ time.
Under its contract of work signed in 1991, Freeport Indonesia was required to divest its stake by up to 51 percent by 2011, either through public offerings, or by selling the stake directly to the government or to Indonesian companies or individuals. Then, in 1994, a government regulation allowed foreign companies to own up to a 95 percent stake, which effectively annulled Freeport Indonesia’s obligation to divest its shares.
Officials such as Bambang Brodjonegoro, head of the fiscal policy office at the Finance Ministry, declined to comment. Thamrin Sihite, director of mineral and coal at the Energy and Mineral Resources Ministry, did not return calls and a text message seeking comments.