Indonesia Court Rules Against Govt Purchase of Newmont Stake

By webadmin on 02:25 pm Jul 31, 2012
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Ulma Haryanto, Dion Bisara & Tito Summa Siahaan

In another
blow to the government, the Constitutional Court announced on Tuesday a
ruling that favored the interests of the House of Representatives.

The
court ruling barred the central government from buying a 7 percent
stake in Newmont Nusa Tenggara, the local unit of the US mining giant
Newmont, which runs the country’s second-biggest copper and gold mine in
Sumbawa Island in West Nusa Tenggara.

Tuesday’s ruling may halt
a planned stake purchase, valued at $246.8 million, as the government
has to seek approval from the House of Representatives, which last year
opposed the plan.

“The court rejected [the government’s] request,” Chief Justice Mahfud M.D. said in Jakarta.

The
prolonged dispute stems from the House’s rejection of the government’s
plan to purchase the divested stake in NNT. Legislators on House
Commission XI, which oversees finance, insisted last year that the
purchase of the 7 percent stake of Newmont by the State Investment
Agency (PIP) was against the law.

However, the government
insisted that purchasing the stage was within its authority after
Newmont complied with regulations requiring it to reduce its NNT stake
from 80 percent to 48.5 percent.

“The president has the
authority to formulate and execute the state budget, and the House has
authority over its approval,” Judge Mohammad Alim said in the ruling.

The
government initially planned to buy the stake in the miner through the
PIP using its reserved budget for investment and accrued income worth Rp
1 trillion ($106 million).

But the panel of judges stated in
its ruling that regardless of the urgency, the purchase should still
abide by the necessary regulations, which means that the government was
required to propose the plan to the House first.

“The PIP was
formed to accelerate development by way of investing in infrastructure.
The purchase is not driven by any economical urgency, nor is it used for
investment in infrastructure,” Alim said.

Furthermore, he continued, the 7 percent stake was not a majority and did not affect any decision-making process.

“The
government does not have to have a stake in the company to regulate it
because it has the authority to control in other ways, such as making
sure that the company abides by the law, is accountable and performs its
corporate social responsibility duties,” Alim said.

The
decision split the panel 5-4, with each of the four judges in the
minority writing dissenting opinions in favor of the purchase.

“The
constitution regulates that natural resources are owned by the state,
therefore the more ownership it can actually possess, the more it can be
used for the public’s welfare, even though it is only 7 percent,” Judge
Achmad Sodiki said.

Judge Maria Farida Indarti added that the
purchase should be seen as a constitutional duty of the government to
promote national interests.

Indonesia Corruption Watch had
previously claimed that the purchase of another 24 percent stake by
Daerah Maju Bersaing, a consortium of local governments in West Nusa
Tenggara, from the divestment was unlawful since the company had been
set up without the required approval from the district and provincial
legislatures.

Andy Hadiyanto, the chief director of Daerah Maju Bersaing, has denied those claims.

Finance
Minister Agus Martowardojo and PIP chief Soritaon Siregar, both
representing the central government during the trial, said that they
would study the court’s decision regarding the purchase before moving
forward. The ruling by the court is final and binding, meaning the
government cannot appeal and must implement the verdict.

Agus,
who said last year that he would resign as finance minister if the NNT
stake purchase failed, could hardly conceal his disappointment after
hearing the verdict.

“We can go to the House again,” the minister said.

The
stake is the last piece of Newmont’s Indonesian unit that is up for
sale. The ruling is likely to further delay a planned listing for NNT on
the Indonesia Stock Exchange.