New Zealand Fund Pulls Freeport Investment, Cites Papua Rights Offenses

Indonesian police clash with striking workers of US gold and copper mining giant company Freeport McMoran in Timika in Indonesia's Papua province on October 10, 2011 where police shot and killed one protester and wounded another. Papua police spokesman Wachyono said that police officers fired warning shots into the air after the striking workers, who are protesting over wages, pelted them with stones, injuring seven policemen. (AFP Photo/Tjahjo Eranius)

Indonesian police clash with striking workers of US gold and copper mining giant company Freeport McMoran in Timika in Indonesia’s Papua province on October 10, 2011 where police shot and killed one protester and wounded another. Papua police spokesman Wachyono said that police officers fired warning shots into the air after the striking workers, who are protesting over wages, pelted them with stones, injuring seven policemen. (AFP Photo/Tjahjo Eranius)

New Zealand’s public pension fund pulled more than $1 million in investment from Freeport-McMoRan Copper & Gold over allegations of human rights offenses committed by security forces around the company’s controversial Grasberg mine in Papua.

The $15.7 billion New Zealand Superannuation Fund announced on Wednesday that it would cease investment in four companies that violate international ethics standards.

The fund raised concerns over “breaches of human rights standards by security forces around the Grasberg mine, and concerns over requirements for direct payments to government security forces by the company in at least two countries in which it operates.”

Indonesian security forces have a heavy presence in the restive province, where police and the Indonesian Military (TNI) are ostensibly suppressing a decades-long insurgency waged by members of the Free Papua Movement (OPM).

But Human Rights Watch, citing leaked military documents, has alleged that security forces have targeted everyone from tribal leaders to political activists in Papua. Security forces routinely suppress pro-independence groups in the province, jailing those caught flying the “Morning Star” flag for treason and killing local leaders suspected of being separatists, like Reverend Kinderman Gire and Mako Tabuni, of the West Papua National Committee (KNPB).

Security forces hired by Freeport’s local subsidiary also engage in regular firefights with unknown gunmen along a road leading to the mine in Timika, Mimika district. The OPM operates from a base in Puncak Jaya, near the Grasberg mine.

The fund concluded that while Freeport’s human rights policies have improved in recent years, the activities of the government forces it employs are beyond the company’s control.

“This limits the effectiveness of further engagement with the company,” the fund said in a statement.

Human Rights Watch applauded the move, calling it “a sound decision indeed.”

“Businesses are getting more and more conscious about human rights abuses,” said Andreas Harsono, a researcher with HRW. “Sound businesses do care about human rights.”

A spokesman for Freeport-McMoRan said the company was committed to preserving human rights in Papua.

“We are disappointed in the New Zealand Superannuation Fund’s decision to exclude Freeport-McMoRan from its portfolio based on claims of breaches of human rights abuses by PT Freeport Indonesia, a Freeport-McMoRan subsidiary,” Eric Kinneberg, external communications director Freeport-McMoRan, said. “As specifically recognized by the Fund, [Freeport Indonesia] has improved its human rights policies and procedures and the actions of the security forces are outside the company’s control.”

Indonesian security forces protect the Grasberg mine under a presidential decree, Kinneberg said. The mine, which is considered “a national vital asset,” accounts for 1.6 percent of the nation’s GDP, according to Reuters figures. The Indonesian government owns about 9 percent of Freeport Indonesia, Reuters reported.

The Indonesian government has also looked to the American mining company to invest in infrastructure in the underdeveloped province.

“From the outset of [Freeport Indonesa] PTFI’s operations, the government has looked to PTFI to provide logistical and infrastructure support and assistance for these necessary services because of the limited resources of the Indonesian government and the remote location of and lack of development in Papua,” Kinneberg said.

The Ministry of Defense declined to comment on the move. Papua Police and local representatives of the TNI were unavailable for comment by deadline.

The fund had $1,062,061 in holdings in Freeport as of June 30.

Japan’s Tokyo Electric Power Company, China’s Zijin Mining Group and construction and defense firm KBR were also dropped from the fund’s portfolio.

All four were dropped after the fund decided that they were unlikely to affect any change in their policies.

“In making a decision to exclude a company from our portfolio, one of the tests we apply is whether engagement with the company might realistically lead to sufficient improvements,” the fund said. “We have come to the conclusion that further engagement by the Fund with these companies is not likely to be effective.

“We would rather focus our efforts on companies where we believe we can make a difference.”

The fund’s equity portfolio includes shares in more than 6,500 companies. It manages the government pension fund available for all New Zealand residents 65 and older.

Freeport, which runs the largest copper mine in the world at Grasberg, has a market capitalization of $37.29 billion and pulled in $3.17 billion in net income last year.

The Grasberg mine accounted for 19 percent of the company’s revenue in 2011, according to Bloomberg.

Seventy-three percent of its shares are held by institutions and mutual funds.