U.S. Company Buys Security in Indonesia

While the State Department has urged Americans to avoid much of predominantly Muslim Indonesia amid demonstrations and threats by extremists protesting American military activity in Afghanistan, operations at the U.S. mining giant Freeport-McMoRan Copper & Gold there haven't been impacted.

The company's 60 American employees, involved in mining the world's largest gold and third largest copper reserves, at the Grasberg mine in the province of Irian Jaya, continue work as usual, company officials say.

"We have not evacuated anyone or received any threats aid directly at Freeport," Vice President for Communications William Collier recently told ABCNEWS.com.

Company officials say that is because of some unique circumstances in Iryan Jaya, including that only a small percentage of its inhabitants are Muslims who might oppose the military campaign out of a sense of religious kinship and that the province is more than 2,000 miles from the Jakarta protests. They also cite a unique relationship nurtured with local tribes, with whom the company shares some of its revenues.

But critics of the company also cite its special relationship with the Indonesian government and its police and military forces, which have a history of committing human rights abuses against the local population in Irian Jaya, also known as West Papua.

It's a complicated relationship, experts say, though not-uncommon in economically-recessed Indonesia, where the military, somewhat independent of government control, has for decades earned money through a variety legal and illegal activities while trying hold the enormous, multi-island country together.

Freeport depends on those forces for their protection. But it cannot control their activities, which the U.S. State Department in recent years says includes committing serious human rights violations.

"I think Freeport's situation is an exemplar of the types of problems [multinational corporations operating in volatile regions] are faced with where one group is pulling toward independence and the other is trying to keep the region inside a sort of central government cocoon," says Sheldon Simon, a political science professor and Southeast Asia security expert at Arizona State University.

"Freeport is caught in the middle and is engaging in a variety of tactics designed to appease everyone."

Freeport's Security Relationship

Since 1991, Freeport's subsidiary PT Freeport Indonesia has been making billions of dollars by extracting copper and gold out of Grasberg.

It has done so through a special contractual relationship with the Indonesian government. As is common in many countries, Freeport shares some of the revenue with the Indonesian government in Jakarta, which owns all oil and mineral rights in the country, through taxes, royalties and dividends. Jakarta in 2000 received $159 million of Freeport's $1.4 billion in gross revenues from the mine, according to the company. Costs were $923 million, it said.

Some of the profit also goes to an Indonesian investment group, which holds some ten percent of the subsidiary's shares, and is owned indirectly by charities headed by the family of former Indonesian president Suharto and associates.

Freeport is reputed to be Jakarta's largest single taxpayer in a time when the Indonesian faltering economy is in a multi-year recession.

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