28 Jul 2014

Indonesia breaks rules to ink Freeport deal

9:57 am on 28 July 2014

The outgoing Indonesia administration has signed a deal with the United States company operating one of the world's largest copper and gold mines in West Papua.

Indonesia's Papua region: the provinces of West Papua and Papua

Indonesia's Papua region: the provinces of West Papua and Papua Photo: RNZ

Freeport McMoRan has made an agreement with Indonesia to continue its operations after 2021.

Susilo Bambang Yudhoyono had earlier pledged that he would meet with the President-elect before signing any deal, but the Jakarta Post reports the the MOU was signed without any discussion.

The company's export tax will be set at 7.5 percent, lower than the industry average of 20 or 25 percent in 2014 and 60 percent by 2016.

The Finance Minister, Chatib Basri, says the company agreed to pay surety bonds and build a smelter, and in exchange, it will pay export tax in line with the progress of the smelter, with the amount of tax eventually reaching zero once the smelter development has reached a point of no return.

A legal expert, Todung Mulya Lubis, says a lame-duck government usually cannot issue such a policy that will now bind the next government.

The President-elect, Joko Widodo, said on Friday that the current administration should not have sealed the deal.