President Susilo Bambang Yudhoyono has affirmed his commitment to renegotiating mining contracts that are disadvantageous to Indonesia.
Indonesia issued a mining law in 2009 that seeks to achieve more revenue for the state and larger royalty fees, imposes a requirement for miners to process the raw materials in the country, obliges miners to divest a stake to local owners and limits the size of mining concession areas.
“These contracts were signed 20 to 30 years ago and nowadays are found to be unfair. I have a moral obligation to make a change,” Yudhoyono told reporters in Rio de Janeiro on Friday.
The president was in the Brazilian capital to attend the United Nations Conference on Sustainable Development, also known as the Rio+20 conference.
Yudhoyono said the government would not waver in its requirement that the country’s natural resources be processed at home because it was important to the Indonesian economy.
“We want to see the downstream sector add more value, undertake more projects and give more revenue to the state. Meanwhile, I want our business partners continue to make profits,” he said.
Yudhoyono said Indonesia would carry out the renegotiations in an appropriate manner, through discussions with the relevant parties. “That should be fair,” he said of the process.
Yudhoyono also said the country’s attempts at renegotiations have been “going on well and fruitfully.”
“We hope that this effort is understood at home. This move is taken for the purpose of helping the country’s interests. It is for our future needs,” he said.
The government in February created a team to renegotiate contracts with big miners, including Freeport Indonesia and Newmont Nusa Tenggara.
Freeport Indonesia, the local unit of Freeport-McMoRan Copper & Gold, the world’s largest publicly traded copper producer, operates the Grasberg gold and copper mine in Papua.
Newmont Nusa Tenggara is the Indonesian unit of Newmont Mining. It operates the Batu Hijau gold and copper mine in West Nusa Tenggara.
Some of the most important mining contracts stipulate royalty fees that are too low, Hatta Rajasa, the coordinating minister for economic affairs, told Reuters in February.
The late Deputy Energy and Mineral Resources Minister Widjajono Partowidagdo also told Reuters in February that these firms’ contracts of work each carry a clause allowing for renegotiation if necessary.
The companies have each said they would “cooperate” with the review, although it is not yet clear to what extent they will go along with changing the terms of their agreements.