---------------------------------------------------------- FREE for JOIN Indonesia Daily News Online via EMAIL: go to: http://www.indo-news.com/subscribe.html - FREE - FREE - FREE - FREE - FREE - FREE - Dengan mengClick banner sponsor anda menyumbang Rp. 1000,- untuk HomePage IndoNews. ---------------------------------------------------------- Australian Financial Review *Caltex, Freeport test the post-Soeharto waters Jakarta Observed, By Greg Earl It is hard to think of two foreign companies more synonymous with the economic development of modern Indonesia than Freeport McMoRan and Caltex Pacific. Caltex was already pumping oil in central Sumatra in the 1950s when former President Soeharto was still learning how to make a few extra rupiah on the side as a regional military commander in central Java. And Freeport started putting its spare cash into the Irian Jaya jungle in the late 1960s when the then new president was just starting to implement the crony capitalist model of growth that so many other companies chose to follow. Both companies have only just bedded down the rights to what amounts to the next phase of their resource development activities in Indonesia -- but not without some twists and turns that reveal a lot about the new climate for foreign investment. Caltex, the country's largest oil producer, has been pursuing rights to continue production on its Coastal Plains Pekanbaru (CPP) block after a 20-year licence expires in 2001. Simultaneously, Freeport, long one of the biggest Indonesian taxpayers, has been seeking the right to expand production at its Grassberg copper and gold mine by about 50 per cent. The expansion plans would produce new revenue from established projects that Indonesia sorely needs as it scours the world for aid money and are also in line with the much touted idea that natural resources will now play a greater role in the country's medium-term growth. Although Freeport is much more associated with the Soeharto order than Caltex, both companies have been fending off allegations of cronyism that have upset the processing of their projects. Links from the Soeharto order could be a growing problem for foreign investors, with businessman Hashim Djojohadikusumo warning that European businesses are holding off new investment because they are concerned that old, potentially corrupt contracts could be cancelled. Hashim, who is Habibie's special business envoy to Europe, has had his own difficulty shrugging off Soehartoist links via his controversial and once powerful soldier brother, Prabowo Subianto. But the Freeport and Caltex cases contain more significant longer-term lessons for potential investors. Both companies have had to deal with a more assertive legislature and an independent-minded minister, rather than a centralised presidential decision- making system, and that is likely to be a persistent feature of the business landscape. Caltex's problems go back to 1997 when a then isolated and anti-foreign Soeharto ordered that the state oil company Pertamina should take over the company's CPP block, which accounts for 10 per cent of its oil production, when the current licence expires. Last year with Pertamina under a cloud for its inefficiency and its own corrupt business ties to the Soehartos, Caltex managed to have the decision reviewed by the new Energy Minister, Kuntoro Mangkusubroto, and argued persuasively that it was best equipped to install enhanced oil recovery technology. In a climate of growing nationalism about resource ownership, Kuntoro's advisers came back with a Solomonic decision that the two companies should form a joint venture. Meantime, Caltex has become embroiled in a new controversy over how it came to award a contract for a power plant in 1997 to a construction company that is reportedly partly owned by Soehartoist interests and the then head of Pertamina. Caltex denies any corruption, pointing out that the contractor is really a subsidiary of its parents -- Chevron and Texaco -- but Kuntoro says tendering rules were breached and the project will now be subjected to a special audit. And in a final sting, Kuntoro has announced that Pertamina will have the majority share in the oil production joint venture and operate it. Freeport has been through a similar saga since Soeharto reportedly approved the plant expansion with a handwritten notation on a letter during a private meeting with Freeport's domineering chief executive, James Moffet, in 1997. The company subsequently got all the necessary formal approvals in place but has had a difficult time getting the final sign-off from Kuntoro as it has been embroiled in a public debate about ownership of resources, regional development and how it got its earlier approvals. The mining minister has to walk a difficult path between pulling new investment and placating rising nationalist sentiment and appears to have decided that giving new rights to Freeport early on may not have been the most astute political move. Kuntoro is one of Habibie's most professionally qualified ministers with a good reputation in the mining industry and he was out of the starting blocks much faster than most of his colleagues amid the policy confusion of last year. He has been pushing forward with his own agenda ahead of the Government by cracking down on Soeharto family contracts in the oil industry, devolving power to the provinces in the mining industry and holding regular press conferences. Some observers say it is an image of action that President Habibie may not fully appreciate. So it was interesting to see Moffet go right back to Indonesian business basics three weeks ago by holding a private meeting with Habibie to discuss his difficulties getting the Freeport production expansion under way. Habibie obviously warmed to the process and signed a letter the very same day telling his ministers to help Freeport. Another mining company executive says he was surprised to see Moffet use his time-honoured dispute settlement mechanism because government officials and Freeport staff are weary of having to pick up the pieces of his periodic interventions in Indonesian affairs. But things are not so simple any more as the irrepressible Kuntoro demonstrated when he observed sarcastically later that everybody can meet the President but "we of course have procedure and clear rules". Amid criticism of Habibie's intervention from environmentalists and other political activists, Kuntoro has since revealed that he wants to at least double Freeport's royalty rate before he feels obliged to apply the President's order. ++++++++++++++++++++++++++++++++++++++++++++++++++++ Didistribusikan tgl. 19 Feb 1999 jam 02:50:44 GMT+1 oleh: Indonesia Daily News Online <[EMAIL PROTECTED]> http://www.Indo-News.com/ ++++++++++++++++++++++++++++++++++++++++++++++++++++
