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INDONESIA: Indonesia to change security pay rules

by Shawn DonnanThe Financial Times
February 7th, 2006

Indonesia plans to revise guidelines governing the relationship between its military and foreign companies for which its soldiers provide security in conflict areas, the country’s defence minister said yesterday.

The move follows renewed allegations surrounding Freeport McMoRan and its relationship with the Indonesian military in remote Papua province, where the New Orleans-based miner operates the world’s largest gold and copper mine.

Recent reports that Freeport has made millions of dollars in payments to individual military officers have prompted calls for investigations from Indonesia and the US, with some alleging the company may have violated the US Foreign Corrupt Practices Act. Freeport has denied any wrongdoing.

Juwono Sudarsono, Indonesia’s defence minister, said yesterday the allegations had prompted a review in Jakarta of the guidelines governing relationships such as Freeport’s with the military. He said new guidelines could be issued within weeks. The government was considering a change that would require all companies to funnel payments to the military through a local partner or government agency, he told reporters.

Indonesian law requires resource projects deemed to be of national importance, such as Freeport’s Grasberg mine and ExxonMobil’s Arun gas field in Aceh, to be guarded by security forces.

Soldiers’ meagre salaries have meant companies such as Freeport often supplement them or provide barracks, food, and other compensation. In some cases the practice has led to awkward relationships between companies and the military.

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