JAKARTA — The American mining company Freeport-McMoRan has brought the world’s biggest gold mine, in the Indonesian province of West Papua, to a standstill. The corporation is butting heads with the Indonesian government over protectionist mining regulations.
And now that Freeport has started to dismiss tens of thousands of workers, the local economy is poised to take a huge hit. In Mimika Regency, the West Papua province containing the Grasberg gold mine, 91 percent of the Gross Domestic Product (GDP) is attributed to Freeport.
Freeport Indonesia abruptly stopped production on February 10 and laid off 10 percent of its foreign workers. It employs 32,000 people in Indonesia, about 12,000 of whom are full-time employees. The freeze was a reaction to a shakeup in Freeport’s 30-year contract with the Indonesian government, signed in 1991.
Indonesia has tried to levy additional obligations from Freeport in an attempt to increase domestic revenue from its natural resources. Freeport retaliated last week by threatening to pursue arbitration and sue the government for damages. The Indonesian Ministry of Energy and Mineral Resources could not be reached for comment on the issue.
Observers on the ground in Papua and from afar in Jakarta worry the shakeup will decimate the local economy and lead to violence in the historically unstable region. West Papua has long been a troubled territory in Indonesia and its independence movement has long been met with brutal military action.
“I don’t think the government comprehended the social impact of the Freeport freeze in Mimika,” said Octovianus Danunan, editor of the Radar Timika, a local newspaper. “Freeport runs two hospitals here, gives hundreds of scholarships to local students, and of course, provides jobs to thousands of Papuans. With these layoffs, people are extremely worried; their lines of credit are vanishing as we speak.”
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