New Zealand’s public pension fund pulled more than $1 million in
investment from Freeport-McMoRan Copper & Gold over allegations of
human rights offenses committed by security forces around the company’s
controversial Grasberg mine in Papua.
The $15.7 billion New
Zealand Superannuation Fund announced on Wednesday that it would cease
investment in four companies that violate international ethics
standards.
The fund raised concerns over “breaches of human
rights standards by security forces around the Grasberg mine, and
concerns over requirements for direct payments to government security
forces by the company in at least two countries in which it operates.”
Indonesian
security forces have a heavy presence in the restive province, where
police and the Indonesian Military (TNI) are ostensibly suppressing a
decades-long insurgency waged by members of the Free Papua Movement
(OPM).
But Human Rights Watch, citing leaked military documents,
has alleged that security forces have targeted everyone from tribal
leaders to political activists in Papua. Security forces routinely
suppress pro-independence groups in the province, jailing those caught
flying the “Morning Star” flag for treason and killing local leaders
suspected of being separatists, like Reverend Kinderman Gire and Mako
Tabuni, of the West Papua National Committee (KNPB).
Security
forces hired by Freeport’s local subsidiary also engage in regular
firefights with unknown gunmen along a road leading to the mine in
Timika, Mimika district. The OPM operates from a base in Puncak Jaya,
near the Grasberg mine.
The fund concluded that while
Freeport’s human rights policies have improved in recent years, the
activities of the government forces it employs are beyond the company’s
control.
“This limits the effectiveness of further engagement with the company,” the fund said in a statement.
Human Rights Watch applauded the move, calling it “a sound decision indeed.”
“Businesses
are getting more and more conscious about human rights abuses,” said
Andreas Harsono, a researcher with HRW. “Sound businesses do care about
human rights.”
A spokesman for Freeport-McMoRan said the company was committed to preserving human rights in Papua.
“We
are disappointed in the New Zealand Superannuation Fund’s decision to
exclude Freeport-McMoRan from its portfolio based on claims of breaches
of human rights abuses by PT Freeport Indonesia, a Freeport-McMoRan
subsidiary,” Eric Kinneberg, external communications director
Freeport-McMoRan, said. “As specifically recognized by the Fund,
[Freeport Indonesia] has improved its human rights policies and
procedures and the actions of the security forces are outside the
company’s control.”
Indonesian security forces protect the
Grasberg mine under a presidential decree, Kinneberg said. The mine,
which is considered "a national vital asset," accounts for 1.6 percent
of the nation's GDP, according to Reuters figures. The Indonesian
government owns about 9 percent of Freeport Indonesia, Reuters reported.
The Indonesian government has also looked to the American
mining company to invest in infrastructure in the underdeveloped
province.
"From the outset of [Freeport Indonesa] PTFI’s
operations, the government has looked to PTFI to provide logistical and
infrastructure support and assistance for these necessary services
because of the limited resources of the Indonesian government and the
remote location of and lack of development in Papua," Kinneberg said.
The
Ministry of Defense declined to comment on the move. Papua Police and
local representatives of the TNI were unavailable for comment by
deadline.
The fund had $1,062,061 in holdings in Freeport as of June 30.
Japan’s
Tokyo Electric Power Company, China’s Zijin Mining Group and
construction and defense firm KBR were also dropped from the fund’s
portfolio.
All four were dropped after the fund decided that they were unlikely to affect any change in their policies.
“In
making a decision to exclude a company from our portfolio, one of the
tests we apply is whether engagement with the company might
realistically lead to sufficient improvements,” the fund said. “We have
come to the conclusion that further engagement by the Fund with these
companies is not likely to be effective.
“We would rather focus our efforts on companies where we believe we can make a difference.”
The
fund’s equity portfolio includes shares in more than 6,500 companies.
It manages the government pension fund available for all New Zealand
residents 65 and older.
Freeport, which runs the largest copper
mine in the world at Grasberg, has a market capitalization of $37.29
billion and pulled in $3.17 billion in net income last year.
The Grasberg mine accounted for 19 percent of the company's revenue in 2011, according to Bloomberg.
Seventy-three percent of its shares are held by institutions and mutual funds.
Comments
hope NZ government does investigate and give the answer ,as what class action taken against jokowi...common problems to have common solutions, full disclosure. I know solo is capable doing so but can NZ do the same?
dial
If you were part of the management structure of the Fund, you might be in a position to make a rational comment about the ethics and appropriate management of it's investments in the interests of it's participants.
Clearly that is not the case.
irresponsible entity and person that shares common goal to screw up supporters.
Jubah.Harshaw
I am well aware of the payments to the military, which have previously been been the subject of much correspondence and comments in the JG some time ago now (as well as in many other publications). It is easy for you to contend that such payments represent bribes, however the reality is at law that they aren't - if you imagine that major US corporations don't go through very close vetting of such payment programs in advance of any such payments actually being made, including review of such programs by external legal counsel, then you are clearly not familiar with corporate government processes in play at such corporations. Payments to the Indonesian military made by the major US oil&gas contractor operating in Aceh have also been challenged, however such payments have not been held to constitute bribery.
US involvement in negotiations between the Netherlands and Indonesia in the 1960's over Papua is a total irrelevance in relation to current US actions against bribery
dial
What on earth has the fact that an absolute loser like your man, Fauzi being defeated in a democratic election by Joko, have to do with a New Zealand Superannuation Fund's decision involving divestment of an investment in Freeport McMoran's shares? Answer, absolutely zero.
@Serigala-Berbulu-Domba: One aspect of the
bribery is well-documented. Police and the military have accepted $14
million in bribes to act as a militia force to keep restive workers in
check. Even Timur Pradopo has confirmed this, although his explanation
was that this was lunch money to keep police and military personnel
happy.
http://english.cntv.cn/20111103/115340.shtml
A quick Google will reveal that other sources claim more than $79 million has been paid in bribes by Freeport over the last 10 years.
It has also been widely reported that ANY company wishing to do business in Indonesia should budget for 17% of its investment to be set aside for bribes as a normal cost of doing business here. I would be surprised if Freeport was any different.
As for complaining to the US regulatory bodies, I can see that going over really well, given that it was primarily the US that supported Indonesia's dodgy annexation of Papua through a rigged plebiscite in order to protect its mining interests.
to speculate, NZ pension funds was caught short squeeze in hedging for its US$ investments. any pension funds always play it to the best possible way minimising risk , that includes contractual agreements when to pull out etc.they just can't simply bugger off ,as what jokowi did to voters in solo,with the knowledge of going public is already in the pipe line.
in general,in dealing with pension funds,there are two boards in pension funds,there is a supervisory board/board of directors
which is responsible for selecting and monitoring Board of the management, which in turn is responsible for all strategic
decisions , with separate oversight committee.pension fund
supervisors are particularly concerned with transparency and the disclosure of information to pension fund
members, the competency and expertise of the governing body and internal controls. I suspect issues always come up concerning the selection of board members of public
pension funds.in NZ pension funds,very few board of supervisory have the competence and
consistency of judgment to challenge the experts who are responsible for executing complex financial
decisions,responsibilities of board members arent clearly defined,also selection of the reps for stake holders often selected on the basis oftheir status in trade unions rather than their knowledge on pension issues..cont
If I have a million and invest it in somebody's company (that's what stocks basically are - but sure you understand as a banker) and then pull my money after a while back for whatever reasons (e.g. lack of profit, disagreement with the ethical behavior of the company, or anything else) it is my decision and this company cannot legally challenge me. Where did you pick that one up?
The New Zealand Superannuation Fund is governed by a separate Crown entity called the Guardians of New Zealand Superannuation. This entity is overseen by a Board selected by the Minister of Finance for their skills and experience. Quoted from their website.
This is a public fund run and overseen by the New Zealand government and as such regardless of the amount withdrawn it can be seen as an action by the NZ government.
This is the NZ government stating clearly that it's pension funds will not be subject to any connection with an organization of questionable connections to local government security forces and abuse of human rights.
Pretty simple Prabayer, but since you obviously have no experience of a government that seriously looks after it's people your ignorance is to be expected.
This is not about money it is about the NZ government taking a stance. If it was simply a pension fund pulling such a paltry sum it would not even have hit the news. But it's not about the money
But actually its not about the money 22 its about the message - it says we know what you are doing and we will not support it
Something Indonesians could learn about
Blue
With all that cash one wonders why we are begging money from nations exporting dirts does it not
22 - just how many Id's have you got???
Anyway - sorry but you are wrong again, the fund has every right to switch its investments as it sees fit
Prabayar
An approximately $1.1 million investment in a Fund with assets of $15.7 billion is, comparatively speaking, the equivalent of a grain of sand on a beach. One thing is for certain, no legal consequences are remotely in prospect for this Fund over its decision to dispose of its investment in Freeport McMoran on the cited grounds, no matter what happens to Freeport McMoran's share price in future.
Indonesian government should just buy this mining operation. I believe we have the cash to do so.
That's not how it works, unless commercially justified it won't give good returns as pulling out after listing, they are wide open for legal challenge.