Economic Impacts

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 Freeport-McMoRan Copper & Gold
I. ECONOMIC IMPACTS

PT FREEPORT INDONESIA

 PT Freeport Indonesia, our Indonesian mining affiliate, provides substantial direct and indirect economic benefits for the central, provincial and local governments of Indonesia, and for the economies of Papua and the nation as a whole. Direct benefits are the traditional contribution of a company to the Republic of Indonesia, and include taxes and royalties. We are often the largest taxpayer in Indonesia. In 2003, we paid $329 million in taxes and royalties, the highest amount in our history. Since 1992, these direct benefits to Indonesia have totaled $2.3 billion.

PT Freeport Indonesia's indirect contributions to Indonesia are much larger and include:

  • Investment of more than $4.5 billion to build company infrastructure in Papua, including towns, electricity generation, seaports and airports, roads, bridges, tunnels, waste disposal facilities, modern communications systems, and many other types of fixed infrastructure, most of which will revert to the Indonesian government at the end of our contract term.
     

  • Investment of over $300 million since 1992 in social infrastructure directly benefiting the people, such as schools, places of worship, hospitals, offices, recreational facilities and small and medium sized businesses.
     

  • Direct employment by PT Freeport Indonesia of over 7,800 people in 2003, 27% of whom are Papuans. PT Freeport Indonesia's payroll for its own employees has totaled more than $800 million since 1992.
     

  • Employment of contract employees serving PT Freeport Indonesia, which totaled 10,500 workers in 2003, meaning that the total of those employed by or serving our operations in Indonesia at the end of 2003 was 18,300 people.
     

  • Purchase of almost $3 billion of domestically sourced goods and services since 1992.

Figure 2. Royalty and Income-based Comparison From 1993-2003 by Country
(IN MILLIONS OF DOLLARS)
Shown above (Figure 2) are income taxes and royalties under PT Freeport Indonesia’s
1991 Contract of Work compared to the regulations of other countries.


PT Freeport Indonesia's support of events like the Kamoro Art and Culture Festival helps the local indigenous communities preserve important cultural traditions.
 
Direct and indirect contributions produce a "multiplier effect" in the Indonesian economy spurring additional employment, wages, purchases and economic activity. This effect is well-known to economists. In 2003, we commissioned the Institute For Economics and Social Research, Faculty of Economics, University of Indonesia to conduct an economic impact analysis on the multiplier effect impact on Papua and Indonesia from PT Freeport Indonesia's operations since 1992. The university's economists found that PT Freeport Indonesia's total economic benefit to Indonesia and Papua was $3 billion in 2003 alone and $30 billion from 1992-2003, accounting for almost 2% of the whole gross domestic product of Indonesia, and more than 58% of the gross domestic product of Papua.

In addition, since 1996, PT Freeport Indonesia's operations have committed one percent of revenues for the benefit of the local community through the Freeport Partnership Fund for Community Development. This fund has helped build schools, hospitals, places of worship, housing and community facilities in our area of operations in Papua. The fund also supports a comprehensive series of health and educational programs. In addition to this fund, we support training and small business development initiatives so that Papuans benefit from the economic development taking place in the area. Contributions to the partnership fund, including Rio Tinto’s share as our joint venture partner, totaled approximately $22 million in 2003, and the total contributions to the fund are nearly $132 million since inception.

In its December 1, 2003 issue, BusinessWeek magazine published the results of its survey ranking America's most philanthropic companies and listed Freeport-McMoRan Copper & Gold Inc. as America's most philanthropic company in terms of cash given as a percentage of revenues. This is largely due to the Freeport Partnership Fund for Community Development.

 

 
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