Economic Impacts

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 Freeport-McMoRan Copper & Gold
I. ECONOMIC IMPACTS
 

  
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 Indonesian nation as a whole. Direct benefits are the traditional contribution by a company to the Republic of Indonesia and include taxes, royalties, dividends, fees and other direct support. We are the largest private employer in Papua and one of the largest taxpayers in Indonesia. During 2006, PT Freeport Indonesia’s results benefited from record high commodity prices but with lower production volumes compared to 2005. As a result, the taxes, royalties, dividends and fees we paid to the Government of Indonesia in 2006 totaled approximately $1.6 billion. In addition, approximately $0.2 billion of direct benefits attributable to 2006 operations was paid during the first quarter of 2007.
 
Financial Benefits to Indonesia
(US$ in billions)

2006

1992-2006
Cash Basis $1.6 $5.1
Attributable Basis $1.5 $5.3
Since our current contract with the Indonesian government began in 1992, these direct benefits to Indonesia have totaled approximately $5 billion.

PT Freeport Indonesia’s indirect contributions to Indonesia are much larger and include the following since 1992:

• Investment of nearly $5 billion to build company infrastructure in Papua, including towns, electricity generation facilities, seaports and airports, roads, bridges, tunnels, waste disposal facilities, modern communications systems and other infrastructure, most of which will revert to the Indonesian government at the end of our contract term.

• Investment of over $500 million in social infrastructure directly benefiting the local people, such as schools, student dormitories, hospitals, health clinics, offices, places of worship, recreational facilities and the development of small and medium-sized businesses.

• Direct employment by PT Freeport Indonesia of almost 9,000 people in 2006. Of these, approximately 2,400, or almost 27 percent, are Papuan. PT Freeport Indonesia’s payroll for its employees has totaled approximately $1.3 billion since 1992.


Local entrepreneur Anastasia Takege (center) opened Papua’s first Roto Rooter franchise under the guidance of Freeport Indonesia’s Community Economic Development Program.
• Employment of contract employees, privatized companies and others serving PT Freeport Indonesia, which totaled 10,700 workers in 2006, meaning that the total of those employed by or serving our operations in Indonesia at the end of 2006 was approximately 19,700 people.

• Purchase of more than $4.3 billion of domestically sourced goods and services.
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 study was last updated in 2006. The University’s economists found that PT Freeport Indonesia:

• Accounted for 2.5 percent, 49 percent and 94 percent of the gross domestic product (GDP) for the country of Indonesia, Papua Province and Kabupaten Mimika respectively in 2006;

• Contributed more than 80 trillion rupiah to the national GDP in 2006, or approximately $9 billion at current exchange rates;

• Contributed over $50 billion to national GDP in total since 1992;

• Created 37 additional indirect jobs for each direct employee of the company, contributing 283,000 jobs to the national economy in 2006;

• Paid taxes that accounted for 2.23 percent of the Indonesian national budget;

• Funded over 66 percent of all community development contributions by the mining sector in Indonesia through the company’s social programs;

• Accounted for 1.3 percent of all household income in Indonesia and 34 percent of the household income in the Papua Province.
 

In addition, since 1996, PT Freeport Indonesia’s operations have committed a portion of its revenues for the benefit of the local community through the Freeport Partnership Fund for Community Development. This fund has helped build schools and dormitories, 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 and training and income generation initiatives so that Papuans benefit from the economic development taking place in the area. Contributions to the Partnership Fund, including the share of our joint venture partner, Rio Tinto plc, totaled $52 million in 2006, and the total contributions to the fund since inception approximate $242 million. BusinessWeek magazine, which surveys the philanthropic activities of American companies every other year, named Freeport-McMoRan Copper & Gold Inc. as America’s most philanthropic company twice in recent years in terms of cash contributed as a percentage of revenues. This was largely attributable to the Partnership Fund for Community Development.


Local youths study in a dormitory built by the Amungme and Kamoro Community Development Organization LPMAK with funds from the Freeport Partnership Fund for Community Development.

 

 
 
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