Wed, 25 Mar 2009
Erwida Maulia and Aditya Suharmoko, THE JAKARTA POST, JAKARTA

Indonesia has moved quickly to resolve a string of business problems plaguing its relations with powerhouse China, a step deemed crucial at a time when Indonesia is struggling hard to survive the deepening global economic downturn.

Acting Coordinating Minister for the Economy Sri Mulyani Indrawati recently flew to China to submit a letter from President Susilo Bambang Yudhoyono to Chinese President Hu Jintao, with the aim of strengthening bilateral ties and seeking concrete action in realizing the strategic partnership.

"We've discussed several issues that have become protracted obstacles in our relations," Mulyani said Monday after meeting with Yudhoyono at the Presidential Palace.

"Among the problems that need to be urgently resolved include China's pledge to help finance our [first phase] 10,000 megawatt [MW] power plants. There have been some delays in the channeling of the loan from Chinese banks."

After the recent negotiations in China, Mulyani said Indonesia was expecting the banks to immediately disburse their loan commitments for the Indramayu, Suralaya and Paiton power plants.

But negotiations are still ongoing for the Pacitan, Pelabuhan Ratu and Meulaboh power plants, she added.

State power company PT PLN, which is overseeing the 10,000 MW project, has so far secured US$6.4 billion for the program and is seeking another $2.5 billion from both local and foreign banks, including the Chinese banks concerned.

The Chinese banks have said they want higher loan interest rates than those agreed upon last year, and in the meantime have only partially disbursed the $1.48 billion loan.

A contract row between state airline PT Merpati Nusantara and China’s Xi’an Aircraft Industry has also caused delays in the disbursement of loans by Chinese banks, Energy and Mineral Resources Purnomo Yusgiantoro said recently.

The dispute started after Merpati failed to fulfill its commitment to pay up to $230 million for the purchase of 15 Xinzhou-60 aircraft, at around $15 million each, as stipulated in a contract it had signed in 2006 with Xi’an, after delivery of only two aircraft in 2008.

Merpati was using a soft-loan facility from the China Export Import Bank to finance the purchase. Xi’an has said it might take the dispute to international arbitration.

Merpati said it would only be able to pay for a total of eight aircraft due to financial problems.

Mulyani said Indonesia and China had agreed to review the deal between the two companies, especially after Merpati fell into financial turmoil that nearly sent the airline into bankruptcy.

Merpati is now under a financial restructuring program run by the Asset Management Company.
Mulyani said the Indonesian restructuring team, together with a team from the Chinese government, would discuss the settlement of the dispute surrounding the purchase of the aircraft.

"We hope to settle the matter without disrupting our relations with China, which we must strengthen to cope with the crisis."

In 2007, China ranked as the world's fourth largest economy while Indonesia was the 20th, according to the World Bank.



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