Chandra Asri haunts Indonesia-Japan ties<\/p>\n
Kornelius Purba, Staff Writer, The Jakarta Post, Tokyo<\/p>\n
One of the main messages that was conveyed to President
\nMegawati Soekarnoputri during her recent visit to Japan was the
\nlooming threat of bankruptcy over its giant trading house
\nMarubeni Corp. A major cause, Japan's top politicians told the
\nPresident, was her government's indecisiveness over the debt
\nrestructuring of a cash-trapped Indonesian company PT Chandra
\nAsri, a petrochemical center.<\/p>\n
Marubeni led the consortium that lent the firm US$700 million
\nin the early 1990s.<\/p>\n
The Japanese officials, led by Prime Minister Junichiro
\nKoizumi, said that, given its major role in a Japanese economy
\nthat was already mired in recession, an insolvent Marubeni would
\nhave far-reaching repercussions in Japan.<\/p>\n
Officials said the Japanese government would therefore go all-
\nout to prevent another failure in Marubeni's negotiations with
\nIndonesia over the settlement of Chandra Asri's loan, the
\nmajority of whose shares are controlled by tycoon Prajogo
\nPangestu.<\/p>\n
Apart from Koizumi, three Japanese ministers, including
\nMinister of Economic and Financial Policy Heizo Takenaka and
\nFinancial Services Agency chief Hakuo Yanagisawa, met with
\nMegawati, pressing her to interfere to end the deadlocked
\nnegotiations between the Indonesian Bank Restructuring Agency
\n(IBRA) and Marubeni.<\/p>\n
The Japanese government also has a direct interest in the
\nproject because most of the $700-million loan came from the Japan
\nBank for International Cooperation (JBIC), which handles Japan's
\nOfficial Development Assistance.<\/p>\n
Marubeni president Toru Tsuji met three times with Megawati,
\nwhile her senior executives held intensive negotiations with
\nState Minister of State Enterprises Laksamana Sukardi in their
\ndesperate effort to resolve the bad debts.<\/p>\n
\"If Marubeni fails this time, Japan may face its worst
\nbankruptcy since World War II,\" said a senior Japanese diplomat,
\nwho was assigned to closely monitor the negotiations.<\/p>\n
Marubeni is reportedly facing several problematic projects in
\nIndonesia, with total debts of more than $1 billion. Its success
\nin overcoming Chandra Asri's debts will pave the way to resolve
\nother bad debts.<\/p>\n
Megawati told her ministers she was in a difficult position
\nregarding Chandra Asri. Politically it was not popular to bail
\nout such a controversial company, especially when the country's
\neconomy continued to shrink. Downstream plants depended on
\nChandra Asri for chemical supplies. But rejecting Japan's demands
\nwould have serious consequences for bilateral relations.<\/p>\n
Marubeni corporate communications manager Hiroshi Nishizaki
\ncomplained,\"Despite the series of negotiations, we still cannot
\nperceive any clear indication that the Indonesian government is
\nready to solve the problem.\"<\/p>\n
Many Indonesians regard Chandra Asri as an example, par
\nexcellence, of the dirtiest business practices carried out under
\nSoeharto's 32-year regime. From its beginnings in the early
\n1990s, the company had been controversial due to the involvement
\nof a member of the Soeharto family and his close associates.<\/p>\n
Chandra Asri was accused of markup practices and secured
\nspecial tariff protection and various other forms of preferential
\ntreatment from Soeharto.<\/p>\n
Prajogo subsequently had a majority stake in the company after
\nSoeharto's son Bambang Trihatmodjo and his cronies quit the
\npetrochemical project.<\/p>\n
An angry Marubeni official blurted out, \"Do you think that
\nAmerican companies operating in your country are cleaner than
\nJapanese companies?\"<\/p>\n
\"I think Indonesia would have quickly resolved the issue if
\nChandra Asri were related to American interests,\" he told The
\nJakarta Post recently.<\/p>\n
During Megawati's visit from Sept. 26 to 30, Koizumi and his
\ntop officials raised four financially troubled megaprojects
\nduring several separate meetings with Megawati.<\/p>\n
One of them is a joint venture led by PT Trans-Pacific
\nPetrochemical Indotama (TPPI) to build a $2.3 billion integrated
\npetrochemical plant in Tuban, East Java, now only 50 percent
\ncompleted. Japanese investors such as JGC Corp. have poured $600
\nmillion of the total $900 million already invested into the
\nproject. Other shareholders are Nissho Iwai Corp., Itochu Corp.
\nand Indonesian businessman Hashim Djojohadikusumo.<\/p>\n
State-owned electricity company PT PLN and its partners,
\nmainly Japanese firms led by Sumitomo Corp., are also facing a
\nstalemate in progressing the Tanjung Jati B coal-fired power
\nplant in Tanjung Jati, Central Java.<\/p>\n
PLN wants to buy out the unfinished project, with $1.5 billion
\nloan in Japanese loans, but its plan was rejected by its
\npartners.<\/p>\n
Another problematic company is independent power producer PT
\nPaiton Energy, the owner of the Paiton I coal-fired power plant
\nin East Java. It is a joint venture between Mitsui & Co.,
\nAmerican firm General Electric and Edison Mission Energy.
\nIndonesia is represented by PT Batu Hitam Perkasa, also owned by
\nHashim.<\/p>\n
Like Chandra Asri, these three projects were related to JBIC
\nand Soeharto's cronies.<\/p>\n
\"Of the four projects, Chandra Asri is the most delicate for
\nus,\" State Secretary\/Cabinet Secretary Bambang Kesowo said, given
\nthe importance of the project, quite apart from its loans being
\nthe greatest.<\/p>\n
Further delays in the resolution of Chandra Asri could damage
\nthe credibility of the Megawati government and put in great doubt
\nthe government's commitment to contracts it has signed.<\/p>\n
Meanwhile, Soeharto and most of his children, who allegedly
\nhad involvement in all the controversial projects, continue to
\nenjoy their liberty at their residence in Menteng. Most of their
\ncronies, except Bob Hasan, remain untouchable by the law.<\/p>\n
The Megawati administration and Marubeni must come up with a
\nacceptable solution to the Chandra Asri debt debacle, otherwise
\nthe olefins industry, the only one in Indonesia, could go
\nbankrupt, disrupting chemicals supplies to hundreds of downstream
\nplants.<\/p>",
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