Councillors find graft under hotel carpet

Councillors find graft under hotel carpet

Ahmad Junaidi, The Jakarta Post, Jakarta

The City Council announced on Wednesday that it would set up a
special team to investigate alleged corruption in a collaborative
venture between the city administration and a private firm to
build the five-star Sheraton Media Hotel in North Jakarta.

"The administration suffered losses due to a reduction in its
shareholding in the hotel," councillor Dani Anwar, the secretary
of the Council's commission B for economic affairs, told
reporters.

Dani, of the Justice Party, said the administration
collaborated with developer PT Bhakti Citradaya, which was owned
by publisher Surya Paloh, to establish the joint venture company
PT Grahasahari Suryajaya, which built the hotel in 1992.

The administration contributed a site of 18,828 square meters
worth Rp 14 billion on Jl. Gunung Sahari. Under the agreement,
this contribution entitled the administration to 25 percent of
the total shares in the joint venture company.

"We discovered that PT Bhakti invested nothing in the joint
venture," Dani said.

PT Grahasahari, the joint venture firm, then secured a loan of
US$50 million from state-owned Bank BNI to develop the hotel, he
said.

Since the firm could not repay the loan, the debt was then
converted into a 57.9 percent shareholding in the company. As a
result, the administration's stake decreased from 25 percent to 7
percent while PT Bhakti's stake declined from 75 percent to 34.6
percent.

Separately, Councillor Sambudi Bakri of the National Mandate
Party said the council would question the decrease in the city's
stake in the hotel.

"According to the agreement, the city's shareholding in the
hotel could not be changed even if there was additional
investment," Sambudi, a member of Commission B, told reporters.

Besides losses arising from the reduction in the city's stake,
he said the hotel management had never made a contribution to the
city budget since the hotel was built.

The council held a hearing with hotel executives on Tuesday
evening.

The hotel management offered to increase the administration's
stake from 7 percent to 11 percent if the city handed over the
land title deeds to Bank BNI, which now had a controlling
interest in the hotel.

"We rejected the offer. The city's stake should be 25 percent
as stated in the agreement," Sambudi said.

The council found that the joint-venture firm had secured the
loan from Bank BNI without using the title deeds as collateral.

According to the administration, it had never handed over the
title deeds as the joint-venture firm had failed to develop a
number of public facilities, such as a public hall and a mosque
in the area as had been stipulated in the collaboration
agreement.

The council has set up a number of special teams to
investigate corruption in joint ventures involving the
administration and the private sector.

One of these teams has concluded that there was corruption
involved in a joint venture between the administration and a
private sector firm in the setting up of the PT Jakarta
International Trade Fair company, which manages the Jakarta Fair
Ground in Kemayoran Central Jakarta.

However, these findings and the recommendations of other
investigative teams have never been followed up with legal
action.