Government urged to explain OPIC deal to the public
JAKARTA (JP): The government must explain to the public the reason behind its move to renew a settlement agreement with the U.S.-based Overseas Private Investment Corporation (OPIC), to avoid speculation that could harm investors' confidence in the country, a noted economist says.
"The government must tell the public, especially the business community, why it canceled (the earlier) settlement agreement with OPIC," economist Pande Raja Silalahi of the Centre for Strategic and International Studies (CSIS) told The Jakarta Post on Friday.
"Should the government refuse to explain, the business community will think that the change was made to serve the interests of certain parties in the government," he added.
Finance Minister Boediono said on Thursday that the government had decided to cancel a settlement agreement with OPIC signed by former finance minister Rizal Ramli on July 31 with U.S. Ambassador to Indonesia Robert Gelbard.
Boediono provided little information on the motivation behind altering the accord, saying only that the new agreement favored the Indonesian side due to a lower interest rate, and the obligation for OPIC to help mobilize funds to restart the development of the power projects.
Boediono said that the new deal had been signed at the finance ministry together with OPIC representatives on August 27.
Under the new agreement, which is also called the Settlement Agreement, Assignment and Release, the government is obliged to repay a US$260 million claim to OPIC and a $140 million claim to OPIC's creditors in 11 years, with a 3-year grace period.
The government's obligation is due to its failure to honor power purchase contracts after it postponed the development of the Dieng and Patuha power plants in Central and West Java.
The two power plants are joint venture projects between state electricity company PLN and Mid American Energy Holdings Co.
In addition to the settlement agreement, the government and OPIC have also signed a re-commissioning loan agreement for restarting the 60-MW Dieng power plant via the issue of a support letter by OPIC for an investment guarantee worth $100 million.
The settlement agreement became controversial after reports, quoting sources, said that the deal signed by Rizal had much deviated from earlier terms agreed by Rizal's predecessor, Prijadi Praptosuhardjo, and would inflict great losses to the state.
"Since the deal was signed on July 31, I presume Rizal Ramli consulted Megawati on the agreement," Pande said.
"The public wants to know if Rizal did not listen to Megawati's advice, or did not give adequate information to Megawati, prompting her to make a wrong decision. Otherwise, the people would think that she changed the agreement to serve her own interests. If that happens, the investors' confidence will be badly shaken," Pande said.
Immediately after President Megawati Soekarnoputri took over the leadership on July 23, she declared the cabinet of her predecessor Abdurrahman Wahid to have non-active status, ordering ministers not to make any strategic decisions without consulting her.
Meanwhile, PLN and state-owned oil company Pertamina are reportedly planning to set up a new company to take over the Dieng and Patuha power projects.(03)