Government urged to explain OPIC deal to the public

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)