Wed, 19 Mar 2003

Govt in dispute with Hutchison over privatization contract

Rendi A. Witular, The Jakarta Post, Jakarta

The government has said it will pursue action against a Hong Kong-based seaport operator that it accuses of breaching its privatization contract.

A deputy at the Office of the State Minister for State Enterprises, Ferdinand Nainggolan, accused seaport operator Hutchison of failing to make the required investment in PT Jakarta International Container Terminal (JICT), which it acquired in 1999 through the government privatization program.

Hutchison now owns a 51 percent stake in JICT, the country's largest container terminal company.

Ferdinand said the government would issue a golden share, or controlling interest in JICT, to state-owned seaport company PT Pelindo II, which owns 48.9 percent of the container terminal company. The remaining shares are held by employees.

Analysts said that with the golden share, Pelindo II would have the veto right to annul the privatization contract, allowing it to buy back the 51 percent stake in JICT from Hutchison.

The share buyback option is stipulated in the privatization contract.

"This is all part of the post-privatization process, in which we evaluate whether the investor (Hutchison) has fulfilled its obligations to the Indonesian government, such as enhancing the infrastructure and service at JICT," Ferdinand said.

He said the golden share could be issued at an extraordinary shareholders meeting at the end of this month if Hutchison failed to explain its failure to fulfill the privatization contract.

Ferdinand said Hutchison has failed to invest some US$28 million to upgrade the information technology system at JICT.

He said Hutchison was also being blamed for the poor service at JICT, which had resulted in complaints from six international liners -- APL Indonesia, Maersk Sealand, P&O Nedlloyd, OOCL, TSK Line and CMA-CGM & ANL.

Ferdinand said Hutchison had the right to challenge the government's accusations. The government would then appoint an independent auditor to examine whether or not Hutchison was in compliance with the privatization contract.

JICT president W.S. Wirjawan, however, denied that his company had violated the contract.

He told the Post that Hutchison had invested some $400 million to enhance the facilities at JICT, adding that until now the company had not formally received any complaints from the government.

Wirjawan also said the government did not have the right to unilaterally issue the golden share without the endorsement of the shareholders meeting.

He warned that if the government took this step, it could further undermine foreign investor confidence in the country, especially the government's privatization program.

The government plans to sell a number of state-owned companies this year in a bid to raise some Rp 8 trillion to help finance the 2003 state budget deficit.