Govt to buy property overseas on credit

Adianto P. Simamora, The Jakarta Post/Jakarta

In an effort to use the funds allocated to rent offices/residences abroad in an "efficient manner", the government will continue purchasing new property for its diplomatic missions and staff by borrowing money from a state financier, according to the Ministry of Foreign Affairs on Friday.

The ministry said the government would apply a system, under which it buys property with third party money and uses the budget-allocated rent money to repay the debts over time.

"We don't budget for the purchase of properties overseas. Instead, we use the monthly installment fee to buy (a property) and after 10 to 15 years, it will become a government asset," Ministry spokesman Marty Natalegawa revealed during a weekly press conference.

The country currently has diplomatic missions in 191 countries with 325 properties that are being used as either offices, residences or schools.

"Of those 325, Indonesia owns 233 permanent buildings, while 92 are still rented," Marty said.

He said that the government had been paying, on average, a whopping $10,000 per month per building in rental fees.

"We can imagine that the installment fee for the 92 offices overseas reaches $920,000 per month," he said.

"In facing such a condition, as long as Indonesia is a sovereign country and has diplomatic ties with other countries, we need the representative offices, we need the property," he said.

Marty also denied a media report that the ministry had proposed a budget of Rp 1 trillion (about US$133 million) to buy new buildings in 12 countries.

The Koran Tempo newspaper reported on Thursday that the foreign ministry had proposed Rp 1 trillion to purchase new offices and it would pay an amount of Rp 175 billion soon in down payments for a number of properties.

Also during the press conference, Freddy Sirait, a ministry official stated that state-owned Bank Mandiri had agreed to provide cash to finance the purchase of the buildings.

"Bank Mandiri will provide cash to buy ambassadorial offices. We then repay the bank in monthly installments allocated for the respected office," he explained.

He did not elaborate on the total amount of cash that had already been disbursed by Bank Mandiri.

He added that the government would purchase property in Helsinki (Finland), Guangzhou (China), Lima (Peru), Athens (Greece), Amman (Jordan), Bandar Seri Begawan (Brunei), Sofia (Bulgaria), Tashkent (Uzbekistan), Tunis (Tunisia), Oslo (Norway), Tripoli (Libya) and Chicago (the United States).

"The finance ministry has agreed to the purchases of three offices located in Helsinki, Peru and Guangzhou," said Freddy, adding that they had also bought land in Brunei.

He said the ministry would pay US$16,000 per month to the bank for Peru office and $12,000 for the Guangzhou office.

"With the monthly installment fee, the two offices will be the permanent state assets in the next 11 and 15 years, respectively," he said.

The purchase of property overseas was conducted in a transparent manner, involving independent appraisals to estimate the price of the building, claimed Marty.

The appraisals were usually from local government sources and real estate agencies, in the area where a property is located.

"This was the case in the purchase of the villa in Geneva, there were two independent appraisals from the local government in Switzerland, so it would have been impossible to mark up the price of the villa," he argued.

Indonesia purchased a controversial villa in Geneva, Switzerland worth over $8 million. Many, particularly Swiss media, have raised concerns over the price amid financial difficulties faced by the country especially in the aftermath of the tsunami disaster.