Gus Dur derides Paiton deal, but vows to honor it
Gus Dur derides Paiton deal, but vows to honor it
JAKARTA (JP): President Abdurrahman Wahid described on Wednesday the power purchase contract signed by state electricity company PLN and PT Paiton Energy as full of nonsense but he said the government would honor it.
"The power tariff scheme (in Paiton's contract) is entirely gombal (rubbish) and was produced by the corrupt old regime. But, like or dislike it, we have to honor it," the President, who is popularly called Gus Dur, said during a media conference at the Bina Graha presidential office.
Abdurrahman said while honoring the contract, the government would renegotiate the contractual terms to protect the interests of the public.
He said he preferred to solve the dispute over the contract out of court rather than a legal solution because the latter could harm the government's efforts to attract foreign investments.
"Our policy is to attract foreign investment. As such, we have to see the case from a broad perspective rather than a narrow electricity perspective," the President said.
PLN filed a lawsuit in October this year at the Central Jakarta District Court to annul Paiton's power purchase agreement (PPA), claiming the contract contained unfair terms.
PLN has had some success in the trial but the government decided to drop PLN's lawsuit on Monday.
The move prompted the resignation of PLN president Adhi Satriya and the company's planning director Hardiv Situmeang.
Abdurrahman likened the Paiton contract to the independence gained by East Timorese following the self-determination ballot supervised by the United Nations in August this year.
"We accepted the political contract whether or not we wanted to see East Timor become independent," Gus Dur said, terming the ballot a "political contract".
He again dismissed allegations that he had bowed to foreign pressure in dropping PLN's lawsuit.
Separately, the assistant to the state minister of investment and state enterprise development, Sofyan Djalil, said in a seminar on investment that the government did not rule out the possibility of refiling the lawsuit against Paiton in the future if the renegotiation efforts bore no fruit.
Sofyan said PLN's lawsuit would hamper the image of Indonesia from an investor point of view.
"Our problem now is that foreign investors don't trust our judicial system," Sofyan said, adding that this was the reason foreign investors preferred arbitration to settling a contract dispute.
He said the government would expect a concession from Paiton now that it had dropped PLN's lawsuit.
"The government has made a very unpopular decision to show that we're serious about our commitment to foreign investors," he said.
PLN had been complaining that under the PPA, Paiton's electricity was too expensive compared to international standards, suspecting that Paiton had marked the cost of its power project in Paiton village, Probolinggo, East Java.
Paiton is owned by Japan's Mitsui, General Electrics of the United States and local company PT Batu Hitam Perkasa. Paiton has built a US$2.4 billion coal-fired power plant with a power generation capacity of 1,230 Megawatts.
Sofyan also defended the United States Ambassador Robert S. Gelbard for lobbying the Indonesian government.
"It's normal for ambassadors to lobby for the interest of their nations, because that's what all ambassadors have to do," he said.
Michael Owens, the U.S. embassy's deputy chief of mission, said at the seminar Gelbard had only expressed the view of the American government that Indonesia had to treat foreign investors fairly.
"Foreign investors will shy away from the (Indonesian) economy if existing investors are not being dealt with fairly," Owens said in his speech at the forum.
Meanwhile, Harvey Goldstein, president of PT Harvest International Indonesia agreed that the decision to drop PLN's lawsuit was hard to accept. However, the move was welcomed by the international investment community.
"This issue does not only affect PLN, but the whole country," he said. (03/prb)